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EXECUTION COPY
EXHIBIT 2.7
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
APPLIEDTHEORY CORPORATION,
APPLIEDTHEORY SEATTLE CORPORATION,
THE CORDADA GROUP, INC.
AND
XXXXXX X. XXXXXXXX
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MAY 15, 2000
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EXECUTION COPY
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER..............................................................................1
1.1. The Merger..........................................................................1
1.2. Closing; Effective Time.............................................................1
1.3. Effect on Capital Stock.............................................................2
1.4. [Reserved]..........................................................................3
1.5. [Reserved]..........................................................................3
1.6. Escrow of Parent Common Stock; Adjustment to Merger Consideration...................3
1.7. Registration Rights.................................................................4
1.8. Merger Sub Common Stock.............................................................4
1.9. Certificate of Incorporation and By-Laws............................................4
1.10. Directors and Officers.............................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY STOCKHOLDER..............................4
2.1. Authority; Execution and Delivery...................................................4
2.2. Ownership of Company Stock..........................................................5
2.3. Validity of Contemplated Transactions...............................................5
2.4. Consents and Approvals..............................................................5
2.5. Litigation..........................................................................5
2.6. No Other Agreements to Sell the Company Stock or the Business of the Company........5
2.7. Accounts and Notes Receivable, etc..................................................6
2.8. Related Parties.....................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY..................................6
3.1. Organization........................................................................6
3.2. Capitalization; Subsidiaries........................................................7
3.3. Authorization; Binding Agreement....................................................7
3.4. Noncontravention....................................................................7
3.5. Governmental Approvals..............................................................8
3.6. Financial Statements................................................................8
3.7. No Undisclosed Liabilities..........................................................8
3.8. Validity of Leases and Contracts....................................................8
3.9. Absence of Certain Changes or Events................................................9
3.10. Litigation, Judgments, No Default, Etc............................................11
3.11. Compliance........................................................................11
3.12. Accounts Receivable; Equipment....................................................11
3.13. Tax Matters.......................................................................11
3.14. Employee Benefit Plans............................................................14
3.15. Finders and Investment Bankers....................................................16
3.16. Collective Bargaining Agreements; Employment Matters..............................16
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3.17. Insurance.........................................................................16
3.18. No Conflict of Interest...........................................................16
3.19. Owned Property....................................................................17
3.20. [Reserved]........................................................................19
3.21. Compliance with Laws..............................................................19
3.22. Licenses and Permits..............................................................19
3.23. Copies of Documents...............................................................19
3.24. No Existing Discussions...........................................................20
3.25. Year 2000.........................................................................20
3.26. Disclosure........................................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................20
4.1. Organization.......................................................................20
4.2. Capitalization.....................................................................21
4.3. Authorization; Binding Agreement...................................................21
4.4. Noncontravention...................................................................21
4.5. SEC Documents......................................................................22
4.6. Governmental Approvals.............................................................22
4.7. Absence of Changes.................................................................23
ARTICLE V COVENANTS OF THE COMPANY AND THE COMPANY STOCKHOLDER...................................23
5.1. Conduct of Business of the Company.................................................23
5.2. Access and Information.............................................................25
5.3. Closing Financial Statements.......................................................25
5.4. No Solicitation....................................................................26
5.5. Takeover Statutes..................................................................26
5.6. Non-Disclosure; Public Announcements...............................................26
5.7. Taxes..............................................................................27
5.8. Lock-up............................................................................27
ARTICLE VI COVENANTS OF PARENT AND MERGER SUB....................................................28
6.1. Conduct of Business of Parent and Merger Sub.......................................28
6.2. Indemnification of Directors and Officers..........................................28
ARTICLE VII ADDITIONAL AGREEMENTS................................................................29
7.1. Reasonable Efforts.................................................................29
7.2. Changes in Representation and Warranties; Notification of Certain Matters..........30
ARTICLE VIII CONDITIONS..........................................................................30
8.1. Conditions to Each Party's Obligations.............................................30
8.2. Conditions to Obligation of Parent and Merger Sub..................................31
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8.3. Conditions to Obligation of the Company and the Company Stockholder................32
8.4. Frustration of Closing Conditions..................................................33
ARTICLE IX NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC............................33
9.1. Survival of Representations, Warranties, Etc.......................................33
9.2. Company Stockholder's Agreement to Indemnify.......................................33
9.3. Parent Agreement to Indemnify......................................................34
9.4. Procedures Relating to Indemnification.............................................35
ARTICLE X TERMINATION............................................................................35
10.1. Termination.......................................................................35
10.2. Procedure for and Effect of Termination...........................................36
ARTICLE XI MISCELLANEOUS.........................................................................37
11.1. Certain Definitions...............................................................37
11.2. Disclosure Schedule...............................................................37
11.3. Amendment and Modification........................................................38
11.4. Waiver of Compliance; Consents....................................................38
11.5. Restrictive Legend................................................................38
11.6. Notices...........................................................................38
11.7. Assignment........................................................................39
11.8. Expenses..........................................................................40
11.9. Gender; Plurals, etc..............................................................40
11.10. Governing Law....................................................................40
11.11. Counterparts.....................................................................40
11.12. Interpretation...................................................................40
11.13. Entire Agreement.................................................................40
11.14. No Third Party Beneficiaries.....................................................40
11.15. Severability.....................................................................40
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of May 15, 2000 (the
"Agreement"), by and among AppliedTheory Corporation, a Delaware corporation
("Parent"), AppliedTheory Seattle Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), The Cordada Group, Inc., a
Washington corporation (the "Company"), and Xxxxxx X. Xxxxxxxx (the "Company
Stockholder").
WHEREAS, the Company Stockholder and the respective boards of
directors of each of Parent, Merger Sub and the Company have determined that
the merger of the Merger Sub with and into the Company (the "Merger") on the
terms and conditions contained herein, in a transaction that is intended to
result in the tax-free issuance of shares of Parent to the stockholders of the
Company and in accordance with the Delaware General Corporation Law (the
"DGCL") and the Washington Business Corporation Act (the "WBCA"), is advisable
and have approved the Merger;
WHEREAS, Merger Sub was created solely for the purpose of effecting
the Merger and will conduct no other activity; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement and to prescribe certain conditions to the Merger.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) and in
accordance with the DGCL and the WBCA, Merger Sub shall be merged with and into
the Company and the separate corporate existence of Merger Sub shall thereupon
cease. The Company shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and will be a
wholly-owned subsidiary of Parent. The Merger is intended to be effected such
that it qualifies as a reorganization under Section 368 (a) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Merger shall have the
effects specified in the DGCL and the WBCA.
1.2. Closing; Effective Time. Subject to the provisions of
Article VIII, the closing of the Merger (the "Closing") shall take place in New
York City at the offices of Xxxxx Xxxxxxxxxx LLP, as soon as practicable but in
no event later than 10:00 a.m. New York City time on the second business day
after the earliest date on which each of the conditions set forth in Article
VIII (other than conditions that are satisfied by the delivery of documents or
the payment of money at or prior to the Closing) have been satisfied or waived
by the party or parties entitled to the benefit of such conditions, or at
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such other date, time and place as Parent and the Company shall mutually agree.
The date on which the Closing actually occurs is hereinafter referred to as the
"Closing Date." At the Closing, Merger Sub and the Company shall (i) cause a
certificate of merger to be executed and filed with the Secretary of State of
the State of Delaware in accordance with the DGCL, and (ii) cause articles of
merger to be filed with the Secretary of State of the State of Washington in
accordance with the WBCA (collectively, the "Merger Certificates"). The Merger
shall become effective as of the date and time of such filing or as of such
subsequent date and time as Parent and the Company shall agree to and shall be
set forth in the Merger Certificates (the "Effective Time").
1.3. Effect on Capital Stock.(a) At the Effective Time, each
share of common stock, no par value, of the Company (the "Company Stock")
issued and outstanding immediately prior to the Effective Time (other than
Parent Shares (as defined in Section 1.3(c)) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive 14.95998 shares of common stock, par value $.01 per share, of
Parent ("Parent Common Stock") (the aggregate number of shares of Parent Common
Stock into which the outstanding Company Stock is convertible being referred to
as the "Merger Consideration").
(b) Subject to Section 1.6 hereof, the Merger
Consideration shall be delivered to the holders of the Company Stock at the
Closing in exchange for certificates representing all outstanding shares of
Company Stock and any other outstanding ownership interests in the Company. The
Parent Common Stock delivered as Merger Consideration hereunder shall not be
registered under the Securities Act of 1933, as amended, (the "Securities Act")
and the sale or other disposition of such Parent Common Stock shall be subject
to the restrictions arising under Rule 144 of the Securities Act until a
registration statement shall have been filed for the purposes of registering
such Parent Common Stock under the Securities Act. As of the Effective Time,
all shares of Company Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist.
(c) Each share of Company Stock held in the Company's
treasury immediately prior to the Effective Time, if any, and each share of
Company Stock then owned by Parent, Merger Sub or any other wholly-owned
subsidiary of Parent, other than any such shares held on behalf of third
parties, if any (collectively, "Parent Shares"), shall, by virtue of the
Merger, be automatically cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(d) No fractional shares of Parent Common Stock shall be
issued pursuant hereto. In lieu of the issuance of any fractional share of
Parent Common Stock, cash adjustments will be paid to the Company Stockholder
in respect of any fractional share of Parent Common Stock that would otherwise
be issuable, and the amount of such cash adjustment shall be equal to the
product obtained by multiplying the Company Stockholder's fractional share of
Parent Common Stock that would otherwise be payable by the last price per share
as quoted on the Nasdaq Stock Market on the last trading day immediately
preceding the Closing Date.
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1.4. [Reserved].
1.5. [Reserved].
