EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
among
INTELLIQUEST INFORMATION GROUP, INC.,
WPP ACQUISITION CORP.
and
KANTAR MEDIA RESEARCH, INC.
Dated as of August 12, 1999
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger..................................................................................2
Section 1.2 Effective Time..............................................................................2
Section 1.3 Effects of the Merger.......................................................................2
Section 1.4 Certificate of Incorporation and Bylaws; Directors and Officers.............................2
Section 1.5 Conversion of Securities....................................................................2
Section 1.6 Exchange of Certificates....................................................................3
Section 1.7 Dissenting Shares...........................................................................5
Section 1.8 No Further Ownership Rights in Shares; Closing of Company Transfer Books....................5
Section 1.9 Closing.....................................................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power; Capitalization and Ownership of Sub.......................6
Section 2.2 Authority; Non-Contravention................................................................6
Section 2.3 Proxy Statement.............................................................................7
Section 2.4 Financing...................................................................................7
Section 2.5 Business of Sub.............................................................................7
Section 2.6 WARN Act....................................................................................8
Section 2.7 Brokers.....................................................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
i
Section 3.1 Organization, Standing and Power............................................................8
Section 3.2 Capital Structure...........................................................................8
Section 3.3 Subsidiaries................................................................................9
Section 3.4 Other Interests.............................................................................9
Section 3.5 Authority; Non-Contravention................................................................9
Section 3.6 SEC Documents and Financial Statements.....................................................10
Section 3.7 Proxy Statement............................................................................11
Section 3.8 Absence of Certain Events..................................................................11
Section 3.9 Litigation.................................................................................12
Section 3.10 Compliance with Applicable Law.............................................................12
Section 3.11 Employee Plans.............................................................................12
Section 3.12 Employment Relations and Agreement.........................................................14
Section 3.13 Contracts..................................................................................15
Section 3.14 Rights Agreement...........................................................................15
Section 3.15 State Takeover Statutes; Certain Charter Provisions........................................15
Section 3.16 Taxes......................................................................................15
Section 3.17 Intellectual Properties....................................................................17
Section 3.18 Voting Requirements........................................................................17
Section 3.19 Year 2000..................................................................................18
Section 3.20 Brokers....................................................................................18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the Merger......................................18
Section 4.2 No Solicitation............................................................................21
Section 4.3 Third Party Standstill Agreements..........................................................22
Section 4.4 Database Agreements........................................................................23
Section 4.5 Payment of Acquisition Expenses............................................................23
ARTICLE V
ADDITIONAL AGREEMENTS
ii
Section 5.1 Company Stockholder Approval; Proxy Statement..............................................23
Section 5.2 Access to Information......................................................................24
Section 5.3 Fees and Expenses..........................................................................24
Section 5.4 Reasonable Efforts.........................................................................24
Section 5.5 Public Announcements.......................................................................25
Section 5.6 State Takeover Laws........................................................................25
Section 5.7 Rights Agreement...........................................................................25
Section 5.8 Indemnification, Directors'and Officers'Insurance..........................................25
Section 5.9 Termination of Employment..................................................................26
Section 5.10 Other Agreements Relating to Stock Options.................................................26
Section 5.11 Interim Operations.........................................................................27
Section 5.12 Completion of Merger.......................................................................26
Section 5.13 Employee Stock Purchase Plan...............................................................27
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.................................27
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination................................................................................29
Section 7.2 Effect of Termination......................................................................30
Section 7.3 Amendment..................................................................................30
Section 7.4 Waiver.....................................................................................30
ARTICLE VIII
GENERAL PROVISIONS
iii
Section 8.1 Non-Survival of Representations and Warranties.............................................31
Section 8.2 Notices....................................................................................31
Section 8.3 Interpretation.............................................................................32
Section 8.4 Counterparts...............................................................................32
Section 8.5 Entire Agreement; No Third-Party Beneficiaries.............................................32
Section 8.6 Governing Law; Jurisdiction; Waiver of Jury Trial..........................................32
Section 8.7 Assignment.................................................................................34
Section 8.8 Severability...............................................................................34
Section 8.9 Enforcement of this Agreement..............................................................34
Section 8.10 Incorporation of Exhibits..................................................................34
Section 8.11 Performance by Sub.........................................................................34
Section 8.12 Resolution of Disputes Relating to Calculations............................................34
Schedule 4.4 Database Agreements
Schedule 6.1 List of Individuals Receiving Employment Agreements
Annex A - Calculation of Merger Consideration
Annex B - Calculation of Option Consideration
Exhibit A-1 -Employment Agreements for Xxxxxxxx Xxxxxx and Xxxx Xxxxxxxx
Exhibit A-2 -Employment Agreements for Xxx Xxxxxx, Xxxxxx Xxxx,
Xxxx Xxxxxxxxxxx and Xxx Xxxxx
xx
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 12, 1999 (this
"Agreement"), among Kantar Media Research, Inc., a Delaware corporation
("Parent"), WPP Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and Intelliquest Information Group, Inc., a
Delaware corporation (the "Company") (Sub and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent of all of the
outstanding shares of Common Stock, par value $.001 per share (the "Common
Stock"), together with associated Rights (as defined below) (the shares of
Common Stock and associated Rights are referred to herein as "Shares"), of
the Company at a price per Share calculated in accordance with the formula
set forth in Annex A attached hereto (the "Merger Consideration"), in cash,
pursuant to a merger (the "Merger") of Sub with and into the Company upon the
terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has adopted
resolutions determining that the Merger is fair to and in the best interests
of the holders of Shares and declaring the advisability of the Merger and
recommending that the Company's stockholders approve and adopt this Agreement
and approve the Merger and the other transactions contemplated hereby;
WHEREAS, the Company will sell substantially all of the assets
relating to the Company's database business (the "Database Business"),
pursuant to an Asset Purchase Agreement, dated as of July 22, 1999, between
the Company and Naviant Technology Solutions, Inc. (the "IQ2 Sale");
WHEREAS, pursuant to the Merger, each issued and outstanding Share
not owned directly or indirectly by Parent or the Company will be converted
into the right to receive per share consideration described herein; and
WHEREAS, pursuant to the Merger, all outstanding Stock Options at
the Effective Time will be canceled in exchange for the consideration to be
paid in accordance with the formula set forth in Annex B attached hereto.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties
agree as follows:
1
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time (as hereinafter defined). Following the Merger,
the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance
with the DGCL.
Section 1.2 EFFECTIVE TIME. The Merger shall become effective when
the Certificate of Merger (the "Certificate of Merger"), executed in
accordance with the relevant provisions of the DGCL, is accepted for record
by the Secretary of State of the State of Delaware. When used in this
Agreement, the term "Effective Time" shall mean the later of the date and
time at which the Certificate of Merger is accepted for record or the date
and time established by the Certificate of Merger. The filing of the
Certificate of Merger shall be made by the parties hereto as soon as
practicable after the satisfaction or waiver of all conditions set forth in
Section 6.1 hereof.
Section 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 259 of the DGCL.
Section 1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND
OFFICERS. (a) At the Effective Time and without any further action on the
part of the Company and Sub, the certificate of incorporation of the Company
shall be amended to read in its entirety as the certificate of incorporation
of Sub reads as in effect immediately prior to the Effective Time, until
thereafter changed or amended as provided therein or applicable law, provided
that such certificate of incorporation shall reflect as of the Effective Time
"Intelliquest Information Group, Inc." as the name of the Surviving
Corporation. The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or the Certificate of
Incorporation and applicable law.
(b) The directors and officers of Sub immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation as of the Effective Time.
Section 1.5 CONVERSION OF SECURITIES. As of the Effective Time, by
virtue of the Merger and without any action on the part of any stockholder of
the Company:
(a) All Shares that are held in the treasury of the Company or by
any wholly owned Subsidiary (as hereinafter defined) of the Company and any
Shares owned by Parent, Sub or any other wholly owned Subsidiary of Parent
shall be cancelled and no consideration shall be delivered in exchange
therefor.
(b) Each Share issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled in accordance with Section
1.5(a) and other than Dissenting Shares
2
(as defined in Section 1.7)) shall be converted as of the Effective Time into
the right to receive in cash, without interest, the Merger Consideration,
after the Effective Time (the "Payment Date"). All such Shares, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and retired, and each holder of a certificate or certificates (the
"Certificates") representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
with respect to such Shares.
(c) Each issued and outstanding share of the capital stock of Sub
shall be converted into and become as of the Effective Time one fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(d) At the Effective Time all outstanding employee stock options,
whether or not then fully exercisable or vested, to purchase Shares (a "Stock
Option") heretofore granted under the Stock Option Plans (as defined in
Section 3.2 below) shall become fully exercisable and vested, and the Stock
Options shall be cancelled by the Company, and the holders thereof shall
receive on the Payment Date a cash payment (the "Cash Payment") from the
Company in an amount calculated and paid in accordance with the formula set
forth in Annex B attached hereto. The Company shall request such holders to
acknowledge the cancellation of all Stock Options held by such holders,
including any Stock Options as to which the exercise price equals or exceeds
the Merger Consideration. The Company shall deliver to Parent within five
business days of the date hereof a true and complete list of Stock Options
which are outstanding as of the date hereof including on such list the name
of each option holder and the exercise price of such options. The Company
shall update such list and deliver such update to Parent on the Closing Date.
