EXHIBIT 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
DATED AS OF
June 28, 2002
AMONG
THE A CONSULTING TEAM, INC.,
INTERNATIONAL OBJECT TECHNOLOGY, INC.
AND
THE STOCKHOLDERS OF INTERNATIONAL OBJECT TECHNOLOGY, INC.
EXECUTION COPY
STOCK PURCHASE AGREEMENT dated as of June 28, 2002, among THE A
CONSULTING TEAM, INC., a New York corporation (the "Purchaser"), INTERNATIONAL
OBJECT TECHNOLOGY, INC., a New Jersey corporation (the "Company") and all of the
holders of all of the issued and outstanding capital stock of the Company
(collectively, the "Stockholders").
WHEREAS, the Boards of Directors of Purchaser and the Company and
each Stockholder (individually or by its governing body) have each duly approved
and/or adopted this Stock Purchase Agreement (this "Agreement") and the proposed
acquisition of all of the issued and outstanding shares of capital stock of the
Company by Purchaser in accordance with this Agreement, upon the terms and
subject to the conditions set forth in this Agreement (the "Acquisition").
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement, the representations, warranties, covenants,
agreements, conditions and promises contained herein and therein, the parties
hereby agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL STOCKHOLDER SHARES
1.1 Agreement to Purchase and Sell Stockholder Shares. Upon the terms and
subject to the conditions hereinafter set forth, at the Closing (as defined
herein), each Stockholder shall sell and deliver to Purchaser, and Purchaser
shall purchase from each Stockholder, for the consideration provided in Section
1.2 hereof, that number and class of shares of capital stock of the Company set
forth opposite the name of each such Stockholder on Schedule I attached hereto
(the "Stockholder Shares") (representing, as to each Stockholder, all shares of
capital stock of the Company to be owned, of record and/or beneficially,
immediately prior to the Closing by each such Stockholder after giving effect to
the exercise, exchange, conversion and/or termination, in full, of all
outstanding rights, options, warrants and any other securities of the Company
owned of record and/or beneficially, by each such Stockholder that are, directly
or indirectly, exercisable or exchangeable for, or convertible into, Company
Stock (as defined herein), which such exercise, exchange, conversion and/or
termination shall be a condition precedent to the Closing), and any and all
rights and benefits incident to the ownership thereof shall be transferred free
and clear of all Encumbrances (as defined herein).
1.2 Consideration. The Purchaser shall, against delivery of all of the
Stockholder Shares, purchase from the Stockholders, in the aggregate, all
outstanding shares of capital stock of the Company (collectively, the "Company
Stock") in exchange for (i) unregistered shares of common stock, par value $0.01
per share, of the Purchaser (the "Purchaser Common Stock"), and (ii) certain
deferred payments of cash. The aggregate purchase price (the "Aggregate Purchase
Price") to be paid for all Stockholder Shares to be purchased hereunder is an
aggregate of (i) one million two hundred seventy thousand (1,270,000) shares of
Purchaser Common Stock (the "Acquisition Shares") and (ii) deferred payments of
six hundred fifty thousand ($650,000.00), in the aggregate (the "Deferred
Payments"). Subject to the terms and conditions
contained herein, including without limitation Article VI, the Aggregate
Purchase Price shall be paid to the Stockholders in accordance with Schedule II
attached hereto. Subject to Sections 6.1 (a) and 6.4 hereof, in the event any
Deferred Payment is not made within fifteen (15) days of its respective payment
date as set forth above, interest shall commence accruing at the rate of five
percent (5%) per annum and the Stockholders may seek such lawful remedies as may
be available to them, and which are not inconsistent with the Subordination
Agreements (as defined herein); provided, however, notwithstanding anything
contained herein or in the Subordination Agreements to the contrary, the
Stockholders shall not have the right to accelerate any Deferred Payment not yet
due and payable pursuant to the terms hereunder. If litigation is required to
recover any Deferred Payment not paid, Purchaser shall be responsible for the
reasonable attorney's fees and expenses incurred by any Stockholder in
connection therewith if such Stockholder prevails in such litigation.
(a) Procedure for Exchange. At the Closing, Purchaser shall deliver
to each Stockholder a stock certificate (a "Purchaser Certificate"), registered
in the name of such Stockholder, representing that number of unregistered
Acquisition Shares set forth opposite the name of such Stockholder on Schedule
II attached hereto under the column entitled "Acquisition Shares". Each
Stockholder shall deliver to the Purchaser stock certificates, duly endorsed in
blank and in proper form for transfer to the Purchaser, representing all of such
Stockholder's Stockholder Shares (each, a "Company Certificate") for transfer
and assignment to the Purchaser, together with such other documents as may be
reasonably required by Purchaser to effectuate the issuance of a Purchaser
Certificate with respect to such Stockholder. In the event of a transfer of
ownership of the Stockholder Shares that is not registered on the transfer
records of the Company, a Purchaser Certificate representing the proper number
of Acquisition Shares may be issued to a transferee if the Company Certificate
representing such Stockholder Shares is presented to Purchaser, accompanied by
all documents required to evidence and effect such transfer.