1.6. Escrow of Parent Common Stock; Adjustment to Merger
Consideration. The parties hereto agree that, at the Closing, a portion of the
Parent Common Stock delivered to the Company Stockholder as Merger
Consideration representing 20% of the Merger Consideration (the "Escrow Fund")
shall be held by Parent as escrow agent (the "Escrow Agent") subject to an
escrow agreement by and among Parent, the Company Stockholder and the Escrow
Agent (the "Escrow Agreement"). A form of the Escrow Agreement is attached
hereto as Exhibit A. The parties hereto acknowledge and agree that the Escrow
Agent shall hold the Escrow Fund as escrow agent pursuant to the Escrow
Agreement. The Escrow Fund shall be subject to the Escrow Agreement, provided
that, as further described in the Escrow Agreement, during the term of the
Escrow Agreement, the Company Stockholder shall be deemed the owner of and
shall have voting power over all Parent Common Stock in the Escrow Fund,
provided, further, that any dividends or other distributions with respect to
Parent Common Stock that are made in the form of cash or any other form of
property, except for ownership rights in Parent or any subsidiary thereof,
shall be distributed to the Company Stockholder, provided, further, that any
dividends or other distributions with respect to Parent Common Stock that are
made in the form of capital stock or of any other form of ownership interest in
Parent or any of its subsidiaries shall remain in the Escrow Fund until the end
of the term of the Escrow Agreement. As further provided in the Escrow
Agreement, if during the term of the Escrow Agreement Parent shall suffer a
Loss in accordance with Section 9.2 hereof, upon presenting a claim under
Section 9.4 hereof that is uncontested by Company Stockholder, or if contested,
when finally resolved or adjudicated by a court of law in favor of Parent with
no opportunity for appeal, Parent shall be entitled to receive for its own
account payment out of the Escrow Fund of that number of shares of Parent
Common Stock, valued at the last price per share as quoted on the Nasdaq Stock
Market on the last trading day immediately preceding the day when such shares
are transferred to Parent to reimburse Parent for such Loss and satisfy
Parent's right to indemnification under Section 9.2. Any claims for payment in
respect of Losses (as defined in Section 9.2 hereof) which are made by Parent
under Section 9.2 hereof during the period between the Closing and the one-year
anniversary of the Closing (the "Escrow Release Date") shall be satisfied out
of the Escrow Fund unless and until the Escrow Fund shall be depleted, in which
case Parent shall be entitled to payment directly from the Company Stockholder
in satisfaction of any Losses; provided, that Parent's right to payment for
Losses is in all cases, in addition to and not in substitution of any other
rights or remedies available to Parent under this Agreement, any other
agreement in respect of the transactions contemplated by this Agreement, or by
operation of law or in equity, including the right to specific performance or
injunctive relief. On the Escrow Release Date, any shares of Parent Common
Stock remaining in the Escrow Fund and not the subject of an unresolved claim
between Parent and the Company Stockholder shall be released to the Company
Stockholder, subject to the provisions of the Escrow Agreement. Upon resolution
or final adjudication by a court of law in favor of the Company Stockholder
with no opportunity for additional appeal of a
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claim under Section 9.4 hereof, any shares of Parent Company Stock remaining in
the Escrow Fund shall be released to the Company Stockholder.
1.7. Registration Rights. The Parent Common Stock to be
delivered to the Company Stockholder as Merger Consideration shall have the
benefit of a registration rights agreement between Parent and the Company
Stockholder in the form attached hereto as Exhibit B (the "Registration Rights
Agreement").
1.8. Merger Sub Common Stock. Each share of the common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of Common Stock of the Surviving
Corporation.
1.9. Certificate of Incorporation and By-Laws. At the Effective
Time, and to the extent consistent with the WBCA, (i) the Articles of
Incorporation of the Surviving Corporation shall be amended and restated in its
entirety to read as the Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time and the name of the Surviving
Corporation shall be AppliedTheory Seattle Corporation, and (ii) the By-Laws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
By-Laws of the Surviving Corporation until thereafter amended in accordance
with applicable law.
1.10. Directors and Officers. The directors and officers of
Merger Sub immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-Laws of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY STOCKHOLDER
Except as disclosed in writing in the Disclosure Schedules being
delivered at or prior to the execution of this Agreement, which Disclosure
Schedules shall identify the specific sections or subsections in this Agreement
to which each such disclosure relates, the Company Stockholder hereby
represents and warrants to Parent and Merger Sub as follows:
2.1. Authority; Execution and Delivery. The Company Stockholder
has the power, capacity and authority to enter into this Agreement and the
other agreements contemplated hereby and to perform fully his obligations
hereunder and thereunder. This Agreement and the other agreements contemplated
hereby have been duly executed and delivered by the Company Stockholder and
constitutes the legal, valid and binding obligations of the Company
Stockholder, enforceable against the Company Stockholder in accordance with
their terms, except as the enforcement hereof (or thereof) may be
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limited by bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights in general or by general principles of equity.
2.2. Ownership of Company Stock. The Company Stockholder is the
beneficial and record owner of the shares of Company Stock identified on
Section 2.2 of the Disclosure Schedule as being owned by him and all such
shares of Company Stock are free and clear of all liens, claims, pledges,
charges, encumbrances, third party rights, security interests or other
restrictions (collectively, "Liens").
2.3. Validity of Contemplated Transactions. Subject to Sections
3.4 and 3.5 of this Agreement, the execution, delivery and performance of this
Agreement by the Company Stockholder does not and will not violate, conflict
with or result in the breach of any term, condition or provision of, or require
the consent of any other person under (a) any existing law, ordinance, or
governmental rule or regulation to which the Company Stockholder is subject,
(b) any judgment, order, writ, injunction, decree or award of any Governmental
Entity which is applicable to the Company Stockholder, or (c) any mortgage,
indenture, agreement, contract, commitment, lease, plan or other instrument,
document or understanding, oral or written, to which such Company Stockholder
is a party, by which the Company Stockholder may have rights or by which any of
the properties or assets of the Company Stockholder may be bound or affected,
or give any party with rights thereunder the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations thereunder.
2.4. Consents and Approvals. Except for spousal consents,
neither the execution and delivery by the Company Stockholder of this Agreement
or the other agreements contemplated hereby, nor the performance of the
transactions contemplated hereby and thereby, require the consent or approval
of any person nor constitute (with or without notice or lapse of time or both)
a default or cause any payment obligation to arise under (a) any law or court
order to which the Company Stockholder is subject, (b) any Contract or other
document to which the Company Stockholder is a party or by which the properties
or other assets of the Company Stockholder may be subject.
2.5. Litigation. There is no action, claim, suit or proceeding
pending or, to the knowledge of the Company Stockholder, threatened by or
against or affecting the Company Stockholder or his Company Stock and, to the
knowledge of the Company Stockholder, there is no investigation pending or
threatened against or affecting the Company Stockholder or his Company Stock,
in each case before any court or governmental or regulatory authority or body,
that could reasonably be expected to have an adverse effect on the consummation
of the transactions contemplated by this Agreement. There are no writs,
decrees, injunctions or orders of any court or governmental or regulatory
agency, authority or body outstanding against the Company Stockholder with
respect to his Company Stock.
2.6. No Other Agreements to Sell the Company Stock or the
Business of the Company. Except as provided for in this Agreement, the Company
Stockholder has no obligation, absolute or contingent, to any other person to
(i) sell their Company Stock, (ii) sell any assets of the Company (other than
sales of inventory in the ordinary course of
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the Company's business), (iii) issue, sell or otherwise transfer any capital
stock or any security convertible into or exchangeable for capital stock of the
Company, (iv) effect any merger, consolidation or other reorganization of the
Company or (v) enter into any agreement with respect to any of the foregoing.
2.7. Accounts and Notes Receivable, etc. Except as set forth on
Section 2.7 of the Disclosure Schedule, there are no outstanding Company
receivables from or advances to the Company Stockholder. There is no contest,
claim, counterclaim, defense or right of set-off with respect to any amounts
owing from the Company Stockholder to the Company.
2.8. Related Parties. Except as set forth on Section 2.8 of the
Disclosure Schedule, the Company Stockholder does not have, or has not had,
directly or indirectly, any interest in any entity that conducts or has
conducted business, or any entity that is or has been a party to an agreement,
with the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY
Except as disclosed in writing in the Disclosure Schedules being
delivered at or prior to the execution of this Agreement, which Disclosure
Schedules shall identify the specific sections or subsections in this Agreement
to which each such disclosure relates, the Company and the Company Stockholder
hereby jointly and severally represent and warrant to Parent as follows:
3.1. Organization. The Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company has no subsidiaries. The Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by the Company or the nature of the
business conducted makes such qualification or licensing necessary, except for
such failures to be so duly qualified or licensed and in good standing that,
individually or in the aggregate, would not have a material adverse effect on
the properties, business, prospects, assets, condition (financial or
otherwise), or results of operations of the Company (a "Company Material
Adverse Effect"). Section 3.1 of the Disclosure Schedule (as defined in Section
11.2 hereof) sets forth a list of all jurisdictions where the Company is
qualified to do business. The Company has previously delivered to Parent true,
correct and complete copies of the Articles of Incorporation and by-laws (or
equivalent governing instruments) and all amendments thereto, as currently in
effect, of the Company.
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3.2. Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists
of 100,000 shares of Company Stock, of which 52,488 shares are issued and
outstanding. As of the date hereof, except as disclosed on Section 3.2(a) of
the Disclosure Schedule no Company Stock Rights were outstanding. Except as
disclosed on Section 3.2(a) of the Disclosure Schedule, the Company has not
granted, nor has it otherwise promised to grant, nor has it undertaken to
grant, any Company Stock Rights. All issued and outstanding shares of Company
Stock have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as disclosed on Section
3.2(a) of the Disclosure Schedule, there are no shareholder agreements, voting
agreements, voting trusts or other similar arrangements, to which the Company
is a party, which have the effect of restricting or limiting the transfer,
voting or other rights associated with the capital stock of the Company.
Section 3.2(a) of the Disclosure Schedule contains a true, accurate and correct
shareholders' list setting forth the number of shares of Company Stock owned
beneficially and of record by each stockholder of the Company as of the date of
this Agreement.
(b) Except as disclosed on Section 3.2(b) of the
Disclosure Schedule, the Company does not own, directly or indirectly, any
equity interest in any corporation, partnership, joint venture, business, trust
or entity.
3.3. Authorization; Binding Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and all agreements contemplated hereby. The execution and delivery of this
Agreement and all agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby have been unanimously approved by
the Board of Directors of the Company and duly and validly authorized by all
necessary corporate action on the part of the Company and, where applicable,
the Company Stockholder. This Agreement constitutes, and all agreements and
documents contemplated hereby to which the Company is, or will be, a party
(when executed and delivered pursuant hereto for value received) will
constitute, valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
3.4. Noncontravention. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (a) conflict with or result in any breach of any provision of the Articles
of Incorporation or by-laws (or equivalent governing instruments) of the
Company, (b) except as set forth on Section 3.4 of the Disclosure Schedule,
require any consent or approval under or conflict with or result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any Real
Property Lease (as hereinafter defined), Contract (as hereinafter defined),
Future Contract (as hereinafter defined), Indebtedness (as hereinafter defined)
or any other note, bond, mortgage,
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indenture, license, agreement or other instrument or obligation (the "Other
Agreements") to which the Company is a party or by which any of them or any
portion of their properties or assets may be bound or (c) violate any order,
judgment, writ, injunction, determination, award, decree, law, statute, rule or
regulation (collectively, "Legal Requirements") applicable to the Company or
any portion of its properties or assets, except with respect to clauses (b) and
(c) such matters that, individually or in the aggregate, have not had and could
not reasonably be expected to have a Company Material Adverse Effect.
3.5. Governmental Approvals. No consent, approval or
authorization of, or declaration or filing, with any foreign, federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality (each, a "Governmental Entity") on the part of the Company
that has not been obtained or made is required in connection with the execution
or delivery by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby, other than (a) the filing of
applicable merger certificates, and (b) consents, approvals, authorizations,
declarations or filings that, if not obtained or made, would not, individually
or in the aggregate, have a Company Material Adverse Effect or prevent the
Company from consummating the transactions contemplated hereby.