Any outstanding stock appreciation rights or limited stock appreciation
rights issued by the Company or any Subsidiary of the Company shall be
cancelled immediately prior to the Effective Time without any payment
therefor. The Company shall ensure that neither it nor any of its
Subsidiaries is or will be bound by any Stock Options, other options,
warrants rights or agreement which would entitle any person or entity, other
than Parent or its Subsidiaries, to own any Shares or to receive any payment
in respect thereof.
Section 1.6 EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Parent and
the Company shall authorize a commercial bank or trust company having net
capital of not less than $100 million (or one or more other persons or
entities as shall be reasonably acceptable to Parent and the Company) to act
as paying agent hereunder (the "Paying Agent") for the payment of the Merger
Consideration upon surrender of Certificates. All of the fees and expenses of
the Paying Agent shall be borne by Parent.
(b) PARENT AND SUB TO PROVIDE FUNDS. Parent shall take all steps
necessary to enable and cause the Sub to deposit in trust with the Paying
Agent prior to the Effective Time cash in an amount necessary to pay for all
of the Shares pursuant to Section 1.5(b) and the amount required in
connection with the Stock Options pursuant to Section 1.5(d). Such amount
shall hereinafter be referred to as the "Exchange Fund."
The Exchange Fund shall be invested by the Paying Agent as directed
by Parent in direct obligations of the United States, obligations for which
the full faith and credit of the United
3
States is pledged to provide for the payment of principal and interest,
commercial paper rated of the highest quality by Xxxxx'x Investors Services,
Inc. or Standard & Poor's Ratings Group or certificates of deposit, bank
repurchase agreements or bankers' acceptances of a commercial bank having at
least $100,000,000 in assets, in each case with maturities not exceeding
seven days (collectively "Permitted Investments"), or in money market funds
which are invested in Permitted Investments, and any net earnings with
respect thereto shall be for the account of Parent. The Paying Agent shall,
pursuant to irrevocable instructions, make the payments referred to in
Section 1.5(b) and 1.5(d) hereof out of the Exchange Fund. The Exchange Fund
shall not be used for any other purpose except as otherwise agreed to by
Parent and the Company.
If the amount of cash in the Exchange Fund is insufficient to pay
all of the amounts required to be paid pursuant to Sections 1.5(b) and
1.5(d), Parent from time to time after the Effective Time shall take all
steps necessary to enable and cause the Surviving Corporation to deposit in
trust additional cash with the Paying Agent sufficient to make all such
payments.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Paying Agent shall mail to each holder of record of a Certificate, other than
Parent, the Company and any Subsidiary of Parent or the Company, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon actual delivery
of the Certificates to the Paying Agent and shall be in a form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by the Surviving
Corporation, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor,
the amount of cash into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 1.5, and the
Certificates so surrendered shall forthwith be cancelled. No interest will be
paid or will accrue on the cash payable upon the surrender of any
Certificate. If payment is to be made to a person or entity other than the
person or entity in whose name the Certificate so surrendered is registered,
it shall be a condition of payment that such Certificate shall be properly
endorsed or otherwise in proper form for transfer and that the person or
entity requesting such payment shall pay any transfer or other taxes required
by reason of such Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 1.6, each Certificate (other than
Certificates representing Dissenting Shares and Certificates representing any
Shares to be cancelled pursuant to Section 1.5(a)) shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 1.5. Notwithstanding the foregoing, none of the Paying
Agent, the Surviving Corporation or any party hereto shall be liable to a
former stockholder of the Company for any cash or interest delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws. Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for twelve months after the Effective Time shall
be repaid to the Surviving Corporation (including, without limitation, all
interest and other income received by the Paying Agent in respect of all such
funds). Thereafter, persons or
4
entities who prior to the Merger held Shares shall look only to the Surviving
Corporation or Parent (subject to the terms of this Agreement and abandoned
property, escheat and other similar laws) with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held
by them, without interest.
Section 1.7 DISSENTING SHARES. Notwithstanding any provision of this
Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, Shares which are issued and outstanding immediately prior
to the Effective Time and which are held by holders of such Shares who have
properly exercised appraisal rights with respect thereto in accordance with
Delaware law (the "Dissenting Shares") will not be exchangeable for the right
to receive the Merger Consideration, and holders of such Shares will be
entitled to receive payment of the appraised value of such Shares in
accordance with the provisions of Delaware law unless and until such holders
fail to perfect or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails
to perfect or effectively withdraws or loses such right, such Shares will
thereupon be treated as if they had been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company shall give Parent
and Sub (A) prompt notice of any written demands for appraisal, withdrawals
of demands for appraisal and any other related instruments received by the
Company, and (B) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal. The Company will not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisal or settle or offer to settle any such demand.
Section 1.8 NO FURTHER OWNERSHIP RIGHTS IN SHARES; CLOSING OF
COMPANY TRANSFER BOOKS. At and after the Effective Time, each holder of a
Certificate shall cease to have any rights as a stockholder of the Company,
except for, in the case of a holder of a Certificate (other than shares to be
cancelled pursuant to Section 1.5(a) hereof and other than Dissenting
Shares), the right to surrender his or her Certificate in exchange for
payment of the Merger Consideration or, in the case of a holder of Dissenting
Shares, to perfect his or her right to receive payment for his or her Shares
pursuant to Delaware law if such holder has validly perfected and not
withdrawn his or her right to receive payment for his or her Shares, and no
transfer of Shares shall be made on the stock transfer books of the Surviving
Corporation. At the Effective Time, the stock transfer books of the Company
shall be closed, and no transfer of Shares shall thereafter be made. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged as provided in this
Article I.
Section 1.9 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of the Company
in Austin, Texas on the date (such date hereinafter the "Closing Date") when
the last of the conditions set forth in Section 6.1 hereof shall have been
fulfilled or waived or at such other time and place as Parent and the Company
shall agree.
5
ARTICLE II
I. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
Section 2.1 ORGANIZATION, STANDING AND POWER; CAPITALIZATION AND
OWNERSHIP OF SUB. Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has all requisite corporate power and authority to
carry on its business as now being conducted. Parent and Sub have made
available to the Company complete and correct copies of their certificate of
incorporation and bylaws, in each case as amended to the date of this
Agreement. The authorized capital stock of Sub consists of 1,500 shares of
common stock, no par value, 100 shares of which are validly issued and
outstanding, fully paid and nonassessable and are owned by Parent free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal or other encumbrances of any nature ("Liens").
Section 2.2 AUTHORITY; NON-CONTRAVENTION. Each of Parent and Sub has
all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Sub and the consummation by Parent
and Sub of the transactions contemplated hereby have been duly authorized by
all necessary action on the part of Parent and Sub and Parent's shareholders.
This Agreement has been duly executed and delivered by Parent and Sub and
(assuming the valid authorization, execution and delivery of this Agreement
by the Company) constitutes a valid and binding obligation of Parent and Sub
enforceable against Parent and Sub in accordance with its terms, except that
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditor's rights
generally and by general equitable principles. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Parent or Sub under, any provision of (i) the Certificate of Incorporation or
Bylaws of Parent or Sub, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or Sub or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or any of their respective properties or assets,
other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, or Liens that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on Parent or Sub or prevent the consummation of any of the transactions
contemplated hereby. No filing or registration with, or authorization,
consent or approval of, any domestic (federal, state or local), foreign or
supranational court, commission, governmental body, regulatory or
administrative agency, authority or tribunal (a "Governmental Entity") is
required by or with respect to Parent or Sub in connection with the execution
and delivery of this
6
Agreement by Parent and Sub or is necessary for the consummation of the
Merger and the other transactions contemplated by this Agreement, except for
(i) in connection, or in compliance, with the Securities Exchange Act of
1934, as amended (including the rules and regulations promulgated thereunder,
the "Exchange Act"), (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which the Company is qualified to
do business, (iii) such filings and approvals as may be required under the
Xxxx-Xxxxx-Xxxxxx Improvements Act of 1976, as amended (the "HSR Act"), (iv)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the corporation, takeover
or blue sky laws of various states or the Nasdaq National Market, and (v)
such other consents, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the ability of Parent or Sub to consummate the transactions contemplated
hereby. For purposes of this Agreement (a) "Material Adverse Change" or
"Material Adverse Effect" means, (i) when used with respect to the Company,
any materially adverse change or effect, either individually or in the
aggregate, to or on the business, assets, liabilities, properties, condition
(financial or otherwise), or results of operations of the Company and its
Subsidiaries taken as a whole or (ii) when used with respect to Parent or
Sub, as the case may be, any materially adverse change or effect, either
individually or in the aggregate, to or on the ability of Parent or Sub, as
the case may be, to perform their respective obligations hereunder, and (b)
"Subsidiary" means any corporation, partnership, joint venture or other legal
entity of which (i) Parent or the Company or any of their respective
Subsidiaries, as the case may be, is a general partner or (ii) Parent or the
Company, as the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
Section 2.3 PROXY STATEMENT. The written information supplied or to
be supplied by Parent and Sub expressly for inclusion in the Proxy Statement
together with any amendments or supplements thereto will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
made, in light of the circumstances under which they are made, not misleading.
Section 2.4 FINANCING. Parent has all of the funds necessary to
consummate the Merger and the transactions contemplated hereby on a timely
basis and to pay any and all of its related fees and expenses.
Section 2.5 BUSINESS OF SUB. Sub was organized solely for the
purpose of acquiring the Company and engaging in the transactions
contemplated by this Agreement and has not engaged in any business since it
was incorporated which is not in connection with the acquisition of the
Company and this Agreement. During the period from the date of this Agreement
through the Effective Time, Sub shall not engage in any activities of any
nature except as provided in or contemplated by this Agreement.