(b) Fractional Shares. No fractional Acquisition Shares shall be
issued in connection with the Acquisition, but in lieu thereof each holder of
Stockholder Shares who would otherwise be entitled to receive a fraction of an
Acquisition Share will receive from Purchaser, at such time as such holder shall
receive a certificate representing Acquisition Shares as contemplated by Section
1.2(a), a check representing an amount of cash (without interest), rounded to
the nearest cent, equal to (i) the average of the closing bid and ask prices for
the five (5) trading days prior to the Closing (the "Average Price") multiplied
by (ii) the fraction of an Acquisition Share otherwise issuable to such holder.
The fractional interests of each Stockholder of the Company will be aggregated
so that no Stockholder of the Company will receive cash in an amount equal to or
greater than the Average Price.
(c) No Further Ownership Rights in Company Stock. All Acquisition
Shares issued and the agreement to make the Deferred Payments in accordance with
the terms hereof (subject to Article VI hereof), in exchange for and upon
surrender of Stockholder Shares in accordance with the terms of this Article I,
shall be deemed to have been made in full satisfaction of any and all rights
pertaining to, or liabilities or obligations of the Company in respect of, such
Stockholder Shares (including, by way of example and not in limitation thereof,
the right to receive any accrued and unpaid dividends or distributions thereon).
2
(d) Lost, Stolen or Destroyed Company Certificates. In the event any
Company Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit to that effect by the person claiming such Company Certificate
to be lost, stolen or destroyed and the agreement of such person to indemnify
the Company and the Purchaser from and against any claim that may be made
against it with respect to such Company Certificate (with respect to which
indemnity Purchaser may in its discretion require the posting of a bond by such
person to secure such indemnity), Purchaser will issue in exchange for such
lost, stolen or destroyed Company Certificate the consideration otherwise
payable in respect of the Stockholder Shares represented thereby in accordance
with the provisions of this Section 1.2.
1.3 Treasury Stock; Options and Rights to Purchase Company Common Stock.
At or prior to the Closing, all shares of capital stock held or owned by the
Company as treasury stock shall be cancelled. Prior to the Closing, each
Stockholder having direct or indirect beneficial ownership of any security
(including, but not limited to any rights, options or warrants) of the Company
which such Stockholder may exercise, exchange and/or convert, directly or
indirectly, into shares of common stock, no par value, of the Company ("Company
Common Stock") shall have exercised, exchanged and/or converted such securities
into or for Company Common Stock or otherwise canceled or terminated such
securities, such that as of the Closing there shall be no security of the
Company outstanding other than the Company Common Stock. Furthermore, all
rights, whether granted by agreement or otherwise, to purchase or subscribe for
shares of Company Stock shall have been terminated prior to the Closing.
1.4 Closing. Subject to the terms and conditions of this Agreement, the
closing hereunder with respect to the transactions contemplated by Article 1
hereof (the "Closing") shall take place on the earliest practicable business day
after the satisfaction or waiver of the conditions set forth in Article IV, but
not later than the fifth business day after such satisfaction or waiver, at the
offices of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP ("Orrick"), 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or at such other date and/or places as the parties hereto
shall agree (such date of Closing sometimes being referred to herein as the
"Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company and each
Stockholder, jointly and severally, represent and warrant to Purchaser that,
except as disclosed in the disclosure schedule attached hereto as Exhibit A
(which disclosure schedule shall contain specific references to the
representations and warranties to which the disclosures contained therein
relate) (the "Company Disclosure Schedule"):
(a) Organization; Good Standing; Qualification and Power. The
Company (i) is a corporation duly organized, validly existing and in good
standing in the State of New Jersey, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted, to enter into this Agreement and the
Related Agreements (as defined herein), to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby
and (iii) is duly qualified and in good standing to do business in those
jurisdictions listed in Section 2.1 (a)
3
of the Company Disclosure Schedule and in all other jurisdictions in which the
failure to be so qualified and in good standing could reasonably be expected to
have a Company Material Adverse Effect (as defined herein). The Company has
delivered to Purchaser true and complete copies of the Charter (as defined
herein) and by-laws of the Company, in each case as amended to the date hereof.
As used herein, "Charter" shall mean, with respect to any corporation, those
instruments that at the time constitute its corporate charter as filed or
recorded under the general corporation law of the jurisdiction of its
incorporation, including the articles or certificate of incorporation or
organization, and any amendments thereto, as the same may have been restated,
and any amendments thereto (including any articles or certificates of merger or
consolidation, certificate of correction or certificates of designation or
similar instruments which effect any such amendment) which became effective
after the most recent such restatement. As used herein, "Company Material
Adverse Effect" shall mean a material adverse effect on the business, condition
(financial or otherwise), assets, properties, operations, results of operations,
prospects, affairs or Liabilities (as defined herein) of the Company.
(b) Equity Investments. The Company has never had, nor does it
currently have, any subsidiaries, nor has it ever owned, nor does it currently
own, any capital stock or other proprietary interest, directly or indirectly, in
any corporation, association, trust, partnership, joint venture or other entity
nor are there any options, warrants, rights, calls, commitments or agreements of
any character to which the Company is a party, or by which the Company is bound,
calling for the issuance to the Company of shares of capital stock or other
equity interests of a third party or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, any such capital stock, or other arrangement to acquire, at
any time or under any circumstance, capital stock of any third party or any such
other securities.
(c) Capital Stock; Securities.