3.6. Financial Statements. Section 3.6 of the Disclosure
Schedule sets forth true, correct and complete copies of the unaudited balance
sheets, statements of income, statements of stockholders' equity and statements
of cash flows for the fiscal years ended December 31, 1997, December 31, 1998
and December 31, 1999, and unaudited balance sheets as of March 31, 2000 and
April 30, 2000 and unaudited statements of income, statements of changes of
operations, statements of stockholders' equity and statements of cash flows for
the three-month period ending March 31, 2000 as well as for the four-month
period ending April 30, 2000 (collectively, the "Company Financial
Statements"). The Company Financial Statements, including the related notes,
have been prepared from and are in accordance with the books and records of the
Company and are true, complete and accurate and fairly present in all material
respects the financial position, results of operations and changes in financial
position of the Company as of the dates and for the periods indicated, in each
case in accordance with GAAP consistently applied throughout the periods
indicated.
3.7. No Undisclosed Liabilities. Except as noted in Section 3.7
of the Disclosure Schedule, the Company does not have any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) that are not
reflected in the Company Financial Statements except for (i) liabilities and
obligations incurred in the ordinary course of business since and April 30,
2000, relating to the period after and April 30, 2000, none of which,
individually or in the aggregate, have had or could reasonably be expected to
have Company Material Adverse Effect.
3.8. Validity of Leases and Contracts. The Company does not own
any real property. Section 3.8 of the Disclosure Schedule sets forth a list of
every (a) lease of real property and all other leased interests in real
property that are used by the Company (a "Real Property Lease"), (b) all
material leases, licenses, contracts, agreements,
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purchase or sales orders, employee secrecy or confidentiality agreements,
undertakings, indentures and written commitments, to which the Company is a
party or by which any of the assets of the Company are bound, including all
ongoing agreements, licenses, written commitments or other engagements and
other instruments of any kind, including all agreements by any person or entity
with the Company with respect to non-competition or non-disclosure that relate
to the Company or any of its assets, but excluding Company Plans (as defined in
Section 3.14), (collectively the "Contracts"), (c) any written proposal,
quotation or bid made or received by the Company in connection with its
business that, if accepted, would lead to a contract for the provision of
services by the Company (a "Future Contract") and (d) any note, debenture,
bond, equipment trust agreement, letter of credit, loan agreement or other
contract or commitment for the borrowing or lending of money or agreement or
arrangement for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person (collectively "Indebtedness"). Except as set
forth on Section 3.8 of the Disclosure Schedule, each Real Property Lease,
Contract, Future Contract or Indebtedness, is valid, legally binding and
enforceable in accordance with its terms and neither the Company is in default
under any material provision of any such Real Property Lease, Contract, Future
Contract or Indebtedness. Upon the completion of the transactions contemplated
by this Agreement, each such agreement will be valid, legally binding and
enforceable by the Surviving Corporation in accordance with its terms. Any
party from whom the Company leases real property or which is a party to any
Contract, Future Contract or Indebtedness, is not, and will not be, with due
notice or lapse of time or both, in default under any provision of any such
Real Property Lease, Contract, Future Contract or Indebtedness. The Company is
not a party to any oral agreements, undertakings or commitments with respect to
any of the matters listed in this Section 3.8
3.9. Absence of Certain Changes or Events. Except as set forth
on Section 3.9 of the Disclosure Schedule, since April 30, 2000 or such other
date as is provided hereunder, the Company has conducted business in the
ordinary and usual course and, without limiting the generality of the
foregoing:
(a) There has not been a Company Material Adverse Effect.
(b) There has not been any split, combination or
reclassification of Company Stock or any issuance, or authorization of the
issuance, of any securities in respect of, in lieu of, or in substitution for
the capital stock of the Company or any declaration, setting side or payment of
any dividend or other distribution (whether in cash, securities, property or
otherwise) in respect of the capital stock of the Company.
(c) The Company has not purchased, redeemed or otherwise
acquired or committed itself to acquire, directly or indirectly, any of the
capital stock of the Company;
(d) The Company has not sold, assigned, conveyed or
otherwise transferred any Owned Property (as defined in Section 3.19);
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(e) The Company has not sold, assigned, conveyed or
otherwise transferred any properties or assets of the Company;
(f) The Company has not mortgaged, pledged or subjected to
any Lien any assets of the Company;
(g) The Company has not cancelled, terminated, entered
into or modified any Contract, Future Contract or Real Property Lease;
(h) The Company has not waived any material right of the
Company with respect to the business of the Company, whether or not in the
ordinary course of business;
(i) The Company has not incurred any liability or loss
with respect to any of the assets or operations of the Company, except for
liabilities incurred in the ordinary course of business, consistent with past
practices, which do not result in a Company Material Adverse Effect;
(j) The Company has not incurred any capital expenditure
or executed any lease or other agreement with respect to any assets of the
Company or any aspect of the business of the Company, or incurred any liability
therefor, requiring any payment or payments in excess of $10,000 individually
or $25,000 in the aggregate;
(k) There have not been any material cancellations or any
threats of material cancellations by any supplier, customer or contractor of
the Company with respect to the business of the Company;
(l) The Company has not effected any amendment or
supplement to, or extension of, any Company Plan;
(m) The Company has not (i) granted to any director or
executive officer of, or consultant to, the Company any increase in
compensation, except for customary increases in cash compensation in the
ordinary course of business consistent with prior practice or as was required
under employment agreements or plans in effect as of December 31, 1999, (ii)
agreed to any granting by the Company to any such director, executive officer
or consultant of any increase in severance or termination pay, except as was
required under any employment, severance or termination agreements or plans in
effect as of December 31, 1999, (iii) except as permitted by Section 5.1, after
the date of this Agreement, agreed to any entry by the Company into, or any
amendment of, any employment, consulting, deferred compensation,
indemnification, severance or termination agreement with any such director,
executive officer or consultant or (iv) agreed to, or taken any action to,
accelerate the vesting of any Company Option or other equity-based
compensation;
(n) The Company has not has made any change in accounting
methods or principles used for financial or regulatory reporting purposes
materially affecting the consolidated assets, liabilities or results of
operations; and
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(o) The Company has not entered into any agreement or
arrangement or otherwise agreed to do any of the foregoing.
3.10. Litigation, Judgments, No Default, Etc. Except as set forth
on Section 3.10 of the Disclosure Schedule, (a) there is no action or
proceeding pending or, to the best knowledge of the Company, threatened against
or affecting the Company, the outcome of which, individually or in the
aggregate, could reasonably be expected to result in a Company Material Adverse
Effect, (b) there is no judgment, decree, injunction, rule or order of any
court, arbitrator or Governmental Entity (collectively, "Orders") outstanding
against the Company, and (c) to the best knowledge of the Company, there are no
facts that would result in any such action or proceeding which could reasonably
be expected to have a Company Material Adverse Effect.
3.11. Compliance. Except as disclosed on Section 3.11 of the
Disclosure Schedule, the Company is not in default or violation of any term,
condition or provision of (a) its certificate of incorporation or by-laws (or
equivalent governing instruments), or (b) any Real Property Lease, Contract,
Indebtedness or Other Agreements to which it is a party or by which any of them
or any portion of their properties or assets may be bound, except, with respect
to the foregoing clause (b), such matters that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect.
3.12. Accounts Receivable; Equipment.
(a) Section 3.12 of the Disclosure Schedule sets forth a
complete list of the accounts receivable of the Company as of April 30, 2000.
The accounts receivable of the Company arose out of the ordinary course of
business of the Company, have been billed or invoiced in the ordinary course of
business in accordance with all applicable laws, regulations and administrative
rulings and procedures, represent bona fide indebtedness of the applicable
debtor of the Company, not subject to defense, set-off or counterclaim and are
collectible in full, net of the reserves set forth in the books of the Company.
(b) All material assets of the Company consisting of
equipment, whether or not reflected in the Company Financial Statements, are
well maintained and in good operating condition, except for reasonable wear and
tear and except for items which have been written down in the Company Financial
Statements to a realizable market value or for which adequate reserves have
been provided in the Company Financial Statements. The present quantity of all
such equipment of the Company is reasonable and warranted in the present course
of the business conducted by the Company. All of such equipment (except for
leased equipment for which the lessors have valid security interest) is free
and clear of any Liens or other encumbrance, except as set forth on Section
3.12(b) of the Disclosure Schedule.
3.13. Tax Matters. "Taxes", as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies, or other
assessments, including, without limitation, all net income, gross income,
sales, use, ad valorem,
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transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, alternative
minimum, severance or withholding taxes or charges imposed by any governmental
entity, whether foreign or domestic, and includes any additions to tax,
interest and penalties. "Tax Return", as used in this Agreement, means a
report, return, statement, declaration or other information required to be
supplied with respect to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
(a) The Company is, and has been since inception and at
all times during its existence, a validly electing S Corporation within the
meaning of Sections 1361 and 1362 of the Code and under any corresponding
provisions of applicable law in jurisdictions where it files Tax Returns. The
Company is not liable for any Tax under Section 1374 of the Code (or any
similar provision of state or local law) and has not, in the past ten years,
acquired assets from another corporation in a transaction in which the
Company's tax basis in the acquired assets was determined, in whole or in part,
by reference to the tax basis of the acquired assets (or any other property) in
the hands of the transferor.
(b) Filing of Timely Tax Returns. All Tax Returns
required to be filed by the Company and any Company Subsidiary under applicable
law have been filed on a timely basis. All such Tax Returns were and are true,
complete and correct.
(c) Payment of Taxes. The Company has, within the time and
in the manner prescribed by law, paid all Taxes that are currently due and
payable. No written claim (and, to the Company's knowledge, no other claim) has
ever been made by an authority in a jurisdiction where the Company does not
file Tax Returns that it is or may be subject to taxation in that jurisdiction.
(d) Tax Reserves. The Company has established (and until
the Closing Date will maintain) on their books and records, including in the
Company Financial Statements (i) reserves adequate to pay all Taxes and all
deficiencies in Taxes asserted, proposed or threatened against the Company and
(ii) reserves for deferred income taxes, in each case in accordance with GAAP.
(e) Tax Liens. There are no Tax liens upon the assets of
the Company except liens for Taxes not yet due.
(f) Withholding Taxes. The Company has complied in all
material respects with the provisions of the Code relating to the withholding
of Taxes, including, without limitation, the withholding and reporting
requirements under Sections 1441 through 1464, 3401 through 3406, and 6041
through 6049 of the Code, as well as any similar provisions under any other
laws, and have, within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental authorities all
amounts required.
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(g) Extensions of Time for Filing Tax Returns. The Company
has not requested any extension of time within which to file any Tax Return,
which Tax Return has not since been filed.
(h) Waivers of Statute of Limitations. The Company has not
executed any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns.
(i) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all Taxes has expired for all applicable Tax
Returns of the Company and any Company Subsidiary or those Tax Returns have
been examined by the appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any Taxes has been proposed, asserted,
assessed or, to the Company's knowledge, threatened against the Company that
has not be resolved and paid in full or previously disclosed by the Company to
the Parent.