7
Section 2.6 WARN ACT. Parent has no present plans or intention to
carry out, after the Closing, any plant closing or mass layoff which would
violate the federal Worker Adjustment and Retraining Notification Act at any
facility of the Company.
Section 2.7 BROKERS. No broker, investment banker or other person or
entity is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Sub.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule (the "Company
Disclosure Schedule") delivered by the Company to Parent at or prior to the
execution of this Agreement or the Company SEC Documents (as defined below),
the Company represents and warrants to Parent and Sub as follows; it being
understood, however, that representations and warranties with respect to the
Company shall not include the Database Business, and notwithstanding anything
to the contrary herein, the Company makes no representations or warranties
with respect to the Database Business.
Section 3.1 ORGANIZATION, STANDING AND POWER. The Company and each
of its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. The
Company and each of its Subsidiaries is duly qualified to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would
not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company has made available to
Parent and Sub complete and correct copies of the Certificate of
Incorporation and By-Laws of the Company and the comparable governing
documents of each of its Subsidiaries, in each case as amended to the date of
this Agreement.
Section 3.2 CAPITAL STRUCTURE. As of the date hereof, the authorized
capital stock of the Company consists of 30 million (30,000,000) shares of
Common Stock and one million (1,000,000) shares of Preferred Stock. At the
close of business on June 30, 1999, (i) 7,882,961 shares of Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable, (ii) 720,000 shares of Common Stock were held in the treasury
of the Company or by Subsidiaries of the Company and (iii) 1,201,780 shares
of Common Stock were reserved for future issuance pursuant to the Company's
Amended 1993 IQI Corp. Stock Plan, the Pipeline Communications, Inc. 1994
Incentive Stock Option Plan, the Intelliquest Information Group, Inc. 1996
Stock Plan, the Intelliquest Information Group, Inc. 1997 Supplemental Stock
8
Plan, and the Intelliquest Information Group, Inc. 1996 Employee Stock
Purchase Plan (collectively, the "Stock Option Plans"). No shares of
Preferred Stock are outstanding. A total of 300,000 shares of Preferred Stock
have been designated as Class A Junior Participating Preferred Stock ("Class
A Preferred Stock"), in connection with the Stockholders Rights Agreement
dated as of October 18, 1998 between the Company and American Securities
Transfer & Trust, Inc. (as amended to date, the "Rights Agreement"). As of
the date of this Agreement, except (i) as set forth above, and (ii) for the
rights to purchase Class A Preferred Stock ("Rights") pursuant to the Rights
Agreement, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. The Company does
not have any 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
the Company on any matter ("Voting Debt"). As of the date of this Agreement,
except for stock options issued under the Stock Option Plans, there are no
outstanding or authorized options, warrants, calls, rights or subscriptions,
convertible or exchangeable securities or other commitments, contingent or
otherwise, to which the Company is a party or by which it is bound obligating
the Company or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right or agreement (each an "Issuance Obligation").
Section 3.3 SUBSIDIARIES. Exhibit 21.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998, as filed with the
Securities and Exchange Commission (the "SEC"), is a true, accurate and
correct list of all of the Subsidiaries of the Company, except that
IntelliQuest Communications changed its name to XX0.Xxx, Inc. All of the
outstanding capital stock of, or ownership interests in, each Subsidiary of
the Company is owned by the Company, directly or indirectly. All of the
shares of capital stock of each Subsidiary are validly existing, fully paid
and non-assessable. All of such capital stock or ownership interests are
owned by the Company, free and clear of all Liens. No Subsidiary of the
Company has outstanding Voting Debt and no Subsidiary of the Company is party
to an Issuance Obligation with respect to any security of the Company or any
Subsidiary of the Company.
Section 3.4 OTHER INTERESTS. Except for the Company's interest in
its Subsidiaries, neither the Company nor its Subsidiaries owns, directly or
indirectly, any interest or investment (whether equity or debt) in, nor is
the Company or any of its Subsidiaries subject to any obligation or
requirement to provide for or to make any investment (in the form of a loan,
capital contribution or otherwise) to or in, any corporation, partnership,
joint venture, business, trust or entity.
Section 3.5 AUTHORITY; NON-CONTRAVENTION. The Board of Directors of
the Company has approved this Agreement and the transactions contemplated
hereby and has declared the Merger advisable and fair to and in the best
interests of the holders of Shares. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to approval of
the Merger by the stockholders of the Company, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary
9
corporate action on the part of the Company, subject to the approval of the
Merger by the stockholders of the Company. This Agreement has been duly
executed and delivered by the Company and (assuming the valid authorization,
execution and delivery of this Agreement by Parent and Sub) constitutes a
valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general equitable
principles. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, any
provision of (i) the Certificate of Incorporation or Bylaws of the Company or
any provision of the comparable charter or organization documents of any of
its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its Subsidiaries or
(iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets, other than, in the case of clause (ii)
or (iii), any such conflicts, violations, defaults, rights, or Liens that,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by
or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except
for (i) in connection or in compliance with the provisions of the Exchange
Act, (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iii) such filings and approvals as may be required under the HSR Act, (iv)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the corporation, takeover
or blue sky laws of various states or the Nasdaq National Market, and (v)
such other consents, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on the ability of the Company to consummate the transactions contemplated
hereby.
Section 3.6 SEC DOCUMENTS AND FINANCIAL STATEMENTS. Since October
1996, the Company has filed with the SEC all documents required to be filed
under the Securities Act of 1933, as amended (including the rules and
regulations promulgated thereunder) (the "Securities Act"), and the Exchange
Act (such documents, together with any exhibits, schedules, amendments or
supplements thereto, and any information incorporated by reference therein,
the "Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they
10
were made, not misleading. The financial statements of the Company included
in the Company SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by the rules applicable to Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented the
consolidated financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
Section 3.7 PROXY STATEMENT. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement, or any amendment or supplement thereto, will at the time of
the mailing of the Proxy Statement and at the time of the Company's special
meeting of stockholders at which the Merger is approved (the "Special
Meeting"), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the stockholders of the Company.
Prior to the filing of such amendment or supplement with the SEC, a copy
thereof shall be delivered to Parent and its counsel, who shall have the
opportunity to comment on such amendment or supplement. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act.
Section 3.8 ABSENCE OF CERTAIN EVENTS. Since December 31, 1998, the
Company and its Subsidiaries have operated their respective businesses only
in the ordinary course consistent with historical practices, and except with
respect to the IQ2 Sale, there has not occurred (i) any event, occurrence or
conditions which, individually or in the aggregate, would be reasonably
likely to have, a Material Adverse Effect on the Company; (ii) any entry into
or any commitment or transaction that, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect on the Company;
(iii) any material change by the Company or any of its Subsidiaries in its
accounting methods or principles, except as required by the United States
generally accepted accounting principles or as a result of a change in law;
(iv) any amendments or changes in the Certificate of Incorporation or Bylaws
of the Company; (v) any revaluation by the Company or any of its Subsidiaries
of any of their respective assets, including, without limitation, write-offs
of accounts receivable, other than in the ordinary course of the Company's
and its Subsidiaries' businesses consistent with past practices; (vi) any
increase in the compensation of any officer of the Company or any of its
Subsidiaries or any general salary or benefits increase to the employees of
the Company or any of its Subsidiaries other than in the ordinary course of
business; or (vii) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company.
11
Section 3.9 LITIGATION. There are no investigations, actions, suits
or proceedings pending against the Company or its Subsidiaries or, to the
knowledge of the Company, threatened against the Company or its Subsidiaries
(or any of their respective properties, rights or franchises), at law or in
equity, or before or by any federal or state commission, board, bureau,
agency, regulatory or administrative instrumentality or other Governmental
Entity or any arbitrator or arbitration tribunal, that would be reasonably
likely to have a Material Adverse Effect on the Company, and, to the
knowledge of the Company, no development has occurred with respect to any
pending or threatened action, suit or proceeding that would be reasonably
likely to result in a Material Adverse Effect on the Company or would prevent
or delay the consummation of the transactions contemplated hereby. Neither
the Company nor any of its Subsidiaries is subject to any judgment, order or
decree entered in any lawsuit or proceeding which would reasonably be
expected to have a Material Adverse Effect on the Company.
Section 3.10 COMPLIANCE WITH APPLICABLE LAW. The Company and its
Subsidiaries hold all permits, licenses, variances, exceptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would not have a Material Adverse Effect on
the Company. The businesses of the Company and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity except for violations or possible violations which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect on the Company.