(i) The authorized capital stock of the Company consists of
18,000,000 shares of common stock, no par value per share. As of the date
hereof, 11,830,494 shares of common stock are validly issued and
outstanding, fully paid and non-assessable and are not subject to any
preemptive rights. Section 2.1(c) of the Company Disclosure Schedule sets
forth a true and complete list of the holders of shares of Company Stock
and the number and class or series of such shares owned of record and
beneficially by each such holder. There are no voting trusts, voting
agreements, proxies, first refusal rights, first offer rights, co-sale
rights, options, transfer restrictions or other agreements, instruments or
understandings (whether written or oral, formal or informal) with respect
to the voting, transfer or disposition of Company Stock to which the
Company is a party or by which it is bound, or among or between any
persons other than the Company. There are no options, warrants, rights,
calls, commitments or agreements of any character to which the Company is
a party, or by which the Company is bound, calling for the issuance of
shares of capital stock or other equity securities of the Company or any
securities convertible into or exercisable or exchangeable for, or
representing the right to purchase or otherwise receive, any such capital
stock or other equity securities, or other arrangement to acquire, at any
time or under any circumstance, capital stock of the Company or any such
other securities. All prior issuances of securities were made in
compliance with and not in violation of all applicable Federal,
4
state, local and foreign securities laws and no shares of capital stock
were issued in violation of any preemptive rights.
(ii) For the purposes of this Agreement, the number of shares
of Company Stock outstanding, at any time, on a "Fully Diluted Basis"
shall be all outstanding shares of capital stock of the Company (assuming
the exercise, exchange or conversion of all options, warrants, rights,
calls, commitments or agreements of any character to which the Company is
a party, or by which the Company is bound, calling for the issuance of
shares of capital stock or other equity securities of the Company or any
securities convertible into or exercisable or exchangeable for, or
representing the right to purchase or otherwise receive, any such capital
stock or other equity securities, or other arrangement to acquire, at any
time or under any circumstance, capital stock of the Company or any such
other securities).
(iii) The Stockholder Shares constitute one hundred percent
(100%) of the outstanding securities of the Company on a Fully Diluted
Basis.
(d) Authority; No Consents. The execution, delivery and performance
by the Company of this Agreement and the Related Agreements to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of the Company; and this Agreement and each of the Related Agreements to
which the Company is a party have been, and when executed and delivered by the
Company will be, duly and validly executed and delivered by the Company, and
this Agreement and the Related Agreements to which the Company is a party shall
be valid and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regardless of whether
such enforceability is considered a proceeding in law or equity. Neither the
execution, delivery and performance of this Agreement or the Related Agreements
to which the Company is a party nor the consummation by the Company of the
transactions contemplated hereby or thereby nor compliance by the Company with
any provision hereof or thereof will (A) conflict with, (B) result in any
violations of, (C) cause a default under (with or without due notice, lapse of
time or both), (D) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under or (E) result in the creation of any Encumbrance on or
against any assets, rights or property of the Company under any term, condition
or provision of (x) any instrument or agreement to which the Company is a party,
or by which the Company or any of its properties, assets or rights may be bound,
(y) any law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority (as defined
herein) applicable to the Company or any of its properties, assets or rights or
(z) the Company's Charter or by-laws, as amended through the date hereof,
respectively. Except as set forth in Section 2.1 (d) of the Company Disclosure
Schedule, no permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Authority or other person is
required in connection with the execution, delivery and performance by the
Company or the Stockholders of this Agreement or the Related Agreements or the
consummation by the Company or the Stockholders of the transactions contemplated
hereby or thereby. "Governmental Authority" shall mean any Federal, state,
5
municipal, foreign or other governmental court, department, commission, board,
bureau, agency or instrumentality.
(e) Financial Information.
(i) Attached hereto as Section 2.1 (e) of the Company
Disclosure Schedule are the following financial statements of the Company
(collectively, the "Company Financial Statements"): the audited balance
sheets, statement of income and statement of cash flows as of and for the
fiscal year ended December 31, 2001 (the "2001 Financial Statements") and
the unaudited balance sheets, statement of income and statement of cash
flows as of and for the three months ended April 30, 2002 (the "2002
Financial Statements").
(ii) The Company Financial Statements (A) are in accordance
with the books and records of the Company, (B) fairly present the
financial condition of the Company as at the respective dates indicated
and the results of operations of the Company for the respective periods
indicated and (C) have been prepared in accordance with generally accepted
accounting principles, consistently applied ("GAAP"), except as indicated
therein and except, in the case of the 2002 Financial Statements, for the
absence of complete footnote disclosure as required by GAAP and subject to
changes, if applicable, resulting from normal year-end audit adjustments,
which adjustments shall not in any event result in a Material Adverse
Change (as defined herein) to any item of revenue or expense.
(f) Absence of Undisclosed Liabilities. The Company has no
liabilities or obligations of any nature (whether known or unknown, matured or
umnatured, fixed or contingent, secured or unsecured, accrued, absolute or
otherwise, which individually exceed $5,000 (each, a "Liability")) and there is
no existing fact, condition or circumstance which could reasonably be expected
to result in any Liability, except Liabilities (i) disclosed on Section 2.1 (f)
of the Company Disclosure Schedule, (ii) set forth on the balance sheets
included in the 2002 Financial Statements, (iii) not required to be disclosed in
the Company Financial Statements in order for such Company Financial Statements
to fairly present the financial condition of the Company as at December 31, 2001
and March 31, 2002 in accordance with GAAP, or (iv) incurred in the ordinary
course of business since March 31, 2002. There were no material loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March,
1975 ("FAS No. 5")) which were not adequately provided for on the Company
balance sheets included in the Financial Statements, as required by FAS No. 5.