(j) Audit, Administrative and Court Proceedings. No audits
or other administrative proceedings or court proceedings are presently pending
with regard to any Taxes or Tax Returns of (i) the Company or (ii) the Company
Stockholder, to the extent relating to the Company. The Company has no
knowledge of any threatened action, audit or administrative or court proceeding
with respect to any such Taxes or Tax Returns. Further, to the best of the
knowledge of the Company, no state of facts exists or has existed which would
constitute grounds for the assessment of any liability for Taxes with respect
to the periods which have not been audited by the Internal Revenue Service (the
"IRS") or other taxing authority.
(k) Tax Rulings. The Company has not received a Tax Ruling
(as defined below) or entered into a Closing Agreement (as defined below) with
any taxing authority that could have a continuing adverse effect after the
Closing Date. "Tax Ruling", as used in this Agreement, shall mean a written
ruling of a taxing authority relating to Taxes. "Closing Agreement", as used in
this Agreement, shall mean a written and legally binding agreement with a
taxing authority relating to Taxes.
(l) Availability of Tax Returns. To the extent not
previously provided, as soon as practicable after the date hereof, the Company
will make available to the Parent complete and accurate copies of such of the
following materials as the Parent may reasonably request: (i) Tax Returns filed
by the Company since its incorporation, (ii) audit reports received from any
taxing authority relating to any Tax Return filed by the Company and (iii)
Closing Agreements entered into by the Company with any taxing authority.
(m) Tax Sharing Agreements. The Company is not a party to
any Tax allocation or sharing or similar agreement or arrangement with any
person.
(n) Affiliated Groups; Liability for Others. The Company
has never been a member of an affiliated group of corporations filing
consolidated, combined or unitary Tax Returns other than an affiliated group in
which the Company was the
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common parent. The Company has no liability for Taxes of any person other than
the Company under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(o) Section 341(f). The Company has not filed a consent
pursuant to Section 341(f) of the Code or has agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as that term is
defined in Section 341(f)(4) of the Code) owned by the Company.
(p) Section 168. No property of the Company is property
that the Company or any party to this transaction is or will be required to
treat as being owned by another person pursuant to the provisions of Section
168(f)(8) of the Code (as in effect prior to its amendment by the Tax Reform
Act of 1986) or is "tax-exempt use property" within the meaning of Section 168
of the Code.
(q) Section 481 Adjustments. The Company is not required
to include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company, and
the IRS has not proposed any such adjustment or change in accounting method.
(r) Section 453. The Company has not disposed of any
property in a transaction accounted for under the installment method pursuant
to Section 453 of the Code.
(s) Section 280G. The Company is not a party to any
agreement, contract, or arrangement that could result, either directly or
indirectly, on account of the transactions contemplated hereunder, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code.
(t) Real Property Holding Corporation. The Company has not
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii).
3.14. Employee Benefit Plans.
(a) Section 3.14(a) of the Disclosure Schedule sets forth
a true and correct list of each deferred compensation plan, stock option plan,
incentive compensation plan, equity compensation plan, "welfare plan" (within
the meaning of section 3(1) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")); "pension plan" (within the meaning of section 3(2)
of ERISA); each employment, termination or severance agreement; and each other
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 the Company, or by any trade or business, whether or not incorporated,
which together with the Company would be deemed a "single employer" within the
meaning of Section 4001 of ERISA (an "ERISA Affiliate") for the benefit of any
employee or former employee of the Company. Such plans are referred to
collectively herein as the "Company Plans".
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(b) The Company has heretofore made available to Parent
with respect to each of the Company Plans true and correct copies of each of
the following documents if applicable: (i) the Company Plan document; (ii) the
actuarial report for such Company Plan for each of the last two years, (iii)
the most recent determination letter from the Internal Revenue Service for such
Plan, (iv) the most recent summary plan description and related summaries of
material modifications and (v) the Form 5500 tax forms for each of the last two
years.
(c) Each of the Company Plans is in material compliance
with its terms and the applicable provisions of the Code and ERISA; each of the
Company Plans intended to be "qualified" within the meaning of section 401(a)
of the Code has received a determination letter from the Internal Revenue
Service that the Company Plan is qualified and the Company knows of no
condition or event that could reasonably be expected to adversely affect such
status; neither the Company nor any ERISA Affiliate has or at any time in the
past has had (i) any liability, contingent or otherwise, under Title IV of
ERISA or Section 412 of the Code, (ii) an obligation to contribute to any
"multiemployer plan" (as defined in Section 3(37) of ERISA); and there are no
pending, or to the knowledge of the Company, threatened or anticipated
disputes, law suits, investigations, audits, complaints or claims (other than
routine claims for benefits) by, on behalf of or against any of the Company
Plans or any trusts related thereto.
(d) The Company has no current or projected liability in
respect of post-employment or post-retirement health or medical or life
insurance benefits for retired, former or current employees of the Company,
except as required to avoid excise tax under Section 4980B of the Code and to
comply with Section 601 of ERISA.
(e) The execution of, and performance of the transactions
contemplated in this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any Company
Plan, trust or loan that will or may result in any material payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any current or former employee, executive or director of the
Company.
(f) With respect to each Company Plan, there has not
occurred, and no person or entity is contractually bound to enter into, any
nonexempt "prohibited transaction" within the meaning of Section 4975 of the
Code or Section 406 of ERISA, nor any transaction that would result in a civil
penalty being imposed under Section 409 or 502(i) of ERISA, except for any such
transactions which, individually or in the aggregate, would not be reasonably
likely to have a Company Material Adverse Effect.
(g) The Company has not entered into any agreement,
contract, or arrangement or made or given any undertaking that could result,
either directly or indirectly, in any claim against the Company, or, following
the Merger, Parent or the Surviving Corporation to the effect that any holder
of a Company Option is entitled to the acceleration of vesting, elimination of
transfer restrictions or any other change or modification to his or her Company
Option.
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(h) The Company is in compliance with all applicable
federal, state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment, wages, hours and
withholding except for such failures to so comply that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect.
3.15. Finders and Investment Bankers. Except as set forth on
Section 3.15 of the Disclosure Schedule, neither the Company, nor any of its
employees officers or directors has employed any investment banker, financial
advisor, broker or finder in connection with the transactions contemplated by
this Agreement, or incurred any liability for any investment banking, business
consultancy, financial advisory, brokerage or finders' fees or commissions in
connection with the transactions contemplated hereby.
3.16. Collective Bargaining Agreements; Employment Matters.
(a) The Company is not a party to or subject to any
collective bargaining agreement with any labor union. There are no labor
controversies pending or, to the best knowledge of the Company, threatened
against the Company.
(b) There are no pending collective bargaining
negotiations relating to the employees of the Company. There are no agreements
with, or pending petitions for recognition of, a labor union or association as
the exclusive bargaining agent for any or all of the employees of the Company,
no such petitions have been pending within the past five years and, to the
knowledge of the Company, there has not been any general solicitation of
representation cards by any union seeking to represent the employees of the
Company as their exclusive bargaining agent at any time within the past five
years. There is no unfair labor practice, charge or complaint or other
proceeding pending or, to the knowledge of the Company, threatened, against the
Company before the National Labor Relations Board or any other governmental
entity. There is no labor strike, slowdown or stoppage pending or, to the
knowledge of the Company, threatened, against or affecting the Company, nor has
there been any such activity within the past two years.
(c) Except as set forth on Section 3.16(c) of the
Disclosure Schedule, there are no pending claims against the Company arising
out of any statute, ordinance or regulation relating to employment practices or
occupational or safety and health standards.
3.17. Insurance. The Company carries insurance with insurers
that, to the best knowledge of the Company, are solvent, in amount and types of
coverage which are customary in the industry and against risks and losses which
are usually insured against by persons holding or operating similar properties
and similar businesses. No material claims have been asserted under any of such
insurance policies or relating to the properties, assets or operations of the
Company.
3.18. No Conflict of Interest. Except as set forth on Section
3.18 of the Disclosure Schedule, no present or former officer, director,
affiliate or associate of the
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Company has or claims to have (i) any interest in the property, real or
personal, tangible or intangible, including without limitation, licenses,
inventions, technology, processes, designs, computer programs, know-how and
formulae used in or pertaining to the business of the Company, or (ii) any
contract, commitment, arrangement or understanding, including, without
limitation, loan arrangements, with the Company. Except as set forth in Section
3.18 of the Disclosure Schedule, no present officer or director of the Company
and no affiliate thereof has any ownership or stock interest in any other
enterprise, firm, corporation, trust or any other entity which is engaged in
any line or lines of business which are the same as, or similar to, or
competitive with, the line or lines of business of the Company. For purposes of
this representation, ownership of not more than one percent of the voting stock
of any publicly held company whose stock is listed on any recognized securities
exchange or traded over the counter shall be disregarded.
3.19. Owned Property.
(a) For purposes of this Section 3.19, "Intellectual
Property" shall mean, collectively, with the exception of those items, the
absence of which would not have a Company Material Adverse Effect: (x) all U.S.
and foreign registered, unregistered and pending (i) trade names, trade dress,
trademarks, service marks, assumed names, business names and logos, internet
domain names and all registrations and applications therefor, together with all
goodwill symbolized thereby, web sites and web pages and related items (and all
intellectual property and proprietary rights incorporated therein), (ii)
computer software, data files, source and object codes, user interfaces,
manuals and other specifications and documentation and all know-how relating
thereto (collectively, the "Computer Software"), (iii) copyrights (including
without limitation those in Computer Software, and all registrations and
applications therefor), (iv) utility and design patents, registered designs and
invention disclosures (including without limitation those relating to Computer
Software), and all grants, registrations and applications therefor
(collectively, the "Patents"), (v) trade secrets, inventions, processes,
formulae, know-how, concepts, ideas, research and development, designs,
business plans, strategies, marketing and other information and customer lists
(collectively, the "Trade Secrets"), and (vi) other intellectual property,
including without limitation adequate research and development facilities; and
(y) all license, assignment, distribution or other agreements relating to any
of the items set forth in clause (x) above (collectively, the "IP Contracts").
(b) Section 3.19 of the Disclosure Schedule sets forth a
complete and accurate list of (i) all Intellectual Property in which the
Company has an ownership interest, indicating the owner thereof, and all
applications, registrations and grants with respect thereto (collectively, the
"Owned Property"), provided that such list need not identify non-material,
unregistered copyrights unless such copyrights relate to proprietary Computer
Software, (ii) all Intellectual Property (other than the Owned Property) which
is used in or relates to the business of the Company, indicating the owner or
licensor thereof, and (iii) all IP Contracts with respect to the Intellectual
Property referred to in clauses (i) and (ii) above. The Intellectual Property
included in clauses (i) and (ii) above is collectively referred to herein as
the "Company Property".
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(c) Except as set forth on Section 3.19 of the Disclosure
Schedule, the Company is the sole and exclusive owner of the Owned Property,
and is listed in the records of the appropriate U.S. and/or foreign
governmental agencies as the sole and exclusive owner of record for each
registration, grant and application listed in Section 3.19 of the Disclosure
Schedule.