Section 3.11 EMPLOYEE PLANS. (a) Each Company Benefit Plan (as
defined below) (and each related trust agreement or insurance contract) is in
compliance with its terms and with all contractual obligations and all
obligations under applicable federal, state and local laws, rules and
regulations (domestic and foreign), other than where the failure to so comply
or perform would not be reasonably likely to have a Material Adverse Effect
on the Company. All contributions and other payments required to be made by
the Company, its Subsidiaries, and another entity that is or has been a
member of a controlled group of organizations (within the meaning of Sections
414(b), (c), (m) or (o) of the Code) of which the Company is a member (an
"ERISA Affiliate") to any Company Benefit Plan (as defined below), prior to
the date hereof have been made, other than where the failure to so contribute
or make payments would not be reasonably likely to have a Material Adverse
Effect on the Company, and all accruals or contributions required to be made
under any Company Benefit Plan have been made. There is no claim, dispute,
grievance, charge, complaint, restraining or injunctive order, litigation or
proceeding pending, threatened or anticipated (other than routine claims for
benefits) against or relating to any Company Benefit Plan or against the
assets of any Company Benefit Plan, which would be reasonably likely to have,
a Material Adverse Effect on the Company. To the knowledge of the Company,
neither the Company, any of its Subsidiaries nor any ERISA Affiliate has
communicated generally to employees or specifically to any employee regarding
any future increase of benefit levels (or future creations of new benefits)
with respect to any Company Benefit Plan beyond those reflected in the
Company Benefit Plans, which benefit
12
increases or creations, either individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect on the Company. Neither
the Company, any of its Subsidiaries nor any ERISA Affiliate presently
sponsors, maintains, contributes to, nor is the Company, its Subsidiaries or
any ERISA Affiliate required to contribute to, nor has the Company or any of
its Subsidiaries ever sponsored, maintained, contributed to, or been required
to contribute to, any employee pension benefit plan within the meaning of
section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any multiemployer plan within the meaning of section
3(37) or 4001(a)(3) of ERISA (a "Multiemployer Plan"), other than the
Company's 401(k) plan (the "401(k) Plan") which is intended to be qualified
under Section 401 of the Internal Revenue Code of 1986, as amended (the
"Code"). No governmental agency, including without limitation, the Internal
Revenue Service of the Department of Labor, has initiated, to the knowledge
of the Company, any examination, audit or investigation of the 401(k) Plan
which has not been completed and no such examination, audit or investigation
has resulted in the failure of the Plan to be qualified under Section 401 of
the Code. No Company Benefit Plan provides for post-employment or retiree
health, medical, life or other welfare benefits, except to the extent
required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the
Code. Neither the Company, any of its Subsidiaries, any ERISA Affiliate, nor,
to the Company's knowledge, any other "disqualified person" or "party in
interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has engaged in any transactions in connection with any
Company Benefit Plan that would reasonably be expected to result in the
imposition of a penalty pursuant to Section 502 of ERISA, damages pursuant to
Section 409 of ERISA, or a tax pursuant to Section 4975 of the Code, except
where the imposition of such penalties, damages or taxes would not reasonably
be expected to result in a Material Adverse Effect on the Company. No
employer securities, employer real property or other employer property is
included in the assets of any Company Benefit Plan. With respect to any
insurance policy providing funding for benefits or an investment alternative
under any Company Benefit Plan in the nature of a retroactive rate
adjustment, loss sharing arrangement or other liability or loss, (i) no
insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding, and (ii) to the knowledge
of the Company, any of its Subsidiaries or any ERISA Affiliate, no such
proceedings with respect to any insurer are imminent.
(b) No Company Benefit Plan provides for the payment by the Company
or any subsidiary of any amount that is an "excess parachute payment" within
the meaning of section 280G(b)(1) of the Code.
(c) (i) "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workers' compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, including, but not limited to, any "employee benefit
plan" within the meaning of section 3(3) of ERISA and (ii) "Company Benefit
Plan" means any employee pension benefit plan and any Plan, other than a
Multiemployer Plan, established by the Company, any of its Subsidiaries or
any ERISA Affiliate or to which the Company or any of its Subsidiaries
contributes or has contributed
13
(including without limitation any such Plans not now maintained by the
Company, any of its Subsidiaries or any ERISA Affiliate or to which the
Company, any of its Subsidiaries or any ERISA Affiliate does not now
contribute, but with respect to which the Company, any of its Subsidiaries or
any ERISA Affiliate has or may have any liability).
(d) Complete and correct copies of the following documents have been
furnished or made available to Parent or Sub:
(i) all Company Benefit Plans and any predecessor plans referred to
therein, any related trust agreements, service provider agreements, insurance
contracts or agreements with investment managers, including without
limitation, all amendments thereto;
(ii) current summary plan descriptions of each Company Benefit Plan
subject to ERISA;
(iii) the most recent Form 5500 and Schedules thereto for each
Company Benefit Plan subject to ERISA reporting requirements; and
(iv) the most recent determination of the IRS with respect to the
qualified status of each Company Benefit Plan which is qualified under
Section 401 of the Code.
Section 3.12 EMPLOYMENT RELATIONS AND AGREEMENT. (a) (i) Each of the
Company and its Subsidiaries is, and at all times has been, in compliance in
all material respects with all federal, state or other applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice; (ii) no unfair labor practice complaint against the Company
or any of its Subsidiaries is pending before the National Labor Relations
Board; (iii) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the Company's knowledge, threatened against or involving the
Company or any of its Subsidiaries, (iv) no arbitration proceeding arising
out of or under any collective bargaining agreement is pending and no claim
therefor has been asserted; and (v) no collective bargaining agreement is
currently being negotiated by the Company or any of its Subsidiaries.
(b) Except for employment agreements and similar agreements,
executed copies of which, as amended, have been delivered or made available
to Parent, neither the Company nor any of its Subsidiaries has any written,
or, to the knowledge of the Company, any oral, employment or severance
agreement with any other person. The executed copies of the employment
agreements and similar agreements previously delivered or made available to
Parent
14
are true and correct, and such agreements have not since been amended,
modified or rescinded except to the extent disclosed to Parent.
Section 3.13 CONTRACTS. Except as filed as Exhibits to Company SEC
Documents and as contemplated by the Database Agreements, neither the Company
nor its Subsidiaries is a party to, or has any obligation under, any contract
or agreement which contains any covenant currently or prospectively limiting
the freedom of the Company, any of its Subsidiaries or any of their
respective affiliates to engage in any line of business or to compete with
any entity. Subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity,
all material contracts and agreements to which the Company or any of its
Subsidiaries is a party or by which any of their respective assets is bound
are valid and binding, in full force and effect and enforceable against the
Company or its Subsidiaries, as applicable, and, to the Company's knowledge,
the other parties thereto in accordance with their respective terms, other
than such failures to be so valid and binding, in full force and effect or
enforceable which, would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on the Company.
There is not under any such material contract or agreement any existing
default, or event which, after notice or lapse of time, or both, would
constitute a default, by the Company or any of its Subsidiaries, or to the
Company's knowledge, any other party, except to the extent such default would
not reasonably be expected to have a Material Adverse Effect on the Company.
Section 3.14 RIGHTS AGREEMENT. The Company and the Board of
Directors of the Company have taken all necessary action to amend the Rights
Agreement (subject only to the execution of such amendment by the Rights
Agent, which execution the Company shall cause to take place prior to the
Effective Time) to (a) render the Rights Agreement inapplicable with respect
to the Merger and the other transactions contemplated by this Agreement and
(b) ensure that (x) neither Parent nor Sub nor any of their Affiliates (as
defined in the Rights Agreement) or Associates (as defined in the Rights
Agreement) is considered to be an Acquiring Person (as defined in the Rights
Agreement) and (y) the provisions of the Rights Agreement, including the
occurrence of a Distribution Date (as defined in the Rights Agreement), are
not and shall not be triggered by reason of the announcement or consummation
of the Merger or the consummation of any of the other transactions
contemplated by this Agreement. The Company has delivered to Parent a
complete and correct copy of the Rights Agreement as amended and supplemented
to the date of this Agreement.
Section 3.15 STATE TAKEOVER STATUTES; CERTAIN CHARTER PROVISIONS.
The Board of Directors of the Company has, to the extent such statute is
applicable, taken all action (including appropriate approvals of the Board of
Directors of the Company) necessary to exempt Parent and its Subsidiaries,
the Merger, this Agreement and the transactions contemplated hereby and
thereby from Section 203 of the DGCL.
Section 3.16 TAXES. (a) (i) The Company and each Subsidiary has
timely filed (taking into account extensions) all material Tax Returns
required to be filed on or before the Effective Time, which returns were true
and complete in all material respects; (ii) the Company and each Subsidiary
has timely paid all material Taxes shown as due and payable on such Tax
Returns;
15
(iii) the most recent consolidated financial statements of the Company
reflect an adequate reserve for all material Taxes payable by the Company and
each Subsidiary for all taxable periods and portions thereof through the date
of such financial statements; and (iv) the Company and each Subsidiary has
withheld or collected all material Taxes they were required to withhold and
collect, and have timely paid to the relevant taxing authorities such Taxes
withheld or collected to the extent due and payable.
(b) (i) Neither the Company nor any Subsidiary has waived any
statute of limitations in respect of Taxes of the Company or any Subsidiary;
(ii) there is no material dispute or claim concerning any of the Tax Returns
referred to in clause (i) of Section 3.16(a) that has been raised in writing
by the relevant taxing authority, and neither the Company nor any of its
Subsidiaries is subject to an audit, examination, action, suit, proceeding,
investigation or claim regarding Taxes ("Tax Controversy") by the relevant
taxing authorities of any nation, state, province or locality that is
currently pending (or scheduled as of the Effective Time to be conducted)
regarding Taxes; (iii) all deficiencies asserted or assessments made as a
result of any such Tax Controversy concerning the Tax Returns referred to in
clause (i) of Section 3.16(a) by a taxing authority have been paid in full or
adequately provided for in the appropriate financial statements of the
Company and its Subsidiaries; and (iv) no material liens or security
interests arising in connection with a failure (or alleged failure) to pay
any Taxes have attached to any of the Company's or any of its Subsidiaries'
assets. The Company has delivered or made available to Parent correct and
complete copies of all United States federal, state and all foreign income
Tax Returns (to the extent filed as of the date hereof or, if not filed,
correct and complete copies of extensions thereof), examination reports,
statements of deficiencies assessed against or agreed to by the Company and
any of its Subsidiaries, or any other similar correspondence from a taxing
authority, relating to taxable years 1996, 1997 and 1998.