(g) Absence of Changes. Except as set forth in Schedule 2.1(g) of
the Company Disclosure Schedule, since the date of the 2002 Financial
Statements, the Company has been operated in the ordinary course, consistent
with past practice, and there has not been:
(i) any material adverse change in the businesses, conditions
(financial or otherwise), assets, properties, operations, results of
operations, prospects, affairs or Liabilities (a "Material Adverse
Change") of the Company;
6
(ii) any damage, destruction or loss, whether or not covered
by insurance, having or which could be reasonably likely to have a Company
Material Adverse Effect;
(iii) any Liability, in excess of $5,000 individually or
$15,000 in the aggregate, created, assumed, guaranteed or incurred, or any
material transaction, contract or commitment entered into, by the Company,
other than the license, sale or transfer of the Company's products or
services to customers in the ordinary course of business;
(iv) any payment, discharge or satisfaction of any Encumbrance
or Liability by the Company or any cancellation by the Company of any
material debts or claims or any amendment, termination or waiver of any
rights of material value to the Company;
(v) any declaration, setting aside or payment of any dividend
or other distribution of any assets of any kind whatsoever with respect to
any shares of the capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition of any such shares of the
capital stock of the Company;
(vi) any stock split, reverse stock split, combination,
reclassification or recapitalization of any Company Stock, or any issuance
of any other security in respect of or in exchange for, any shares of
Company Stock;
(vii) any issuance by the Company of any shares of its capital
stock or any debt security or securities, rights, options or warrants
convertible into or exercisable or exchangeable for any shares of its
capital stock or debt security, other than the issuance of 200,000 shares
of Company Stock to each of Xxxxxxx Xxxxxx and Xxxxxx Xxxxxx;
(viii) any license, sale, transfer, pledge, mortgage or other
disposition of any material tangible or intangible asset of the Company,
other than in the ordinary course of business;
(ix) any termination of, or written indication of an intention
to terminate or not renew, any material contract, license, commitment or
other agreement between the Company and any other person or entity;
(x) any material write-down or write-up of the value of any
asset of the Company, or any material write-off of any accounts receivable
or notes receivable of the Company or any portion thereof;
(xi) any increase in or modification of compensation payable
or to become payable to (A) any director or officer of the Company or (B)
any employee of the Company, or the entering into of any employment
contract with any officer or employee;
(xii) any material increase in or modification or acceleration
of any benefits payable or to become payable under any bonus, pension,
severance, insurance or
7
other benefit plan, payment or arrangement (including, but not limited to,
the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any director, officer, employee,
consultant or agent of the Company;
(xiii) the making of any loan, advance or capital contribution
to or investment in any person or entity or the engagement in any
transaction with any employee, officer, director or securityholder of the
Company, other than advances to employees in the ordinary course of
business for travel and similar business expenses;
(xiv) any change in the accounting methods or practices
followed by the Company or any change in depreciation or amortization
policies or rates theretofore adopted;
(xv) any change in the manner in which the Company extends
discounts or credit to customers or otherwise deals with customers;
(xvi) any termination of employment of any officer or key
employee of the Company or any expression of intention by any officer or
key employee of the Company to resign from such office or employment with
the Company;
(xvii) any amendments or changes in the Company's Charter or
by-laws; or
(xviii) any agreement, understanding, authorization or
proposal, whether in writing or otherwise, for the Company to take any of
the actions specified in items (i) through (xvii) above.
(h) Tax Matters.
(i) (a) All Tax Returns (as defined below) required to be
filed by or on behalf of the Company have been filed on a timely basis
with the appropriate governmental authority in all jurisdictions in which
such Tax Returns are required to be filed, and all such Tax Returns are
true, correct and complete in all material respects; (b) all Taxes (as
defined below) of the Company (whether or not reflected on any Tax Return)
have been fully and timely paid or properly accrued; (c) no waivers of
statutes of limitation have been given or requested with respect to the
Company in connection with any Tax Returns covering the Company with
respect to any Taxes payable by it; (d) no taxing authority in a
jurisdiction where the Company does not file Tax Returns has made a claim,
assertion or threat to the Company that the Company is or may be subject
to taxation by such jurisdiction; (e) the Company has duly and timely
withheld from employee salaries, wages and other compensation, or with
respect to any other payment for which the Company was required to
withhold, and paid over to the appropriate governmental authority all
amounts required to be so withheld and paid over for all periods under all
applicable laws; and no amounts have been or would be required to be
withheld with respect to the lapse of restrictions on Company Stock; (f)
there are no liens with respect to Taxes on any of the Company's property
or assets other than liens for current Taxes not yet payable; (g) there
are no Tax rulings, requests for rulings, or closing agreements relating
to the Company that could affect the liability for Taxes or the
8
amount of taxable income of the Company for any period (or portion of a
period) after the date hereof; and (h) any adjustment of Taxes of the
Company made by the Internal Revenue Service in any examination that is
required to be reported to the appropriate state, local or foreign taxing
authorities has been reported, and any additional Taxes due with respect
thereto have been paid.
(ii) Neither the Company nor any other person on behalf of the
Company (a) has filed a consent pursuant to Section 341 (f) of the
Internal Revenue Code of 1986, as amended (the "Code") or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by
the Company; (b) has executed or entered into a closing agreement pursuant
to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law; or (c) has agreed to or
is required to make any adjustments pursuant to Section 481 (a) of the
Code or any similar provision of state, local or foreign law by reason of
a change in accounting method initiated by the Company or has notice that
a governmental authority has proposed any such adjustment or change in
accounting method.