(d) No act has been done or omitted to be done by the
Company, or any licensee thereof, which has had or could have the effect of
impairing or dedicating to the public, or entitling any U.S. or foreign
governmental authority or any other person to cancel, forfeit, modify or
consider abandoned, any Owned Property, or give any person any rights with
respect thereto (other than pursuant to an IP Contract listed on Section 3.19
of the Disclosure Schedule), and all of the Company's rights in the Company
Property are valid, enforceable and free of defects. The Company has no
knowledge of any facts or claims which cause or would cause any Company
Property to be invalid or unenforceable, and Company has not received any
notice that any person may bring such a claim.
(e) Except as set forth on Section 3.19 of the Disclosure
Schedule, the Company owns or otherwise has the valid right to use through an
IP Contract listed on Section 3.19 of the Disclosure Schedule any and all
Intellectual Property that is used in or is necessary or advisable for the
conduct of the Company's business as currently conducted and as contemplated to
be conducted, free and clear of any lien, encumbrance, royalty or other payment
obligations (except for royalties payable in respect of off-the-shelf Computer
Software at standard commercial rates) and otherwise on commercially reasonable
terms.
(f) Neither the Company, nor its businesses as currently
conducted or as contemplated to be conducted, is in conflict with or in
violation or infringement of, or has violated or infringed, nor has the Company
received any notice of any conflict with or violation or infringement of, nor
are proceedings or claims pending, nor have any such proceedings or claims been
instituted or asserted in writing against the Company, nor are any proceedings
threatened, alleging any violation, nor is there any valid basis for any such
proceeding or claim, of any rights or asserted rights of any other person with
respect to any Intellectual Property of such other person.
(g) No proceedings or claims in which the Company alleges
that any person is infringing upon, or otherwise violating, any Company
Property are pending, and none have been served by, instituted or asserted by
the Company, nor are any proceedings threatened alleging any such violation or
infringement, nor does the Company know of any valid basis for any such
proceeding or claim.
(h) The Company has not, prior to the date hereof,
divulged, furnished to or made accessible to any person, any Trade Secrets
included in the Company Property without prior thereto having obtained an
enforceable agreement of confidentiality from such person, and all such
confidentiality agreements are listed on Section 3.19 of the Disclosure
Schedule. All key personnel employed by the Company have signed such an
enforceable agreement of confidentiality.
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(i) The Company has obtained from all individuals who
participated in any respect in the invention or authorship of any Owned
Property (as employees of the Company, as consultants, as employees of
consultants or otherwise) effective waivers of any and all ownership rights of
such individuals in such Owned Property, and assignments to the Company of all
rights with respect thereto, other than from such individuals whose
copyrightable works the Company hereby represent to be "works made for hire"
within the meaning of Section 101 of the Copyright Act of 1976. No officer or
employee of the Company is subject to any agreement with any other person or
entity which requires such officer or employee to assign any interest in
inventions or other intellectual property or keep confidential any trade
secrets, proprietary data, customer lists or other business information or
which restricts such officer or employee from engaging in competitive
activities or solicitation of customers.
(j) The Company has taken all actions which are reasonably
necessary or advisable in order to fully protect the Company Property in a
manner consistent with prudent commercial practice in the computer services
industry.
3.20. [Reserved]
3.21. Compliance with Laws. The businesses of the Company have
been conducted in accordance with all Legal Requirements applicable thereto
(excluding ERISA, which is covered by Section 3.14 hereof), except for the
failures to so conduct such business that, individually or in the aggregate,
have not had and could not reasonably be expected to have a Company Material
Adverse Effect. The Company has not received any written notice of alleged
material violations of any of the foregoing, and there are no presently
existing circumstances which would result or be likely to result in violations
of any of the foregoing, nor are there any pending or, to the best knowledge of
the Company, threatened hearings or investigations with respect to alleged
material violations of any of the foregoing.
3.22. Licenses and Permits. The Company has obtained, and is in
compliance with, all licenses, permits, consents, approvals, orders,
certificates, authorizations, declarations and filings required by applicable
law for the conduct of the businesses and operations of the Company as now
conducted or as planned to be conducted (collectively, the "Required
Licenses"), and there are no proceedings pending or, to the best knowledge of
the Company, threatened which may result in the revocation, cancellation or
suspension, or any materially adverse modification, of any such Required
License.
3.23. Copies of Documents. The Company has previously delivered
to Parent true and complete copies of (or, in the case of any oral agreements
or arrangements, true, correct and complete written summaries thereof) all of
the agreements, arrangements or other documents in respect of items identified
on any schedule to this Agreement which is prepared by or for the Company, as
well as:
(a) all Required Licenses; and
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(b) all written results of any examinations of the Company
or any of its businesses by any governmental agency, whether federal, state or
local.
All books of account, financial and accounting records and other data
of the Company relating to the Company or any of its businesses, including
customers' and suppliers' lists, all payroll, personnel and other employee
records and any minute books have been maintained in all material respects in
accordance with good business practices and, as applicable, in accordance with
GAAP consistently applied.
3.24. No Existing Discussions. As of the date hereof, the Company
is not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to a Takeover Proposal (as defined in Section
5.4(b) hereof).
3.25. Year 2000. Except as set forth on Section 3.25 of the
Disclosure Schedule, all internal computer systems that are material to the
business, finances or operations of the Company are (i) able to receive,
record, store, process, calculate, manipulate and output dates from and after
January 1, 2000, time periods that include January 1, 2000 and information that
is dependent on or relates to such dates or time periods, in the same manner
and with the same accuracy, functionality, data integrity and performance as
when dates or time periods prior to January 1, 2000 are involved and (ii) able
to store and output date information in a manner that is unambiguous as to
century.
3.26. Disclosure. This Agreement and the schedules hereto do not
and will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein and therein not
misleading in light of the circumstances in which they were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Except as disclosed in writing in the Disclosure Schedules being
delivered at or prior to the execution of this Agreement, which Disclosure
Schedules shall identify the specific sections or subsections in this Agreement
to which each such disclosure relates, Parent and Merger Sub hereby represent
and warrant to the Company as follows:
4.1. Organization. Each of Parent and Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Parent is duly licensed or qualified
to do business as a foreign corporation and is in good standing under the laws
of any other state of the United States in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary, except where the failure to be so qualified
or to be in good standing would not have a material adverse effect on the
business, results of operations or financial condition of Parent taken as a
whole ( a "Parent Material Adverse Effect"). Merger Sub is a newly-formed,
wholly owned subsidiary of Parent
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and, except for activities related to the acquisition of the Company, Merger
Sub has not engaged in any business activities of any type or kind whatsoever.
4.2. Capitalization.
(a) The authorized capital stock of Parent consists of
90,000,000 shares of Parent Common Stock and 1,000,000 shares of Preferred
Stock, par value $.01, ("Parent Preferred Stock"). As of May 2, 2000, there
were 23,360,629 shares of Parent Common Stock and no shares of Parent Preferred
Stock issued and outstanding. Parent has no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
which are convertible into or exercisable for securities having the right to
vote) with the stockholders of Parent on any matter. All such issued and
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except as contemplated
by this Agreement, as of the date hereof there are no existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments, other than pursuant to the Parent Option Plans,
which obligate Parent or any of its subsidiaries to issue, transfer or sell any
shares of capital stock of Parent or any of its subsidiaries.
(b) The authorized capital stock of Merger Sub consists of
3000 shares of common stock, par value $.01 per share, of which 100 shares are
issued and outstanding and owned by Parent. Notwithstanding any provisions to
the contrary, Parent may, in its sole discretion, increase or decrease the
number of shares of authorized common stock of Merger Sub and the number of
shares of common stock of Merger Sub issued and outstanding owned by Parent.
Merger Sub has not engaged in any activities other than in connection with the
transactions contemplated by this Agreement.
4.3. Authorization; Binding Agreement. Each of Parent and Merger
Sub has all requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The
consummation by Parent and Merger Sub of the transactions contemplated hereby
has been approved by the Board of Directors of Parent and duly and validly
authorized by all necessary corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, valid and legally binding
obligations of Parent and Merger Sub, as the case may be, enforceable against
Parent and Merger Sub in accordance with their respective terms, except as such
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
4.4. Noncontravention. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws (or equivalent governing instruments)
of Parent or Merger Sub, (b) require any consent, approval or notice under or
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right
of termination, cancellation or acceleration) under, any of the terms,
conditions or
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provisions of any Contracts and Other Agreements to which the Parent is a party
or by which Parent or any portion of its properties or assets may be bound or
(c) violate any Legal Requirements applicable to Parent or any portion of
Parent's properties or assets, except with respect to clauses (b) and (c) such
matters that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Parent Material Adverse Effect.
4.5. SEC Documents.
(a) As of their respective dates, each registration
statement, report, proxy statement or information statement (as defined in
Regulation 14C under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Parent prepared by it since its initial public offering
(including, without limitation, the Registration Statement on Form S-1 with
respect to its initial public offering), in the form (including exhibits and
any amendments thereto) filed with the SEC, (collectively, the "Parent
Reports") (i) complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, except that
information as of a later date shall be deemed to modify information as of an
earlier date. Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related notes
and schedules) fairly presents in all material respects the consolidated
financial position of Parent as of its date, and each of the consolidated
statements of income, retained earnings and cash flows included in or
incorporated by reference into the Parent Reports (including any related notes
and schedules) fairly presents the results of operations, retained earnings or
cash flows, as the case may be, of Parent for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied
throughout the periods indicated, except as may be noted therein.
(b) Parent has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) except (i) liabilities or
obligations reflected on, or reserved against in, a balance sheet of Parent or
in the notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied and included in the Parent Reports and (ii)
liabilities or obligations incurred in the ordinary course of business which
are not material in amounts.
4.6. Governmental Approvals. No consent, approval or
authorization of, or declaration or filing with, any Governmental Entity on the
part of Parent or Merger Sub that has not been obtained or made is required in
connection with the execution or delivery by Parent or Merger Sub of this
Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, other than (a) a filing of applicable certificates of
merger, (b) filings under the Exchange Act, (c) such filings and approvals as
are required to be made or obtained under the securities or "Blue Sky" laws of
various states, and (d) consents, approvals, authorizations, declarations or
filings that, if not
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obtained or made would not, individually or in the aggregate, prevent Parent or
Merger Sub from consummating the transactions contemplated hereby.