(c) For purposes of this Agreement (i) "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means any federal, state, local, foreign or
other income, gross receipts, profits, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer, stamp, severance, capital gains, capital stock
or excise tax, or any other tax, levy custom, duty, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest
or penalty, imposed by any governmental authority and shall include any
liability for such amounts as a result either of being a member of a
combined, consolidated, unitary or affiliated group or of a contractual
obligation to indemnify any person or other entity with respect to Taxes, and
(ii) "Tax Return" means any return, form, report or similar statement
required to be filed with respect to any Tax (including any schedules,
related or supporting information), including, without limitation, any
information return, claim for refund, amended return or declaration of
estimated Tax.
(d) None of the Company or any of its Subsidiaries has agreed to any
extension of time with respect to any Tax assessment or deficiency.
(e) There are no tax sharing, allocation, indemnification or similar
agreements in effect as between the Company or its Subsidiaries or any
predecessor or affiliate thereof and any
16
other party under which Parent or Sub, the Company or its Subsidiaries could
be liable for Taxes or other claims of any party.
(f) No election under Section 341(f) of the Code has been made or
shall be made prior to the Effective Time to treat the Company or its
Subsidiaries as a consenting corporation, as defined in Section 341 of the
Code.
(g) Neither the Company nor any of its Subsidiaries is a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(h) Neither the Company nor any of its Subsidiaries has been
required to include in income any adjustments pursuant to section 481 of the
Code by reason of a voluntary change in accounting method initiated by the
Company or any of its Subsidiaries, and the Internal Revenue Service has not
initiated or proposed any such adjustment or change in accounting period.
Section 3.17 INTELLECTUAL PROPERTIES. (a) The Company owns or
otherwise possesses legally enforceable rights or licenses to use all
material patents, trademarks, trade names, service marks, copyrights together
with any registrations and applications therefor, Internet domain names,
trade secrets, proprietary information, know-how, computer software programs
or applications including, without limitation, all object and source codes
and tangible or intangible proprietary information or material that in any
material respect are used in the business of the Company and any of its
Subsidiaries as currently conducted (the "Company Intellectual Property").
Section 3.17 of the Company Disclosure Schedule sets forth: (i) all material
patents, trademarks, trade names, service marks, registered copyrights, and
any applications therefor in any nation included in the Company Intellectual
Property; and (ii) all material licenses and other agreements to which the
Company or any of its Subsidiaries is a party and pursuant to which the
Company or any of its Subsidiaries is authorized to use any Company
Intellectual Property and includes the identities of the parties thereto, a
description of the nature and subject matter thereof, the applicable royalty
and the term thereof. Neither the Company nor any of its Subsidiaries is, or
as a result of the execution, delivery or performance of the Company's
obligations hereunder will be, in violation of, or lose any rights pursuant
to, any license or agreement set forth in Section 3.17 of the Company
Disclosure Schedule, except as would not reasonably be expected to have a
Material Adverse Effect on the Company.
(b) Except as would not reasonably be expected to have a Material
Adverse Effect on the Company, to the knowledge of the Company (i) no claims
are pending or threatened that the Company or any Subsidiary is infringing on
or otherwise violating the rights of any person with regard to any Company
Intellectual Property, and (ii) no person is infringing on or otherwise
violating any right of the Company or any Subsidiary with respect to any
Company Intellectual Property.
Section 3.18 VOTING REQUIREMENTS. The affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock
(voting as one class, with each share of Common Stock having one (1) vote)
entitled to be cast approving this Agreement is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve
this
17
Agreement and the transactions contemplated by this Agreement under the DGCL
and the Company's Certificate of Incorporation and By-Laws.
Section 3.19 YEAR 2000. The Company has a Year 2000 readiness plan
(the "Y2K Readiness Plan") as described in the Company SEC Documents. Upon
completion of the Y2K Readiness Plan, the Company believes all software
material to the business, finances or operations of the Company ("Software"):
(i) shall accurately and completely process (including but not
limited to calculation, comparison and sequencing, and including without
limitation leap year calculations) date-related data for dates prior to the
year 2000, date-related data for dates after the year 1999, and date-related
data for dates both before the year 2000 and after the year 1999, except
where the failure to do so would not reasonably be expected to have a
Material Adverse Effect; and
(ii) shall not, as a consequence of the change of centuries or
of the fact that date from more than one century is being processed, cause an
abnormal termination of execution, an endless loop, incorrect values or
invalid results, or otherwise fail to perform accurately and completely those
functions set forth in the associated user documentation, which action would
not reasonably be expected to have a Material Adverse Effect.
Section 3.20 BROKERS. No broker, investment banker or other person
or entity, other than U.S. Bancorp Xxxxx Xxxxxxx Inc., the fees and expenses
of which will be paid by the Company, is entitled to any broker's, finder's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Company. A true and correct copy of the engagement letter of U.S.
Bancorp Xxxxx Xxxxxxx Inc. as in effect on the date hereof has been delivered
to Parent.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as otherwise expressly contemplated by this Agreement, as described in
the Company Disclosure Schedule or with respect to the Database Business,
during the period from the date of this Agreement through the date of the
stockholders approval of the Merger, the Company shall, and shall cause its
Subsidiaries to, in all material respects carry on their respective
businesses in, and not enter into any transaction other than in accordance
with, the regular and ordinary course and, to the extent consistent
therewith, use its reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and key employees and preserve their relationships with customers, suppliers
and others having business dealings with them. Without limiting the
generality of the foregoing, and, except as otherwise expressly contemplated
by this
18
Agreement or as described in the Company Disclosure Schedule, the Company
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent, which consent shall not be unreasonably withheld, of Parent:
(a) (x) declare, set aside or pay any dividends on, or make any
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to stockholders of the Company
in their capacity as such, other than dividends payable to the Company
declared by any of the Company's Subsidiaries, (y) 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 (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities, except pursuant to the terms of the Stock Option
Plans;
(b) except for the disposition of shares of XX0.Xxx in connection
with the IQ2 Sale, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or
equity equivalent or any securities convertible into or exchangeable or
exercisable for, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or equity equivalent,
other than, in the case of the Company, the issuance of Shares during the
period from the date of this Agreement through the Effective Time upon the
exercise of Stock Options outstanding or the issuance of Stock Options in the
ordinary course of business consistent with past practice in accordance with
their current terms or enter into any agreement or contract with respect to
the sale or issuance of any of its securities;
(c) amend its charter or bylaws;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing assets of or equity in, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any material assets
(other than in the ordinary course of business consistent with past practice);
(e) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its material assets (other than (i) the Database
Business or (ii) in the ordinary course of business consistent with past
practice);
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, except for borrowings or guarantees incurred in the
ordinary course of business consistent with past practice for working capital
purposes, or make any loans, advances or capital contributions to, or
investments in, any other person or entity, other than to the Company or any
wholly owned Subsidiary of the Company or other than in the ordinary course
of business;
19
(g) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any
Subsidiary of the Company or adopt any plan with respect to any of the
foregoing (other than with respect to the Database Business);
(h) other than as provided in the Database Agreements (as defined in
Section 4.4 below), grant any severance or termination pay not currently
required to be paid under existing severance plans or enter into or adopt, or
amend any existing, severance plan, agreement or arrangement or, other than
in the ordinary course of business, enter into or amend any employee benefit
plan (including without limitation, the Stock Option Plans), or enter into or
amend any employment or consulting agreement, except as required by law or as
set forth on the Company Disclosure Schedule;
(i) enter into any contract or commitment with respect to capital
expenditures with a value in excess of, or requiring expenditures by the
Company and its Subsidiaries in excess of, $150,000, individually, or enter
into contracts or commitments with respect to capital expenditures with a
value in excess of, or requiring expenditures by the Company and its
Subsidiaries in excess of, $200,000, in the aggregate;
(j) except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the date
of this Agreement, increase the compensation or fringe benefits of any of its
directors, officers or employees provided that, with respect to employees
that are not executive officers or directors, the Company may increase
compensation associated with promotions and regular reviews in the ordinary
course of business consistent with past practice;
(k) agree to the settlement of any material claim or litigation;
(l) make or rescind any material tax election or settle or
compromise any material tax liability;
(m) except as required by applicable law or GAAP, make any material
change in its method of accounting;
(n) except as required under the Stock Option Plans or any existing
agreements made available by the Company to Parent and Sub or by law, and as
otherwise provided in this Agreement, the Database Agreements or any
employment-related agreements in connection with the sale of the Database
Business, accelerate the payment, right to payment or vesting of any bonus,
severance, profit sharing, retirement, deferred compensation, stock option,
insurance or other compensation or benefits;
(o) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction (A) of any such claims,
liabilities or obligations in the ordinary course of business and consistent
with past practice or as provided in the Database Agreements or (B) of
claims, liabilities or
20
obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) contained in the
Company SEC Documents;
(p) except as provided in the Database Agreements, enter into any
agreement, understanding or commitment that restrains, limits or impedes the
Company's or any of its Subsidiaries' ability to compete with or conduct any
business or line of business, including, but not limited to, geographic
limitations on the Company's or any of its Subsidiaries' activities;
(q) except as provided in the Database Agreements, modify, amend or
terminate any material contract to which it is a party or waive any of its
material rights or claims except in the ordinary course of business
consistent with past practice;
(r) notwithstanding anything to the contrary contained herein,
incur, assume or suffer to exist any material liability or obligation in
connection with the IQ2 Sale which is not reflected in the Database
Agreements; or
(q) agree, in writing or otherwise, to take any of the foregoing
actions, provided, however, that nothing in this Section 4.1 shall be deemed
as prohibiting the Company from making such expenditure as it deems
reasonably necessary to complete its Y2K Readiness Plan.