(iii) There is no dispute or claim concerning any Tax
liability of the Company either (a) claimed or raised by any authority in
writing or (b) as to which any of the directors and officers (and
employees responsible for Tax matters) of the Company have knowledge based
on contact or correspondence with any agent of a Taxing authority. Section
2.1 (h) of the Company Disclosure Schedule lists all Tax Returns filed
with respect to the Company that currently are the subject of audit or
other examination.
(iv) The Company has not made any payment or payments, is not
obligated to make any payment or payments and is not a party to any
agreement that could obligate it or Purchaser to make any payment or
payments that would constitute an "excess parachute payment," as defined
in Section 280G of the Code (or any similar provision of state, local or
foreign law) or that would otherwise not be deductible under Section 162
or Section 404 of the Code.
(v) The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(vi) The Company is not a party to any Tax allocation or
sharing agreement. The Company (a) has not been a member of an affiliated
group filing a consolidated income Tax Return under Section 1501 of the
Code (or any similar provision of state, local or foreign law) and (b)
does not have any liability for Taxes of any person under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a result of being a transferee or successor, by contract
or otherwise.
(vii) The unpaid Taxes of the Company (a) did not, as of
December 31, 2001 and March 31, 2002, exceed the reserve for Tax liability
set forth on the face (rather than any reserve for deferred Taxes
established to reflect timing differences
9
between book and Tax income) of the Financial Statements and (b) do not
exceed that reserve as adjusted for the passage of time and operations in
the ordinary course of business through the Closing Date.
(viii) All options that the Company has treated as incentive
stock options under Section 421 of the Code meet the requirements of
Section 422 of the Code.
(ix) The Company has not been a party to a distribution to
which Section 355 (d) or (e) of the Code applies.
(x) The Company (and any predecessor of the Company) was a
validly electing S corporation within the meaning of Code Section 1361 and
1362 (and applicable provisions of state law in each jurisdiction in which
the Company is subject to Tax) at all times from the date of its
incorporation up to March 5, 2001.
(xi) The Company will have sufficient monies on hand at the
time of Closing to pay all Taxes of, or imposed on, or with respect to, or
resulting from the operations of, the Company for all periods up to and
including the Closing Date.
As used in this Agreement, the term "Tax" shall mean any of the
Taxes and the term "Taxes" shall mean, with respect to any person or entity, (i)
all income taxes (including any tax on or based upon net income, or gross
income, or income as specially defined, or earnings, or profits, or selected
items of income, earnings or profits) and all gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such person or entity and (ii) any liability
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another person or entity or as
a result of being a member of an affiliated or combined group.
(i) Title to Assets, Properties and Rights and Related Matters. The
Company has good and marketable title to all assets, properties and interests in
properties, real, personal or mixed, reflected, respectively, on the Company
balance sheet included in the 2002 Financial Statements or acquired after March
31, 2002 (except inventory or other property sold or otherwise disposed of since
March 31, 2002, in the ordinary course of business and accounts receivable and
notes receivable paid in full subsequent to March 31, 2002, or not so reflected
in such balance sheet but used or useful in the conduct or operation of the
Company's business), free and clear of all Encumbrances, of any kind or
character, except for (i) those Encumbrances set forth in Section 2.1(i) of the
Company Disclosure Schedule, (ii) liens for current taxes not yet due and
payable and (iii) statutory mechanics and materialmen's liens. The assets,
properties and interests in properties of the Company are in good operating
condition and repair in all material respects (ordinary wear and tear excepted).
As used herein, the term "Encumbrances" shall mean and include security
interests, mortgages, liens, pledges, guarantees, charges, easements,
reservations, restrictions, clouds, equities, rights of way, options, rights of
first
10
refusal and all other Encumbrances, whether or not relating to the extension
of credit or the borrowing of money.
(j) Real Property Owned or Leased. The Company does not currently
own, nor has it or any of its predecessors ever owned, any real property.
Section 2.1(j) of the Company Disclosure Schedule contains a list of (i) all
real property leased by the Company (the "Leased Real Property"), and (ii) with
respect to each lease covering the Leased Real Property (collectively, the
"Leases"), any requirement of consent of the lessor to a change in the majority
ownership of the outstanding voting capital stock of the Company. The Company is
the owner and holder of all the leasehold estates purported to be granted by
each Lease and all Leases are in full force and effect and constitute valid and
binding obligations of the Company.
(k) Intellectual Property.
(i) The Company owns or possesses sufficient legal rights to
all Intellectual Property (as defined herein) necessary for its business
without any conflict with the rights of others. The Company has not
received any communications alleging that the Company has violated or is
infringing, or by conducting its business, would violate or infringe, any
of the patents, trademarks, service marks, tradenames, copyrights (or in
each case, any applications therefor), software licenses, trade secrets or
other proprietary rights or processes of any other person or entity. The
Company is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court
or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interest of the Company or that
would conflict with the Company's business. Neither the execution or
delivery of this Agreement or any Related Agreement, nor the carrying on
of the Company's business by the employees of the Company, nor the conduct
of the Company's business as proposed, will, to the Company's best
knowledge, conflict with or result in a breach of the terms, conditions,
or provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. The Company
does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to
their employment by the Company.