4.7. Absence of Changes. Since the date of the most recent
Parent Report, there has not been a Parent Material Adverse Effect
ARTICLE V
COVENANTS OF THE COMPANY
AND THE COMPANY STOCKHOLDER
5.1. Conduct of Business of the Company. Except for matters set
forth in the Disclosure Schedule or otherwise expressly permitted by this
Agreement, from the date of this Agreement to the Effective Time, the Company
shall, and the Company Stockholder shall cause the Company to, conduct its
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, and use all reasonable efforts to preserve
intact its business organization, keep available the services of its current
officers and employees and keep its relationships with customers, suppliers,
licensors, licensees and employees and others with which it has business
relationships to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement or as
set forth on Section 5.1 of the Disclosure Schedule, from the date of this
Agreement to the Effective Time, the Company shall not do any of the following
without the prior written consent of the Parent:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, (ii)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any other securities thereof or
any rights, warrants or options to acquire any such shares or other securities;
(b) issue, sell, grant, pledge, deliver, otherwise
encumber or subject to any Lien (i) any shares of its capital stock, (ii) any
securities convertible into or exchangeable for, or any options, warrants or
rights to acquire, any such shares, voting securities or convertible or
exchangeable securities, or (iii) any "phantom" stock, "phantom" stock rights,
stock appreciation rights or stock-based performance units, other than the
issuance of Company Stock upon the exercise of Company Stock Rights outstanding
on the date of this Agreement and in accordance with their present terms;
(c) amend the certificate of incorporation or by-laws (or
equivalent governing instruments) of the Company, except as required by the
terms of this Agreement;
(d) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing assets of, or by any other manner, any
equity interest in or portion of any business of any corporation, partnership,
company, limited liability company, joint
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venture, association or other business organization or division thereof or (ii)
any assets that, individually, are in excess of $10,000 or, in the aggregate,
are in excess of $25,000;
(e) enter into any joint venture agreement or strategic
alliance or similar agreement or arrangement with any person or entity;
(f) sell, lease (as lessor), license, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of any
properties or assets;
(g) sell, lease, assign, transfer, convey, deliver or
otherwise dispose of, or divest, or purchase or acquire, or enter into any
material agreement with any person with respect to, any Owned Property, except
in the ordinary course of business consistent with prior practice;
(h) (i) grant to any officer or director of the Company
any increase in compensation, except to the extent required under employment
agreements in effect as of Xxxxx 00, 0000, (xx) grant to any employee, officer
or director of the Company any increase in severance or termination pay, except
to the extent required under any agreement or plan in effect as of Xxxxx 00,
0000, (xxx) enter into any employment, consulting, deferred compensation,
indemnification, severance or termination agreement with any such employee,
officer or director, (iv) establish, adopt, enter into or amend in any material
respect any collective bargaining agreement or Company Plan, (v) take any
action to accelerate any rights or benefits, or make any material
determinations not in the ordinary course of business consistent with prior
practice, under any Company Plan or (vi) take any action to accelerate, or,
where the Company has reserved the unilateral discretion to prevent such
acceleration, fail to take any action to prevent the acceleration of, the
vesting of any Company Stock Rights or other equity-related compensation;
(i) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may be required by a
change in GAAP;
(j) (i) incur any indebtedness for borrowed money,
increase any indebtedness for borrowed money, guarantee any such indebtedness
of another person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or (ii) make
any loans, advances, capital contributions to, or investments in, any other
person, other than to or in the Company;
(k) (i) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than (x) the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
prior practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the Company's financial statements (or
the notes thereto) dated April 30, 2000, which have previously
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been provided to Parent, and (y) with respect to Taxes, (ii) cancel any
indebtedness or waive any claims or rights of substantial value or (iii) waive
the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company is a party;
(l) engage in any transaction or enter into any agreement
or arrangement with any shareholder of the Company or affiliate of the Company;
(m) enter into any other agreements, commitments or
contracts that are material to the Company taken as a whole, other than in the
ordinary course of business consistent with past practice;
(n) except as contemplated by this Agreement, take or
cause to be taken any action described in clauses (b) through (g) of Section
3.9
(o) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article VIII not being satisfied;
(p) make or rescind any material election with respect to
Taxes, make a request for a Tax Ruling or enter into a Closing Agreement with
respect to Taxes, settle or compromise any material Tax matter, or, with
respect to any material Tax matter, change any method of accounting or
reporting;
(q) establish, adopt, enter into, make any new rights or
awards under, amend or otherwise modify any Company Plan, or increase the
salary, wage, bonus or other compensation of any employee; or
(r) agree, commit or arrange to do any of the foregoing.
5.2. Access and Information. The Company shall afford to
officers, employees, accountants, counsel and other representatives of Parent
reasonable access to all of their properties, personnel, books and records and
the Company shall furnish promptly to the Parent all information within their
control or possession concerning their businesses, properties and personnel as
Parent may reasonably request. All such information shall be kept confidential
in accordance with the terms of the letter of intent between the Company and
Parent, dated March 8, 2000.
5.3. Closing Financial Statements. The Company and the Company
Stockholder shall prepare balance sheets for the Company as of the last day of
the month preceding the month in which the Closing occurs (such date being the
"Closing Balance Sheet Date") and statements of income, statements of changes
of operations, statements of stockholders' equity and statements of cash flows
for the Company for the period between December 31, 1999 and Closing Balance
Sheet Date (such financial statements being referred to collectively as the
"Closing Financial Statements"), which financial statements shall be set forth
on Section 5.3 of the Disclosure Schedule. The Closing Financial Statement (i)
shall have been prepared in accordance with the books and
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records of the Company in accordance with GAAP consistently applied throughout
the period covered thereby, (ii) shall fairly present the financial condition
and results of operations of the Company as of the date thereof and for the
period covered therein and (iii) contain and reflect all necessary adjustments
and accruals for a fair presentation of the financial condition and the results
of operations of the Company as of the date thereof and for the period covered
therein.
5.4. No Solicitation.
(a) The Company shall not authorize or permit any of their
officers, directors, employees, representatives or agents (collectively,
"Representatives") to directly or indirectly solicit, initiate or encourage any
inquiries relating to or that may reasonably be expected to lead to, the making
of any proposal which constitutes, a Takeover Proposal (as defined below),
recommend or endorse any Takeover Proposal, or participate in any discussions
or negotiations, or provide third parties with any nonpublic information,
relating to any such inquiry or proposal or otherwise facilitate any effort or
attempt to make or implement a Takeover Proposal. The Company shall (i) advise
Parent orally (within one day) and in writing (as promptly as practicable) of
the receipt of any such inquiry or proposal by it or by any of the
Representatives and (ii) inform Parent orally and in writing, as promptly as
practicable after the receipt thereof, of the material terms and conditions of
any such inquiries or proposals (including the identity of the party making
such inquiry or proposal) and shall keep Parent informed of the status thereof.
The Company will immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any parties other than Parent with respect to any of the foregoing and require
the return (or if permitted by the terms of the applicable confidentiality
agreement, the certified destruction) of all confidential information
previously provided to such parties.
(b) For purposes of this Agreement, "Takeover Proposal"
shall mean any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving the Company or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of the Company, other than the transactions contemplated
or permitted by this Agreement.
5.5. Takeover Statutes. If any takeover statute is or may become
applicable to the transactions contemplated hereby, the Board of Directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate the
effects of any takeover statute on any of the transactions contemplated hereby.
5.6. Non-Disclosure; Public Announcements.
(a) None of the Company, the Parent nor the Company
Stockholder will not at any time from and after the date of this Agreement
divulge, furnish or make accessible to anyone any information or documentation
regarding the transactions contemplated by this Agreement, any confidential or
secret aspects of the
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Company or the Surviving Corporation or any financial or other information
about the Company or the Surviving Corporation except as required by law and
except for the press release contemplated by Section 5.6(b) hereof. Any
information which at or prior to the time of disclosure was generally available
to the public through no breach of this covenant shall not be deemed
confidential information for purposes hereof, and the undertakings in this
covenant with respect to confidential information shall not apply thereto.
(b) The initial press release or releases with respect to
the transactions contemplated by this Agreement shall be in the form
satisfactory to Parent. For as long as this Agreement is in effect, the Company
shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without
the consent of Parent, except where such release or announcement is required by
applicable law, in which case the Company will consult with Parent and issue a
release or announcement reasonably satisfactory in form and content to Parent.
5.7. Taxes.
(a) The Company Stockholder shall be liable for and shall
pay any and all Taxes of the Company attributable to any taxable period ending
on or prior to the Closing Date and the allocable portion of any and all Taxes
of the Company attributable to any partial period (through and including the
Closing Date) of any taxable period beginning before and ending after the
Closing Date to the extent that such Taxes are not reflected in the reserve for
Taxes shown in the Company Financial Statements. The Taxes attributable to any
partial period shall be computed as if the taxable period ended on the Closing
Date, except that any Taxes imposed on the ownership of real, personal or
intangible property shall be allocated, pro rata on a daily basis, between the
partial period ending on the Closing Date and the balance of the taxable
period.
(b) The Company Stockholder shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns of the Company for all
periods ending on or before the Closing Date which are due after the Closing
Date. The Company Stockholder shall have the responsibility for any audit (and
the disposition thereof) of any federal Tax Return of the Company (and any
state Tax Return of the Company for which status substantially equivalent to S
Corporation status is applicable) pertaining to taxable periods ending on or
before the Closing Date and the Company Stockholder shall pay all costs related
thereto, including legal fees and expenses. Notwithstanding the foregoing, the
Company Stockholder shall not enter into any compromise or settlement of any
Tax matter relating to the Company without Parent's consent (which shall not be
unreasonably withheld).
5.8. Lock-up. The Company Stockholder hereby covenants and
agrees with Parent that, subject to the applicable rights under the
Registration Rights Agreement, during the period between the Closing Date and
365 days following the Closing Date, (the "Lock-Up Period") he shall not sell,
transfer, assign or otherwise dispose of the
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Parent Common Stock which he received as Stock Consideration without the prior
written consent of Parent, which consent Parent shall be entitled to withhold
in its full discretion. The Company Stockholder further agrees that following
the expiration of the Lock-Up Period, he will sell such shares of Parent Common
Stock pursuant to the provisions of Rule 144 of the Securities Act.
ARTICLE VI
COVENANTS OF PARENT AND MERGER SUB
6.1. Conduct of Business of Parent and Merger Sub. Except as set
forth on Section 6.1 of the Disclosure Schedule or as otherwise contemplated by
this Agreement or consented to in writing by the Company, Parent and Merger Sub
shall not:
(a) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article VIII not being satisfied;
(b) take any action or enter into any agreement that could
reasonably be expected to jeopardize or materially delay the receipt of any
Requisite Regulatory Approval (as defined in Section 8.1(b) hereof); or
(c) agree, commit or arrange to do any of the foregoing.
6.2. Indemnification of Directors and Officers.
(a) From and after the Effective Time, Parent agrees that
it will indemnify and hold harmless each present and former director and
officer of the Company (individually, an "Indemnified Person" and collectively,
the "Indemnified Persons") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at, or after, the
Effective Time, to the fullest extent that the Company would have been
permitted under the Washington Business Corporation Act and its charter or
by-laws in effect on the date hereof to indemnify such Indemnified Person (and
Parent shall also advance expenses as incurred to the fullest extent permitted
under applicable law; provided, that the Indemnified Person to whom expenses
are advanced provides a written affirmation of his or her good faith belief
that the standard of conduct necessary for indemnification has been met, and an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Person is not entitled to indemnification).