Section 4.2 NO SOLICITATION. (a) The Company and its affiliates (as
such term is defined under Rule 12b-2 under the Exchange Act) and each of
their respective officers, directors, employees, financial advisors,
attorneys and other advisors, representatives and agents shall immediately
cease any discussions or negotiations which may be ongoing with third parties
with respect to any Takeover Proposal (as defined below), except in
connection with the sale of the Database Business. The Company shall not, nor
shall it authorize or permit any officer, director or employee of or any
financial advisor, attorney or other advisor, representative or agent of, the
Company to, (i) solicit, initiate or encourage the submission of, any
Takeover Proposal (as hereafter defined) (including, without limitation, the
taking of any action which would make the Rights Agreement or Section 203 of
the Delaware General Corporation inapplicable to a Takeover Proposal except
as otherwise provided in this Agreement), or (ii) enter into any agreement
with respect to any Takeover Proposal or enter into any arrangement,
understanding or agreement requiring it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this
Agreement; provided, however, that in response to an unsolicited Takeover
Proposal and in compliance with its obligations under Section 4.2(c) hereof,
the Company may participate in discussions or negotiations with or furnish
information (pursuant to a confidentiality agreement with terms in the
aggregate not materially more favorable to such third party than the terms of
the Confidentiality Agreement) to any third party which makes a Superior
Proposal (as defined below) if the Board of Directors believes it would be in
the best interests of the Company and its stockholders to do so. For purposes
of this Agreement, "Takeover Proposal" means (i) any inquiry, proposal or
offer from any person or entity relating to any direct or indirect
acquisition or purchase of a substantial amount of assets of the Company or
any of its Subsidiaries (other than the stock and assets described in the
Database Agreements) or of over 20% of any class of equity securities of the
Company or any of its Subsidiaries (other than the stock and assets described
in the Database Agreements), (ii) any
21
tender offer or exchange offer that, if consummated, would result in any
person or entity beneficially owning 20% or more of any class of equity
securities of the Company or any of its Subsidiaries (other than XX0.Xxx) or
(iii) any merger, consolidation, business combination, sale of all, or
substantially all, of the assets or similar transaction involving the Company
or any of its Subsidiaries (other than any such transaction relating to the
stock and assets described in the Database Agreements); and "Superior
Proposal" means a bona fide Takeover Proposal on terms which the Board of
Directors of the Company determines in its good faith reasonable judgment to
be more favorable to the Company and its stockholders than the transactions
contemplated hereby, (x) for which financing is then available and (y) which
is not subject to any financing or due diligence condition.
(b) Except as set forth in Section 4.2(c), neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Sub, the approval or recommendation by such Board of Directors or such
committee of the Merger or this Agreement, or (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal or (iii) cause the
Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Takeover Proposal.
(c) In the event the Company receives a Superior Proposal, nothing
contained in this Agreement (but subject to the terms of this paragraph (c))
will prevent the Board of Directors of the Company from executing or entering
into an agreement relating to such Superior Proposal and recommending such
Superior Proposal to its stockholders; in such case, the Board of Directors
of the Company may withdraw, modify or refrain from making its recommendation
of the transactions contemplated hereby, and, to the extent it does so, the
Company may refrain from calling, providing notice of and holding the
stockholders meeting to adopt and approve this Agreement and the Merger and
from soliciting proxies or consents to secure the vote or written consent of
its stockholders to adopt and approve this Agreement and the Merger and may
terminate this Agreement; PROVIDED HOWEVER that the Company shall (i) provide
Parent at least 24 hours prior written notice of the Company's intention to
execute or enter into an agreement relating to such Superior Proposal, (ii)
terminate this Agreement by written notice to Parent provided no sooner than
48 hours after Parent's receipt of a copy of such Superior Proposal (or a
description of the significant terms and conditions thereof) and (iii) pay to
Parent the fee described in Section 5.3(b).
(d) Nothing contained in this Section 4.2 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by the
Exchange Act or from making any disclosure to the Company's stockholders if,
in the good faith judgment of the Board of Directors of the Company, such
disclosure is required by applicable state or federal securities laws or is
necessary in order to comply with its fiduciary duties to the Company's
stockholders under applicable law.
Section 4.3 THIRD PARTY STANDSTILL AGREEMENTS. During the period
from the date of this Agreement through the Effective Time, the Company shall
not terminate, amend, modify or
22
waive any provision of any confidentiality or standstill agreement to which
the Company or any of its Subsidiaries is a party (other than any involving
Parent).
Section 4.4 DATABASE AGREEMENTS. On or before the date hereof, the
Company shall have delivered to Parent copies of any and all material
contracts or agreements, except for employment-related agreements, relating
to the sale of the Database Business as set forth on Schedule 4.4 hereto and
the Company shall not enter into any modifications, changes or amendments to
such contracts and agreements without the prior written consent of Parent
(the agreements listed on Schedule 4.4, as the same may be amended from time
to time, the "Database Agreements"), which consent shall not be unreasonably
withheld.
Section 4.5 PAYMENT OF ACQUISITION EXPENSES. Prior to the Effective
Time, the Company shall pay all legal, accounting, printer's and investment
banking fees incurred in connection with the transactions contemplated by
this Agreement pursuant to duly submitted invoices for such services.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 COMPANY STOCKHOLDER APPROVAL; PROXY STATEMENT. (a) As
soon as practicable following the date hereof, the Company shall call a
meeting of its stockholders (the "Stockholder Meeting") for the purpose of
voting upon the Merger and shall take all action necessary or advisable to
obtain stockholder approval of the Merger. The Company will, through its
Board of Directors, subject to the terms of this Agreement, recommend to its
stockholders the approval of the Merger.
(b) The Company will prepare and file a preliminary Proxy Statement
with the SEC promptly after the date hereof and will use its commercially
reasonable efforts to respond to any comments of the SEC or its staff and to
cause the Proxy Statement to be cleared by the SEC. The Company will notify
Parent of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Proxy Statement or the Merger. The Company shall give Parent and its counsel
the opportunity to review the Proxy Statement prior to its being filed with
the SEC and shall give Parent and its counsel the opportunity to review all
amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company and Parent agrees
to use its reasonable efforts, after consultation with the other parties
hereto, to respond promptly to all such comments of and requests by the SEC.
As promptly as practicable after the Proxy Statement has been cleared by the
SEC, the Company shall mail the Proxy Statement to the stockholders of the
Company. If at any time prior to the approval of this Agreement by the
Company's stockholders there shall occur any event that should be set forth
in an amendment or
23
supplement to the Proxy Statement, the Company will prepare and mail to its
stockholders such an amendment or supplement.
(c) The Company shall take all such action as may be reasonably
necessary or advisable to obtain the necessary approvals by its stockholders
of the Merger, this Agreement and the transactions contemplated hereby.
(d) Parent agrees to cause Shares owned by Parent, Sub or any other
Subsidiary of Parent to be voted in favor of the approval of the Merger.
Section 5.2 ACCESS TO INFORMATION. (a) The Company shall, and shall
cause each of its Subsidiaries to, afford to Parent, and to Parent's
accountants, counsel, financial advisers and other representatives,
reasonable access and permit them to make such inspections as they may
reasonably request during normal business hours during the period from the
date of this Agreement through the earlier of the termination of this
Agreement and the Effective Time to all their respective properties,
information systems, books, contracts, commitments and records and, during
such period, the Company shall, and shall cause each of its Subsidiaries to,
furnish promptly to Parent (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state laws and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request. In no event shall the Company, be requested to supply to Parent, or
to Parent's accountants, counsel, financial advisors or other
representatives, any information relating to indications of interest from, or
discussions with, any other potential acquirers of the Company which were
received or conducted prior to the date hereof, except to the extent
necessary for use in the Proxy Statement; provided, however, that access to
documents relating to the sale of the Database Business shall be governed by
Section 4.4.
Section 5.3 FEES AND EXPENSES. (a) Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, except as expressly set forth in this
Agreement.
(b) If this Agreement is terminated (i) by Parent (x) in accordance
with Section 7.1(b)(ii) hereof or (y) in the event of any willful or
intentional action or inaction by the Company which causes the Company to
breach in any material respect any representation, warranty, covenant or
other agreement contained in this Agreement, and within six months of that
termination, the Company enters into any agreement with respect to any
Takeover Proposal, or (ii) by the Company in accordance with Section
7.1(c)(ii) hereof; then the Company shall on the fifth business day next
succeeding the date of termination pay to Parent in immediately available
funds an amount equal to $1.5 million.
Section 5.4 REASONABLE EFFORTS. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable efforts to take, or cause to be
24
taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger, and the other transactions contemplated by this
Agreement, including (a) obtaining all necessary actions or non-actions,
waivers, consents and approvals from Governmental Entities and the making of
all necessary registrations and filings (including filings with Governmental
Entities, including without limitation, all filings under the HSR Act) and
the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from or to avoid an action or proceeding by any Governmental
Entity, (b) obtaining all necessary consents, approvals or waivers from third
parties, (c) defending any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (d) executing and delivering any additional
instruments necessary to consummate the transactions contemplated by this
Agreement.
Section 5.5 PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand,
and the Company, on the other hand, will consult with each other before
issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law or regulation or by
obligations pursuant to any listing agreement with any national securities
exchange or the Nasdaq National Market.