(ii) Section 2.1 (k) of the Company Disclosure Schedule sets
forth (A) the Company's patents, patent applications, trademarks,
trademark applications, trade names, service marks, service xxxx
applications, copyrights and copyright registrations and applications and
(B) Internet domain names and applications therefor and other filings and
formal actions made or taken pursuant to federal, state or local and
foreign laws by the Company to protect or perfect its interests therein.
(iii) "Intellectual Property" means all patents, patent
applications, patent rights, trademarks, trademark applications, trade
names, service marks, service xxxx applications, copyrights, copyright
applications, franchises, licenses, databases, "URL's" and Internet domain
names and applications therefor (and all interest therein), computer
programs and other computer software, user interfaces, know-how, trade
secrets, customer lists, proprietary technology, processes and formulae,
source code,
11
object code, algorithms, architecture, structure, display screens,
layouts, development tools, instructions, templates, marketing materials,
inventions, mask works, trade dress, logos and designs, skills,
experience, expertise and all documentation and media constituting,
describing or relating to the foregoing.
(l) Agreements, Etc. Section 2.1(1) of the Company Disclosure
Schedule sets forth a true and complete list of all written or oral contracts,
agreements and other instruments not made in the ordinary course of business to
which the Company is a party, or made in the ordinary course of business and
referred to in clauses (i) through (xvi) of this Section 2.1(1). Except as set
forth on Schedule 2.1(1) to the Company Disclosure Schedule, the Company is not
a party to any agreement, arrangement or understanding, whether written or oral,
formal or informal, relating to the following:
(i) any material distributorship, dealer, sales, advertising,
agency, manufacturer's representative, franchise or similar contract or
relationship or any other contract relating to the payment of a commission
or other fee calculated as or by reference to a percentage of the profits
or revenues of the Company or of any business segment of the Company;
(ii) any joint venture, partnership or other agreement or
arrangement for the sharing of profits;
(iii) any collective bargaining contract or other contract
with or commitment to any labor union;
(iv) the future purchase, sale or license of products,
material, supplies, equipment or services requiring payments to or from
the Company in an amount in excess of $10,000 per annum, which agreement,
arrangement or understanding is not terminable on thirty (30) days' notice
without cost or other Liability at or at any time after the Closing Date,
and any agreement in which the Company has granted or received
manufacturing rights, most favored nations pricing provisions or exclusive
marketing or other rights relating to any product, group of products,
services, technology, assets or territory;
(v) any license (whether as licensor or licensee), or
sublicense, royalty, permit, or franchise agreement, including, without
limitation, any agreement pursuant to which the Company licenses any
intellectual property or other products and services to any third party;
(vi) the employment of any officer, employee, consultant or
agent or any other type of contract, commitment or understanding with any
officer, employee, consultant or agent which (except as otherwise
generally provided by applicable law) is not immediately terminable
without cost or other Liability at or at any time after the Closing Date;
(vii) any profit-sharing, bonus, stock option, stock
appreciation right, pension, retirement, disability, stock purchase,
hospitalization, insurance or similar
12
plan or agreement, formal or informal, providing benefits to any current
or former director, officer, employee, agent or consultant;
(viii) any indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment for the borrowing of
money, for a line of credit or for a leasing transaction of a type
required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(ix) any material agreement, instrument or other arrangement
granting or permitting any Encumbrance on any of the properties, assets or
rights of the Company;
(x) any lease for real property (whether as lessor or lessee)
or any other lease or agreement under which the Company is lessee of or
holds or operates any items of tangible personal property owned by any
third party;
(xi) any contract or commitment for charitable contributions;
(xii) any contract or commitment for capital expenditures
individually in excess of $5,000;
(xiii) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code), which could
result in a disallowance of the deduction for any "excess parachute
payment" (as defined in Section 280G(b)(i) of the Code) under Section 280G
of the Code as a result of the transactions contemplated hereby;
(xiv) any agreement or arrangement for the sale of any assets,
properties or rights having a value in excess of $5,000;
(xv) any agreement which restricts the Company from engaging
in any aspect of its business or competing in any line of business in any
geographic area; or
(xvi) any other agreement, contract or commitment which is
material to the Company.
For purposes of this Section 2.1(1), the term "material" shall mean and
refer to those agreements, contracts, instruments or arrangements (as
applicable) that involve payments or expenditures by or to the Company, or
otherwise have a value, of at least $10,000. The Company has furnished to
Purchaser true and complete copies of all such agreements listed in Schedule
2.1(1) of the Company Disclosure Schedule and (x) each such agreement (A) is the
legal, valid and binding obligation of the Company and, to the best knowledge of
the Company, the legal, valid and binding obligation of each other party
thereto, in each case enforceable in accordance with its terms, (B) is in full
force and effect and (y) to the best knowledge of the Company, except as set
forth in Section 2.1(1) of the Company Disclosure Schedule, the other party or
parties thereto is or are not in default thereunder.
13
(m) No Defaults. The Company has in all material respects performed
all the obligations required to be performed by it to date and is not in default
or alleged to be in default under (i) its Charter or by-laws or (ii) any
agreement, lease, contract, commitment, instrument or obligation to which the
Company is a party or by which any of its properties, assets or rights are or
may be bound or affected, and there exists no event, condition or occurrence
which, with or without due notice or lapse of time, or both, would constitute
such a default by the Company under any of the foregoing.