(b) Any Indemnified Persons wishing to claim
indemnification under paragraph (a) of this Section 6.2, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify
Parent thereof in writing, but the failure to so notify shall not relieve
Parent of any liability it may have to such
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Indemnified Persons unless such failure to so notify has resulted in the loss
of substantive rights with respect to Parent's ability to defend such claim. In
the event of any such claim, action, suit, proceeding or investigation, (i)
Parent or the Surviving Corporation shall have the right to assume the defense
thereof and Parent shall not be liable to such Indemnified Persons for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Persons in connection with the defense thereof, except that if
Parent or the Surviving Corporation elects not to assume such defense or
counsel for the Indemnified Persons advises that there are issues which raise
conflicts of interest between Parent or the Surviving Corporation and the
Indemnified Persons, the Indemnified Persons may retain counsel reasonably
satisfactory to Parent, and Parent or the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Persons;
provided, however, that Parent shall be obligated pursuant to this Section
6.2(b) to pay for only one firm of counsel for all Indemnified Persons in any
jurisdiction unless the use of one counsel for such Indemnified Persons would
present such counsel with a conflict of interest, (ii) the Indemnified Persons
will cooperate in the defense of any such matter and (iii) Parent shall not be
liable for any settlement effected without its prior written consent, which
shall not be unreasonably withheld; and provided, further, that Parent shall
not have any obligation hereunder to any Indemnified Persons if and when a
court of competent jurisdiction shall ultimately determine, and such
determination shall be become final, that the indemnification of such
Indemnified Persons in the manner contemplated hereby is prohibited by
applicable law.
(c) Notwithstanding the provisions of this Section 6.2,
the right to indemnification under this provision shall not extend to the
Company Stockholder with respect to his obligation to indemnify for Losses (as
hereinafter defined) under Section 9.2 of this Agreement.
(d) The provisions of this Section 6.2 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Person and,
his or her heirs and representatives.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Reasonable Efforts.
(a) Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
as promptly as practicable including, but not limited to, (i) the preparation
and filing of all forms, registrations and notices required to be filed to
consummate the transactions contemplated by this Agreement and the taking of
such commercially reasonable actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions or waivers by any third party or
Governmental
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Entity and (ii) using all reasonable efforts to cause the satisfaction of all
conditions to Closing. Each party shall promptly consult with the other with
respect to, provide any necessary information with respect to and provide the
other (or its counsel) copies of, all filings made by such party with any
Governmental Entity or any other information supplied by such party to a
Governmental Entity in connection with this Agreement and the transactions
contemplated by this Agreement. No party will take any action which would
prevent the satisfaction of any conditions to Closing set forth in Article VIII
hereof.
(b) Each party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the transactions
contemplated by this Agreement. If any party or affiliate thereof receives a
request for additional information or documentary material from any such
Governmental Entity with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request.
7.2. Changes in Representation and Warranties; Notification of
Certain Matters. Between the date of this Agreement and the Effective Time, the
Company and the Company Stockholder shall give notice in writing to Parent, and
Parent and Merger Sub shall give notice in writing to the Company, promptly
upon becoming aware of (i) any information known to such party that indicates
in the reasonable judgment of such party that any representation or warranty of
such party contained herein will not be true and correct in a manner that
results or would likely result in a failure of the condition specified in
Section 8.2(a), in the case of a notice from the Company and the Company
Stockholder, or Section 8.3(a), in the case of a notice from Parent and Merger
Sub and (b) the occurrence of any event known to such party which in the
reasonable judgment of such party will result, or has a reasonable prospect of
resulting in, the failure by such party to satisfy a condition specified in
Article VIII; provided, however, that the delivery of any notice pursuant to
this Section 9.2 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations. The respective
obligation of each party to effect the Merger is subject to the satisfaction or
waiver at or prior to the Effective Time of each of the following conditions:
(a) no court or Governmental Entity of competent
jurisdiction shall have enacted, issued, entered, promulgated or enforced any
Legal Requirements prohibiting, restraining, enjoining or otherwise preventing
the consummation of the Merger; and
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(b) all consents, authorizations, orders and approvals of
(or filings or registrations with) any Governmental Entity required in
connection with the execution and delivery of this Agreement and the
performance of its terms (collectively, "Requisite Regulatory Approvals") shall
have been obtained or made (as the case may be), except for filings in
connection with the Merger and any other documents required to be filed after
the Effective Time.
8.2. Conditions to Obligation of Parent and Merger Sub. The
obligation of Parent and Merger Sub to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) the representations and warranties of the Company and
the Company Stockholder contained in this Agreement shall be true and correct
in all material respects as of the Effective Time, except that representations
and warranties qualified by materiality or Company Material Adverse Effect
shall be true in all respects, as of the date of this Agreement and as of the
Closing Date, as though made on and as of such time, except to the extent that
any such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct in all
material respects, and those not qualified by materiality or Company Material
Adverse Effect shall be true in all respects, on and as of such earlier date);
(b) the Company and the Company Stockholder shall have
performed in all material respects the obligations required to be performed by
them under this Agreement at or prior to the Closing Date;
(c) from the date of this Agreement through the Effective
Time, there shall not have occurred a Company Material Adverse Effect;
(d) Parent shall have received a certificate signed by an
executive officer of the Company to the effect of Sections 8.2(a), (b) and (c)
hereof;
(e) Parent shall have received a certificate signed by the
Company Stockholder to the effect of Sections 8.2(a), (b) and (c) hereof;
(f) the Company shall have provided Parent with evidence
satisfactory to Parent that the Company has obtained all consents, waivers or
approvals required for the assignment or transfer of all agreements and
instruments identified on Section 3.8 of the Disclosure Schedule hereto;
(g) the Company shall have furnished Parent with an
opinion, dated the Closing Date, of Preston, Gates & Xxxxx LLP, counsel to the
Company, in the form attached hereto as Exhibit C in form and substance
satisfactory to Parent;
(h) the Company Stockholder and the Company shall have
provided Parent with a certified statement, pursuant to Section 1.1445-2(c)(3)
of the Treasury Regulations, that the Company is not, and has not been within
the last five years, a "United States real property holding corporation";
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(i) no claim, action, suit, investigation or other
proceeding shall be pending or threatened by any third party (including any
governmental agency) before any court or administrative agency or otherwise
relating to the transactions provided for herein, which may affect Parent or
the Company in a manner which is materially adverse;
(j) the Company Stockholder shall have executed the Escrow
Agreement;
(k) Xxxxx Xxxxx and Xxxxxxx Xxxxxx shall have entered into
an agreement with Parent acknowledging that the shares of Parent Common Stock
which they receive pursuant to the terms of this Agreement will not be
registered under the Securities Act and will be subject to restrictions on
their sale or disposition;
(l) Xxxxxxx Xxxx, Xxxxxxx Xxxxxx, Xxxxx Xxxxx and the
Company Stockholder shall have entered into employment arrangements with
Parent; and
(m) the Company and the Company Stockholder shall have
furnished Parent with all other documents, certificates and other instruments
reasonably requested by Parent.
8.3. Conditions to Obligation of the Company and the Company
Stockholder. The obligation of the Company to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the Effective Time of the
following additional conditions:
(a) the representations and warranties of Parent and
Merger Sub contained in this Agreement shall be true and correct in all
material respects as of the Effective Time, except that representations and
warranties qualified by materiality or Parent Material Adverse Effect shall be
true in all respects, as of the date of this Agreement and as of the Closing
Date, as though made on and as of such time, except to the extent that any such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct in all
material respects, and those not qualified by materiality or Parent Material
Adverse Effect shall be true in all respects, on and as of such earlier date);
(b) Parent and Merger Sub shall have performed in all
material respects their obligations required to be performed by them under this
Agreement at or prior to the Closing Date;
(c) the Company shall have received a certificate signed
by an executive officer of each of Parent and Merger Sub to the effect of
Sections 8.3(a) and (b) hereof;
(d) Parent shall have executed the Escrow Agreement
(e) Parent shall have entered into an employment
arrangement with the Company Stockholder in form mutually agreeable to Parent
and the Company Stockholder; and
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(f) no claim, action, suit, investigation or other
proceeding shall be pending or threatened by any third party (including any
governmental agency) before a court or administrative agency or otherwise
relating to the transactions provided for herein which could reasonably be
expected to prevent Parent or Merger Sub from consummating the transactions
contemplated by this Agreement.
8.4. Frustration of Closing Conditions. Neither the Company nor
the Parent may rely on the failure of any condition set forth in Section 8.1,
8.2 or 8.3, as the case may be, to be satisfied if such failure was caused by
such party's failure to use all reasonable efforts to consummate the Merger and
the other transactions contemplated by this Agreement.
ARTICLE IX
NATURE AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES, ETC.
All statements contained in any Exhibit or Disclosure Schedule hereto
or in any certificate or instrument of conveyance delivered by or on behalf of
the parties pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be deemed representations and warranties by the
parties hereunder.
9.1. Survival of Representations, Warranties, Etc. Except as
otherwise provided herein, the representations and warranties contained in this
Agreement, or in any certificate or other instrument delivered pursuant to this
Agreement, shall survive the Closing for a period of twenty-four (24) months
after the Closing Date; provided, however, that: (i) the representations and
warranties contained in Section 3.13 hereof shall survive the Closing Date until
thirty (30) days after the expiration of the applicable statutes of limitations
for the assessment of Taxes; (ii) if the giving of any representation or
warranty contained in this Agreement is made with willful or knowing fraud, it
shall survive the Closing Date for an unlimited period of time; (iii) any
specific claim or action of which specific written notice setting forth with
particularity the facts underlying such claim or action is given to the party
which made such representation or warranty prior to the date on which such
representation or warranty otherwise terminates as provided herein, may continue
to be asserted and shall be indemnified against pursuant to this Article IX; and
(iv) the representations and warranties set forth in Sections 2.1, 2.2 and 3.2
hereof shall survive the Closing without limitations.
9.2. Company Stockholder's Agreement to Indemnify.
(a) Subject to paragraphs (c), (d) and (e) of this Section
9.2, the Company Stockholder shall fully indemnify, defend and hold harmless,
on an after-tax basis, Parent, Merger Sub and the Surviving Corporation, their
officers, directors, employees, agents, representatives and affiliates and
their successors and assigns (collectively, the "Company Indemnified Parties")
against and in respect of any and all liabilities, losses, damages, claims,
penalties, actions, fines, deficiencies, costs, taxes, loss of deductions or
expenses (including, without limitation, the reasonable fees, expenses
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and disbursements of counsel) (collectively, "Losses") regardless of whether an
action has been filed or asserted against Parent, Merger Sub, or the Surviving
Corporation after the Closing Date, arising from, in connection with or
resulting from (i) any misrepresentation, inaccuracy or breach of the
representations, warranties or covenants by the Company or the Company
Stockholder made in this Agreement (including, without limitation, the Exhibits
and the Disclosure Schedules hereto and the certificates delivered hereunder)
or as provided herein, (ii) the business, operations or assets of the Company
prior to the Effective Time or the actions or omissions of the Company's
directors, officers, shareholders, employees or agents prior to the Effective
Time, other than Losses arising from matters expressly disclosed in the Company
Financial Statements, this Agreement or the Disclosure Schedules to this
Agreement, and (iii) any claims or litigation involving the Company which are
pending or, to the knowledge of the Company, threatened prior to the Closing
Date.