Section 5.6 STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute
or regulation shall become applicable to the transactions contemplated
hereby, Parent and the Company and their respective Boards of Directors shall
take all such action as may be necessary or advisable to obtain such
approvals and take such actions as are necessary or advisable so that the
transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby and thereby.
Section 5.7 RIGHTS AGREEMENT. The Company shall not, unless required
to do so by a court of competent jurisdiction, (i) redeem the Rights, (ii)
amend (other than to delay the Distribution Date (as defined therein) or to
render the Rights inapplicable to the Merger) or terminate the Rights
Agreement prior to the Effective Time without the consent of Parent, or (iii)
take any action which would allow any Person (as such term is defined in the
Rights Agreement) other than Parent or Sub to be the Beneficial Owner (as
such term is defined in the Rights Agreement) of 20% or more of the Common
Stock without causing a Distribution Date (as such term is defined in the
Rights Agreement) or a Triggering Event (as such term is defined in the
Rights Agreement) to occur.
Section 5.8 INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE.
Parent and the Surviving Corporation shall cause to be maintained in effect
(i) for a period of six years after the Effective Time, the current
provisions regarding indemnification of current or former officers
25
and directors (each an "Indemnified Party") contained in the charter and
bylaws of the Company or its Subsidiaries and in any agreements between an
Indemnified Party and the Company or its Subsidiaries, provided that in the
event any claim or claims are asserted or made within such six year period,
all rights to indemnification in respect of any claim or claims shall
continue until final disposition of any and all such claims, and (ii) for a
period of six years after the Effective Time, for the benefit of the
Company's current directors and officers, an insurance and indemnification
policy that provides coverage for events occurring at or prior to the
Effective Time that is no less favorable than the existing policies or, if
substantially equivalent insurance coverage is unavailable, the best
available coverage; provided, however, that Parent and the Surviving
Corporation shall not be required to pay an annual premium for such insurance
in excess of 1.50 times the last annual premium paid prior to the date
hereof, but in such case shall purchase as much such coverage as possible for
such amount. This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs
and legal representatives. For a period of six years after the Effective Time
(provided that in the event any claim or claims are asserted or made within
such six year period, all rights to indemnification in respect of any claim
or claims shall continue until final disposition of any and all such claims),
Parent shall indemnify the Indemnified Parties to the same extent as such
Indemnified are entitled to indemnification and pursuant to clause (i) of the
first sentence of this Section 5.8. Without limitation of the foregoing, in
the event any such Indemnified Party is or becomes involved in any action,
proceeding or investigation in connection with any matter occurring prior to
or on the Effective Time, including the transactions contemplated hereby,
Parent will pay as incurred such Indemnified Party's reasonable fees and
expenses of counsel selected by the Indemnified Party and reasonably
acceptable to Parent (including the cost of any investigation and preparation
and the cost of any appeal) incurred in connection therewith. This covenant
shall survive the closing of the transactions contemplated hereby and is
intended to be for the benefit of, and shall be enforceable by, each of the
Indemnified Parties and their respective heirs and legal representatives.
Section 5.9 TERMINATION OF EMPLOYMENT. Immediately following the
Effective Time, the Surviving Corporation shall terminate Xxx Xxxxxxx, Xx
Xxxxxxx and Xxxxx Xxxxxxxx without cause (as such term is defined in such
individuals' respective severance agreements). The severance cost of such
termination, and the severance costs relating to the termination of any
accounting personnel and any other personnel who have severance arrangements
with the Company, shall be charged to the Company as an expense as of the
Closing Date for purposes of the Annex A calculation of Working Capital.
Section 5.10 OTHER AGREEMENTS RELATING TO STOCK OPTIONS. With
respect to Stock Options under the Pipeline Communications, Inc. 1994
Incentive Stock Option Plan (the "1994 Plan"), the Intelliquest Information
Group, Inc. 1996 Stock Plan and the Intelliquest Information Group, Inc. 1997
Supplemental Stock Plan (collectively, the "Affected Stock Plans"), the
Company agrees to obtain the consent of holders of at least 90%, in the
aggregate, of the Shares of Common Stock outstanding under the Stock Options,
as of the Effective Time, granted under the Affected Stock Plans to the
cancellation of such Stock Options held by such holders in exchange for a
cash payment as described and calculated in Section 1.5(d) and Annex B of
this Agreement, and to take all actions required with respect to obtaining
such consents. To the
26
extent that an option granted under the 1994 Plan has been terminated under
Section 10(b)(iii) of that plan prior to the Effective Time, the provisions
of this Section 5.10 shall not be applicable to the Shares of Common Stock
underlying such option.
Section 5.11 INTERIM OPERATIONS. During the period commencing on the
date the stockholders of the Company approve the Merger and ending on the
Closing Date or the termination of this Agreement, Parent shall assume
responsibility for the operation of the business of the Company subject to
consultation and review with Xxxxx Xxxxxxxx and the Board of Directors of the
Company. Such consultation, review and approval of Xxxxx Xxxxxxxx and the
Board of Directors of the Company shall be required for all matters, other
than matters in the ordinary course of business. Matters which are considered
outside of the ordinary course of business for purposes of this Section 5.11
shall be the same matters that prior to the Closing would have required the
consent of Parent pursuant to Section 4.1 hereof. During this period, Parent
shall use its reasonable efforts to keep available the services of the
Company's current officers and key employees and preserve the Company's
relationship with customers, suppliers and others having material business
dealings with the Company.
Section 5.12 COMPLETION OF MERGER. In the event that the Price Per
Share as defined in Annex A is equal to or greater than the minimum
authorized price per share set forth in the Proxy Statement, the parties
shall complete the Merger in accordance with Article I.
Section 5.13 EMPLOYEE STOCK PURCHASE PLAN. The Company shall take
all actions necessary to terminate the Intelliquest Information Group, Inc.
1996 Employee Stock Purchase Plan (the "ESP") and to terminate the 7/1/99 -
12/31/99 Offering Period (as defined in the ESP), in each case, at or prior
to September 30, 1999. As of the Effective Time no participant under the ESP
shall possess any rights to acquire any shares of the Common Stock thereunder.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Merger shall have been approved by the
requisite vote of holders of the Common Stock of the Company.
(b) NO ORDER. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree or injunction which prohibits
or has the effect of prohibiting the consummation of the Merger; provided,
however, that the Company, Parent and Sub shall use their reasonable efforts
to have any such order, decree or injunction vacated.
27
(c) HSR ACT WAITING PERIOD. Each party shall have filed an
application under the HSR Act and Parent shall pay the filing fee required
thereunder. The applicable waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated.
(d) EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENT. Each of the
individuals listed on Schedule 6.1 attached hereto shall have entered into an
Employment Agreement in the form and to the effect of Exhibit A-1 (solely in
the case of Xxxxxxxx Xxxxxx and Xxxx Xxxxxxxx) or Exhibit A-2, as applicable.
Xxxxx Xxxxxxxx shall have entered into a Consulting Agreement in a form
mutually acceptable to Parent and Xxxxx Xxxxxxxx.
(e) NON-COMPETITION AGREEMENTS. Xxxxx Xxxxxxxx shall have entered
into an extension of his Non-Competition Agreement with the Company, dated as
of September 30, 1995, for a period of two years following the Effective
Time. Xxxxx Xxxxxx ("Zandan") shall have entered into a Non-Competition
Agreement, mutually acceptable to Parent and Xxxxx Xxxxxx, with the Company
pursuant to which Zandan shall be prohibited for a period of two years after
the Effective Time from (i) personally engaging, or participating, in any
solicitation of business from any client of the Company if such business is
related to survey-based research or (ii) soliciting any employees of the
Company; it being understood, that for purposes of Zandan's Non-Competition
Agreement, the term "client" shall mean any client of the Company which
generates 5% or more of the Revenues of the Company (as defined in Annex A
hereto) at the Effective Time or at any time within the 12-month period
immediately preceding the Effective Time.
(f) COVENANTS. Each of the parties to this Agreement shall have
performed and complied with, in all material respects, all covenants and
agreements required by this Agreement to be performed or complied with by
such party at or prior to the Closing.
(g) IQ2 SALE. The IQ2 Sale shall have been completed on
substantially the same terms and conditions set forth in the Asset Purchase
Agreement, dated as of July 22, 1999, between the Company and Naviant
Technology Solutions, Inc., as such agreement may be amended, changed or
modified from time to time with the prior written consent of Parent, which
consent shall not be unreasonably withheld.
(h) MINIMUM PRICE PER SHARE. The purchase price per share payable to
stockholders of the Company shall be no less than the minimum amount set
forth in the Proxy Statement submitted to stockholders.
(i) CONSENTS. The Company shall have (A) obtained the consent of
holders of at least 90%, in the aggregate, of the Shares of Common Stock
outstanding under the Stock Options, as of the Effective Time, granted under
the Affected Stock Plans to the cancellation of such Stock Options held by
such holders in exchange for a cash payment as described and calculated under
Section 1.5(d) and Annex B of this Agreement and (B) taken the actions
described in Section 5.13 above.