(n) Litigation, Etc. Except as set forth in Schedule 2.1 (n) of the
Company Disclosure Schedule, there are no (i) actions, suits, claims,
investigations or legal or administrative or arbitration proceedings
(collectively, "Actions") pending, or to the best knowledge of the Company,
threatened against the Company, nor is there any basis therefor, whether at law
or in equity, or before or by any Governmental Authority, (ii) judgments,
decrees, injunctions or orders of any Governmental Authority or arbitrator
against the Company or (iii) disputes with customers, vendors, consultants,
salespersons or distributors. There are no Actions pending or, to the best
knowledge of the Company, threatened, nor is there any basis therefor, with
respect to (A) the current employment by, or association with, the Company, of
any of the present officers or employees of or consultants to the Company
(collectively, the "Designated Persons") or (B) the use, in connection with any
business presently conducted or proposed to be conducted by the Company, of any
information, techniques or processes presently utilized or proposed to be
utilized by the Company or any of the Designated Persons, that the Company or
any of the Designated Persons are or would be prohibited from using as the
result of a violation or breach of, or conflict with any agreements or
arrangements between any Designated Person and any other person, or any legal
considerations applicable to unfair competition, trade secrets or confidential
or proprietary information.
(o) Accounts and Notes Receivable. Except as set forth on Section
2.1 (o) of the Company Disclosure Schedule, all the accounts receivable and
notes receivable owing to the Company as of the date hereof constitute, and as
of the Closing Date will constitute, valid and enforceable claims arising from
bona fide transactions in the ordinary course of business, and there are no
known or asserted claims, refusals to pay or other rights of set-off against any
thereof. Except as set forth on Section 2.1(o) of the Company Disclosure
Schedule, there is (a) no account debtor or note debtor delinquent in its
payment by more than ninety (90) days, (b) no account debtor or note debtor that
has refused (or, to the best knowledge of the Company, threatened to refuse) to
pay its obligations for any reason, (c) to the best knowledge of the Company, no
account debtor or note debtor that is insolvent or bankrupt and (d) no account
receivable or note receivable which is pledged to any third party by the
Company. Except to the extent of a reserve which the Company has established
specifically for doubtful accounts receivable and notes receivable (which
reserve is set forth on the Company balance sheet included in the Financial
Statements, is reasonable under the circumstances and is consistent with past
practice), to the best actual knowledge of Company each account receivable of
the Company existing on the Closing Date shall be paid in full by not later than
the ninetieth (90th) day after the date each such respective account receivable
was created and all of the notes receivable shall be paid in accordance with the
terms thereof.
(p) Accounts and Notes Payable. All accounts payable and notes
payable by the Company to third parties as of the date hereof arose, and as of
the Closing will have arisen, in
14
the ordinary course of business, and, except as set forth in Section 2.1 (p) of
the Company Disclosure Schedule, there is no such account payable or note
payable delinquent in its payment, except those contested in good faith and
disclosed in Section 2.1 (p) of the Company Disclosure Schedule.
(q) Compliance; Governmental Authorizations. The Company has
complied and is presently in compliance in all material respects with all
Federal, state, local or foreign laws, ordinances, regulations and orders
applicable to it or its business (including, without limitation, laws,
ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and hours).
The Company has all Federal, state, local and foreign governmental
authorizations, consents, approvals, licenses and permits necessary in the
conduct of its business as presently conducted or as proposed to be conducted,
such authorizations, consents, approvals, licenses and permits are in full force
and effect, no violations are or have been recorded in respect of any thereof
and no proceeding is pending or, to the best knowledge of the Company,
threatened to revoke or limit any thereof. Section 2.1 (q) of the Company
Disclosure Schedule contains a true and complete list of all such governmental
licenses, authorizations, consents, approvals, permits, orders, decrees and
other compliance agreements under which the Company is operating or bound, the
Company is not in default or alleged to be in default under any thereof. None of
such authorizations, consents, approvals, licenses and permits shall be affected
in any material respect by the transactions contemplated hereby.
(r) Environmental Matters. The Company currently is and at all times
has been in material compliance with all Federal, state and local laws,
ordinances, regulations and orders relating to the protection of the environment
applicable to its properties, facilities or operations, including, without
limitation, the Leased Real Property.
(s) Labor Relations; Employees. The Company employs a total of fifty
six (56) employees as of the date hereof. Except as set forth in Section 2.1(s)
of the Company Disclosure Schedule, (A) the Company is not delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed by them to date or
amounts required to be reimbursed to such employees, (B) upon termination of the
employment of any such employees, neither the Company nor the Purchaser will by
reason of anything done prior to the Closing be liable to any of such employees
for so-called "severance pay" or any other payments, (C) the Company is in
compliance in all material respects with all Federal, state, local and foreign
laws and regulations respecting labor, employment and employment practices,
terms and conditions of employment and wages and hours, (D) there is no unfair
labor practice complaint against the Company pending before the National Labor
Relations Board or any comparable Governmental Authority, (E) there is no labor
strike, dispute, slowdown or stoppage actually pending or, to the best knowledge
of the Company, threatened against or involving the Company, (F) no labor union
has taken any action with respect to organizing the employees of the Company,
(G) neither any grievance which might have a Company Material Adverse Effect on
the Company or the conduct of its business nor any arbitration proceeding
arising out of or under collective bargaining agreements is pending and no claim
therefor has been asserted against the Company and (H) no employee has informed
any officer of the Company that such employee will terminate his or her
employment or engagement with the Company and the Company has no reason to
believe that the key
15
employees will not remain employees of the Company after the Closing. To the
best knowledge of the Company, no employee of the Company is in violation of any
term of any employment contract, non-disclosure agreement or any other contract
or agreement relating to the relationship of such employee with the Company or
any other party because of the nature of the business conducted or proposed to
be conducted by the Company.