(b) No obligation of the Company Stockholder to indemnify,
defend and hold harmless Parent, Merger Sub or the Surviving Corporation under
this Section 9.2 shall arise unless and until the amount of Losses incurred
exceeds $100,000 in the aggregate; and provided, further, that in the case of
aggregate Losses in excess of $100,000, the Company Stockholder shall be liable
for the entire amount of such Losses. The maximum obligation of the Company
Stockholder to indemnify, defend and hold harmless Parent, Merger Sub or the
Surviving Corporation under this Section 9.2 shall be one-half of the value of
the Merger Consideration. The maximum amount of the Company Stockholder's
indemnification obligations under this Section 9.2 and Parent's indemnification
obligation under Section 9.3 hereof shall be the product of (x) 400,000 and (y)
the last price per share of Parent Common Stock as quoted on the Nasdaq Stock
Market on the last trading day immediately preceding the Closing Date.
(c) Notwithstanding the provisions of the foregoing
Section 9.2(b), the Company Stockholder shall fully indemnify, defend and hold
harmless on an after-tax basis the Company Indemnified Parties against and in
respect of any and all Losses (including any fees, expenses and disbursements
of counsel and other agents) arising from, in connection with or resulting from
any misrepresentation, inaccuracy or breach with respect to Sections 3.13,
5.1(p) and 5.7 and the provisions of Section 9.2(b) hereof shall not apply to
limit the obligations of the Company Stockholder under this Section 9.2(c).
(d) The indemnification liability of the Company
Stockholder under the foregoing provisions of Section 9.2 shall be absolute and
unconditional as if the Company Stockholder rather than the Company have made
the representations and warranties herein irrespective of any right of set-off
or counterclaim which may at any time be available to or asserted by the
Company Stockholder against Parent or any of its affiliates.
9.3. Parent Agreement to Indemnify. Parent shall fully
indemnify, defend and hold harmless, on an after-tax basis, the Company
Stockholder against and in respect of any and all Losses resulting from any
misrepresentation or breach of any representation, warranty, covenant or
agreement by Parent or Merger Sub in this
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Agreement; provided, however, that no obligation to indemnify, defend and hold
harmless the Company Stockholder under this Section 9.3 shall arise unless and
until the amount of Losses incurred exceeds $100,000 in the aggregate; and
provided, further, that in the case of aggregate Losses in excess of $100,000,
the maximum obligation of the Parent to indemnify, defend and hold harmless the
Company Stockholder under this Section 9.3 shall be one-half of the value of
the Merger Consideration.
9.4. Procedures Relating to Indemnification. Promptly after the
receipt by any party hereto of notice of any claim, action, suit or proceeding
of any third party for which it intends to seek indemnification hereunder, such
party or parties (the "Indemnified Party") shall give written notice of such
claim (a "Notice of Claim") to the party or parties obligated to provide
indemnification hereunder (collectively, the "Indemnifying Party"), stating the
nature and basis of such claim and the amount thereof, to the extent known. The
failure of the Indemnified Party to so notify the Indemnifying Party shall not
impair the Indemnified Party's ability to seek indemnification from the
Indemnifying Party unless such failure to so notify has resulted in the loss of
substantive rights with respect to the Indemnifying Party's ability to defend
such claim, and then only to the extent of such loss. The Indemnifying Party
shall be entitled to participate in the defense or settlement of such matter
and the parties agree to cooperate in any such defense or settlement and to
give each other full access to all information relevant thereto. The
Indemnifying Party shall not be obligated to indemnify an Indemnified Party
hereunder for any settlement entered into without the Indemnifying Party's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. If any Notice of Claim relates to a claim by a person
or persons (other than by federal, state or local income tax authorities or by
Parent), and the amount of such claim is acknowledged by the Company
Stockholder to be fully covered by the foregoing indemnity, the Company
Stockholder may elect to defend against such claim at his expense, in lieu of
Parent assuming such defense; provided that the Parent shall be entitled to
participate in or monitor such defense at its expense and the Company
Stockholder will fully cooperate with the Parent and their counsel with respect
thereto. If the Company Stockholder so elects to assume such defense, he shall
retain counsel reasonably satisfactory to Parent. No compromise or settlement
of such claim may be effected by either party without the other party's consent
(which shall not be unreasonably withheld) unless (i) there is no finding or
admission of any violation of law and no effect on any other claims that may be
made against such other party and (ii) the sole relief provided is monetary
damages that are paid in full by the party seeking the settlement.
ARTICLE X
TERMINATION
10.1. Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time:
(a) By the mutual written consent of Parent, Merger Sub
and the Company;
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(b) By Parent and Merger Sub, on the one hand, or the
Company, on the other hand, at any time on or after the later to occur of:
(i) 60 days after the date on which any request or
application for a Requisite Regulatory Approval shall have been denied
or withdrawn at the request or recommendation of the Governmental
Entity which must grant such Requisite Regulatory Approval, unless
within the 60-day period following such denial or withdrawal a
petition for rehearing or an amended application has been filed with
the applicable Governmental Entity, provided, however, that no party
shall have the right to terminate this Agreement pursuant to this
Section 10.1(b)(i) if such denial or request or recommendation for
withdrawal shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein; and
(ii) 60 days following the date hereof, if the Effective
Time shall not have occurred on or before that date and if any of the
conditions to the obligation of the terminating party to close the
Merger has not, at that time, been fulfilled; provided, however, that
the right to terminate this Agreement under this Section 10.1(b)(ii)
shall not be available to any party whose failure to fulfill
materially any covenant or obligation under this Agreement has been
the cause of, or resulted in, either the failure of the Effective Time
to occur on or before such date or the failure of fulfillment before
such date of any of the conditions to such terminating party's
obligation to close the Merger;
or at such time as a court of competent jurisdiction or other Governmental
Entity shall have issued an Order or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such Order or
other action shall have become final and nonappealable;
(c) By Parent and Merger Sub, on the one hand, or the
Company, on the other hand, (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), if there shall have been a material breach of any of the
representations, warranties or covenants set forth in this Agreement on the
part of the other party, which breach is not cured within thirty (30) days
following written notice to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing; provided, however, that
neither party shall have the right to terminate this Agreement pursuant to this
Section 10.1(c) unless the breach of representation, warranty or covenant would
entitle the terminating party not to consummate the transactions contemplated
hereby under Section 8.2(a) (in the case of a breach of representation or
warranty by the Company) or Section 8.3(a) (in the case of a breach of
representation or warranty by Parent and Merger Sub) or which breach, by its
nature, cannot be cured prior to the Closing.
10.2. Procedure for and Effect of Termination. In the event that
this Agreement is terminated and the Merger is abandoned by Parent or Merger
Sub, on the one hand, or by the Company, on the other hand, pursuant to Section
10.1, written notice
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of such termination and abandonment shall forthwith be given to the other
parties and this Agreement shall terminate and the Merger shall be abandoned
without any further action. If this Agreement is terminated as provided herein,
no party hereto shall have any liability or further obligation to any other
party under the terms of this Agreement except (i) with respect to the willful
breach by any party hereto, and (ii) that this Section 10.2, the last sentence
of Section 5.4, Section 5.6, Section 11.3 and Section 11.4 shall survive the
termination of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them in this Section 11.1:
(a) "affiliate", with respect to any person, shall mean
any person controlling, controlled by or under common control with such person;
(b) "business day" shall mean each day on which banking
institutions in New York, NY are not authorized or required to close;
(c) "including" shall, unless the context clearly requires
otherwise, mean including but not limited to the items or things following such
term;
(d) "knowledge", "to the knowledge of", "best knowledge"
and any similar language shall mean, with respect to the Company or any of its
subsidiaries, the actual knowledge, after due inquiry, of the Company
Stockholder and of any other person who, on the date hereof, is an officer of
the Company
(e) "person" shall mean and include an individual, a
partnership, a joint venture, a limited liability company, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof; and
(f) "subsidiary", with respect to any corporation or other
person, shall mean any corporation 50% or more of the outstanding voting power
of which, or any partnership, joint venture, limited liability company or other
entity 50% or more of the total equity interest of which is directly or
indirectly owned by such person, and any other entity over which such
corporation or other person has control as a result of ownership interests, any
contract or other arrangement, or through any other means. For purposes of this
Agreement, all references to "subsidiaries" of a person shall be deemed to mean
"subsidiary" if such person has only one subsidiary.
11.2. Disclosure Schedule. The disclosure schedules being
delivered at or prior to the execution of this Agreement (the "Disclosure
Schedule") (which Disclosure Schedule shall identify the specific sections or
subsections on this Agreement to which such disclosure relates) are
incorporated into or shall modify, as the case may be, the representations and
warranties made in this Agreement.
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11.3. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented, only by a written agreement
signed by each of the parties hereto at any time prior to the Effective Time
with respect to any of the terms contained herein.
11.4. Waiver of Compliance; Consents. Any failure of Parent or
Merger Sub, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein may be waived by Parent
and Merger Sub or the Company, respectively, only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 11.4.
11.5. Restrictive Legend. Each certificate representing Parent
Common Stock to be delivered to the holders of Company Stock hereunder shall,
except as otherwise provided in this Section 11.5, be stamped or otherwise
imprinted with a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS
BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Parent the securities being sold thereby may be publicly
sold without registration under the Securities Act.
11.6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by telecopier (with a confirmed receipt thereof) or registered or
certified mail (postage prepaid, return receipt requested), and on the next
business day when sent by overnight courier service, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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(1) if to Parent or Merger Sub, to:
AppliedTheory Corporation
0000 Xxxxxxxx, Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
Senior Vice President, Chief Financial Officer
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx XX
Telecopier: (000) 000-0000
(2) if to the Company, to:
The Cordada Group, Inc.
0000-000xx Xxxxxx XX, X-000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxx
Telecopier: (000) 000-0000
with copies to:
Preston, Gates & Xxxxx LLP
000 0xx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: G. Xxxxx Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
(3) if to the Company Stockholder:
c/o The Cordada Group, Inc.
0000-000xx Xxxxxx XX, X-000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxx
Telecopier: (425) 869-4-70
11.7. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, administrators, executors, representatives, affiliates,
subsidiaries, successors and
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permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties.
11.8. Expenses. Whether or not the Merger is consummated, all
fees, charges and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
fees, charges or expenses.
11.9. Gender; Plurals, etc. Whenever used herein, the singular
number shall include the plural, the plural the singular and the use of any
gender shall be applicable to all genders.
11.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State, without regard
to the choice of law principles thereof.
11.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12. Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
11.13. Entire Agreement. This Agreement (including the schedules,
exhibits, documents or instruments referred to herein) embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, among the parties, or between any of them, with respect to
the subject matter hereof.
11.14. No Third Party Beneficiaries. Except as provided in
Sections 6.2(a) and 9.2(a), this Agreement is not intended to, and does not,
create any rights or benefits of any party other than the parties hereto.
11.15. Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE CORDADA GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxx
Chief Executive Officer
COMPANY STOCKHOLDER
/s/ Xxxxxx X. Xxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxx
APPLIEDTHEORY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------
Xxxxx X. Xxxxxx
Vice President, Corporate
Development
APPLIEDTHEORY SEATTLE CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------
Xxxxx X. Xxxxxx
Secretary