28
(j) COOPERATION AGREEMENT. The Company shall have either (i) amended
section 2.2 of the Cooperation Agreement between the Company and Naviant
Technology Solutions, Inc. (the "Cooperation Agreement") in order to extend
the exclusive offer period another 90 days beyond the 120 day period set
forth therein or (ii) requested Affinity Marketing Services to be provided to
the Company pursuant to the terms of the Cooperation Agreement in a manner
sufficient to satisfy the requirements for extending the period of
exclusivity thereunder.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after any approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by the Parent or Sub:
(i) if the Company has breached in any material respect any
representation, warranty, covenant or other agreement contained in this
Agreement which (x) cannot or has not been cured prior to twenty (20)
business days after the giving of written notice of such breach to the
Company and (y) has not been waived by Parent pursuant to the provisions
hereof; or
(ii) (x) if the Board of Directors of the Company withdraws or
modifies its recommendation of the Merger or shall have resolved or publicly
announced its intention to do any of the foregoing, or (y) the Company shall
have recommended to the stockholders of the Company any Superior Proposal or
resolved to do the same or (z) the Company has entered into an agreement to
engage in a Superior Proposal with any person other than Parent, Sub or an
affiliate thereof.
(c) by the Company
(i) if Parent or Sub has breached in any material respect any
representation, warranty, covenant or other agreement contained in this
Agreement which (x) cannot be or has not been cured within twenty (20)
business days after the giving of written notice to Parent or Sub and (y) has
not been waived by the Company pursuant to the provisions hereof; or
(ii) if the Board of Directors of the Company determines to
accept a Superior Proposal;
(d) by either Parent or the Company:
29
(i) if the Effective Time has not occurred on or prior to the
close of business on December 31, 1999; provided, further, that the right to
terminate this Agreement pursuant to this clause shall not be available to
any party whose failure to fulfill any material obligation of this Agreement
or other material breach of this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to have occurred on or prior to the
aforesaid date;
(ii) if any court of competent jurisdiction or any governmental,
administrative or regulatory authority, agency or body shall have issued an
order, decree or ruling or taken any other action permanently restricting,
enjoining, restraining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and non-appealable;
(iii) if at a duly held meeting of the stockholders of the
Company (including any adjournment thereof) held for the purpose of voting on
this Agreement and the transactions contemplated hereby, the holders of a
majority of the outstanding shares of the Company's common stock shall not
have approved this Agreement and the Merger; or
(iv) if at the time of the determination of Working Capital, the
condition set forth in Section 6.1(h) shall not have been satisfied and
Parent shall not otherwise agree to pay the amount of Merger Consideration
necessary to satisfy such condition.
Section 7.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement by either Parent or the Company, as provided in Section 7.1,
this Agreement shall forthwith become void and there shall be no liability
hereunder on the part of the Company, Parent or Sub or their respective
officers or directors (except as set forth in Section 5.3, which shall
survive the termination); provided, however, that nothing contained in this
Section 7.2 shall relieve any party hereto from any liability for any willful
breach of any covenant or agreement contained in this Agreement.
Section 7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after any approval of the Merger by the
stockholders of the Company but, after the Special Meeting, no amendment
shall be made which decreases the Merger Consideration or which in any way
materially adversely affects the rights of such stockholders, without the
further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.4 WAIVER. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party. No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the
30
part of any party hereto of any right, power or privilege hereunder operate
as a waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. Unless otherwise provided, the rights
and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties hereto may otherwise have at law or in
equity. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time;
provided, however, this Section 8.1 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the
Effective Time.
Section 8.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent
by overnight courier or telecopied (with a confirmatory copy sent by
overnight courier (other than United Parcel Service)) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent, to
Kantar Media Research, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxx
Facsimile No.: (000) 000-0000
with copies to:
Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to
Intelliquest Information Group, Inc.
31
1250 Capital of Texas Xxxxxxx
Xxxxxxxx Xxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
Section 8.3 INTERPRETATION. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation." When
the phrase "knowledge of the Company" is used herein, it shall refer to the
actual knowledge of the individuals set forth in Section 8.3 of the Company
Disclosure Schedule. As used in this Agreement, "business day" shall have the
meaning ascribed thereto in Rule 14d-1(e)(6) under the Exchange Act. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the content requires otherwise.
Section 8.4 COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, including the documents and instruments referred to herein,
together with the Confidentiality Agreement dated January 7, 1999, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except for the provisions of Sections 1.5, 1.6,
1.7, 5.8 and 5.9 of this Agreement (which is intended to be for the benefit
of the persons and entities covered thereby and may be enforced by such
persons and entities), is not intended to confer upon any person or entity
other than the parties hereto any rights or remedies hereunder.
Section 8.6 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.
32
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or federal court of the United
States of America, sitting in Delaware, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the
transactions contemplated hereby or thereby or for recognition or enforcement
of any judgment relating thereto, and each of the parties hereby irrevocably
and unconditionally (i) agrees not to commence any such action or proceeding
except in such courts, (ii) agrees that any claim in respect of any such
action or proceeding may be heard and determined in such Delaware State
court. or, to the extent permitted by law, in such federal court, (iii)
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
such action or proceeding in any such Delaware State or federal court, and
(iv) waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such Delaware State or federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.2. Nothing
in this Agreement will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND
HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
8.6(c).
33
Section 8.7 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties, except that
Sub may assign, in its sole discretion, any of or all its rights, interests
and obligations under this Agreement to Parent or to any direct or indirect
wholly owned subsidiary of Parent, but no such assignment shall relieve
Parent or Sub of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective successors and assigns.
Section 8.8 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby are not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions be consummated as
originally contemplated to the fullest extent possible.
Section 8.9 ENFORCEMENT OF THIS AGREEMENT. The parties agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 8.10 INCORPORATION OF EXHIBITS. The Company Disclosure
Schedule and all Exhibits attached hereto are hereby incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
Section 8.11 PERFORMANCE BY SUB. Parent hereby agrees to cause Sub
to comply with its obligations hereunder and to cause Sub to consummate the
Merger as contemplated herein and whenever this Agreement requires Sub to
take any action, such requirement shall be deemed to include an undertaking
of Parent to cause Sub to take such action.
Section 8.12 RESOLUTION OF DISPUTES RELATING TO CALCULATIONS. Xxx
Xxxxxxx ("Xxxxxxx") and Xxxxxxx Xxxxxx ("Xxxxxx") shall make all calculations
of amounts set forth in this Agreement. In the event of any dispute which is
not resolved within 7 business days after notice thereof, an accounting firm
mutually designated by the parties prior to the Closing shall determine the
correct calculation and its determination shall be binding upon all parties
hereto.
34
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
KANTAR MEDIA RESEARCH, INC.
By: /s/ Xxxx Xxxxx Xxxx
------------------------------------
Name: Xxxx Xxxxx Xxxx
Title: Secretary
WPP ACQUISITION CORP.
By: /s/ Xxxx Xxxxx Xxxx
------------------------------------
Name: Xxxx Xxxxx Xxxx
Title: President
INTELLIQUEST INFORMATION GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer,
President and Director
35
ANNEX A
1. CALCULATION OF MERGER CONSIDERATION
The purchase price for each Share acquired by Parent in connection
with the Merger shall be calculated as follows:
Price Per Share = AP/AS (as defined in Annex B)
Aggregate Purchase Price = (A) $42.5 million PLUS Balance Sheet Cash
(as defined below) PLUS Database Proceeds
(as defined below) plus Holdback Amount
(as defined below), if any, less (B) the
amount of Balance Sheet Cash necessary,
if any, to provide a minimum of $4,000,000
of Working Capital (as defined below) on
the date that the shareholders approve the
Merger.
For purposes of this Agreement, the following terms shall be defined
as set forth below:
"BALANCE SHEET CASH" shall mean all cash and cash equivalents,
calculated in accordance with U.S. generally accepted accounting principles
("GAAP") excluding Database Proceeds, and excluding any taxes with respect
thereto which have not yet been paid, set forth on the balance sheet of the
Company as of the date that the shareholders approve the Merger.
"DATABASE PROCEEDS" shall mean cash proceeds actually received by
the Company with respect to the sale of the Database Business multiplied by
one minus the effective tax rate for the Database Business transaction as
determined by Price Waterhouse Coopers.
"DEDUCTION AMOUNT" shall mean the product of 4-times the difference
between the Margin Target and the Gross Margin.
"DIRECT COSTS" shall mean all costs and expenses incurred by the
Company during the Measuring Period which are related to the projects and
services performed by the
36
Company during the Measuring Period, all determined in accordance with GAAP
as consistently applied by the Company.
"GROSS MARGIN" for the Measuring Period shall be equal to Revenues
less Direct Costs.
"HOLDBACK AMOUNT" shall mean (i) in the event the Gross Margin
equals or exceeds $10,525,000 (the "MARGIN TARGET") an amount equal to
$2,500,000 or (ii) in the event the Gross Margin is less than the Margin
Target, an amount equal to $2,500,000 less the Deduction Amount, except that
in no event shall the Deduction Amount exceed $2,500,000.
"MEASURING PERIOD" shall mean the period commencing on January 1,
1999 and ending on September 30, 1999.
"REVENUES" shall mean all revenues of the Company for the Measuring
Period as determined in accordance with GAAP as consistently applied by the
Company.
"WORKING CAPITAL" shall mean current assets of the Company which are
realizable in one year or less, minus the current liabilities of the Company,
calculated in accordance with GAAP.
37
ANNEX B
Let s = the number of common shares outstanding
Let a = the Aggregate Purchase Price
Let p = the sum of the number of each in the money option times its exercise
price, for example, if there are only 2 options outstanding, one for 10,000
shares at $5 and one for 20,000 shares at $3, then p = 10,000 x 5 + 20,000 x
3 = 110,000
Let AP = Adjusted Aggregate Purchase Price = a + p
Let o = the number of in-the-money options
Let AS = adjusted number of shares = s + o
c = Compensation per share = AP/AS
Compensation per option holder = (c - exercise price) x number of in the
money options held by that option holder at that exercise price
38