(t) Employee Benefit Plans and Contracts.
(i) Section 2.1 (t) of the Company Disclosure Schedule
identifies each "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
all other written or formal plans or agreements involving direct or
indirect compensation (including any employment agreements entered into
between the Company and any Employee (as defined herein), but excluding
workers' compensation, unemployment compensation, other
government-mandated programs and the Company's salary and wage
arrangements) currently or previously maintained, contributed to or
entered into by the Company or any ERISA Affiliate thereof (the "Employee
Plans"). The Company has made available to the Purchaser true and complete
copies of all Employee Plans (and, if applicable, related trust
agreements), all amendments thereto, summary plan descriptions for all
Employee Plans and written interpretations of all of the foregoing. For
purposes of the preceding sentence, "ERISA Affiliate" shall mean any
entity which is a member of (A) a "controlled group of corporations", as
defined in Section 414(b) of the Code, (B) a group of entities under
"common control", as defined in Section 414(c) of the Code or (C) an
"affiliated service group", as defined in Section 414(m) of the Code or
treasury regulations promulgated under Section 414(o) of the Code, any of
which includes the Company. Any Employee Plans that individually or
collectively would constitute an "employee pension benefit plan", as
defined in Section 3(2) of ERISA, but which are not multiemployer plans
(as defined in Section 2.1(t)(iii)) (collectively, the "Pension Plans"),
are identified as such in the Company Disclosure Schedule. For purposes of
this Section 2.1(t), "Employee" means any common law employee, consultant
or director of the Company.
(ii) Each Employee Plan that is intended to be qualified under
Section 401 (a) of the Code is so qualified and has been so qualified
during the period from its adoption to the date hereof, and each trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of
the Code. The Company has provided the Purchaser with copies of the most
recent Internal Revenue Service determination letters, IRS Forms 5500
(including schedules and attachments), and consolidated statement of
assets and liabilities prepared in accordance with GAAP with respect to
any Employee Plans. Each Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including, without limitation,
ERISA and the Code, which are applicable to such Employee Plans. All
filings required to be filed as of the date hereof with respect to each
Employee Plan, including, without limitation, filings of IRS Form 5500,
have been made timely, accurately and with the appropriate government
agency.
16
(iii) No Employee Plan is a "multiemployer plan" as defined in
Section 4001(a)(13) of ERISA, a "multiple employer plan" as defined in
Section 413(c) of the Code, a "defined benefit plan" as defined in Section
3(35) of the Code, or is otherwise subject to Title IV of ERISA or Section
412 of the Code, and neither the Company nor any ERISA Affiliate has ever
maintained, sponsored, participated in or contributed to any such plan, or
has incurred any Liability with respect to Section 412 of the Code or
Title IV of ERISA, including Sections 4062, 4063 or 4201 of ERISA.
(iv) Section 2.1 (t) of the Company Disclosure Schedule lists
each employment, severance or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured arrangements), workers'
benefits, vacation benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or
benefits which (A) is not an Employee Plan, (B) is entered into,
maintained or contributed to, as the case may be, by the Company on behalf
of any Employee, (C) covers any Employee or former Employee, and (D) under
which the Company or any ERISA Affiliate has any present or future
obligation or Liability (excluding workers' compensation, unemployment
compensation or other government-mandated programs and the Company's
salary and wage arrangements). Such contracts, plans and arrangements as
are described above, are hereinafter referred to collectively as the
"Benefit Arrangements". Each Benefit Arrangement has been maintained in
compliance with its terms and with the requirements prescribed by any and
all material laws, statutes, rules, regulations, orders and judgments
which are applicable to such Benefit Arrangements.
(v) Each Employee Plan which is a "group health plan" (as
defined in Section 5000 of the Code) (A) has been maintained in compliance
with Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA,
and no tax payable on account of Section 4980B of the Code has been or is
expected to be incurred with respect to any current or former Employees of
the Company, and (B) has been maintained in compliance with the Health
Insurance Portability and Accountability Act of 1996, as amended. No such
plan has reserves, assets or prepaid premiums.
(vi) All contributions due and payable on or before the
Closing Date in respect of any Employee Plan or Benefit Arrangement have
been made in full and proper form, or adequate accruals have been provided
for in the Company Financial Statements for all other contributions or
amounts in respect of the Employee Plans or Benefit Arrangements for
periods ending on the Closing Date for which payment is due after the
Closing Date.
(vii) No Employee Plan or Benefit Arrangement currently or
previously maintained by the Company or its ERISA Affiliates provides any
post-retirement health or life insurance benefits, and neither the Company
nor its ERISA Affiliates maintains any obligations to provide any
post-retirement benefits in the future.
(viii) The consummation of the transactions contemplated by
this Agreement will not (A) entitle any individual to severance or
separation pay, or (B)
17
except as set forth in the Section 2.1(t)(viii) of the Company Disclosure
Schedule, accelerate the time of payment or vesting, or increase the
amount, of compensation due to any individual. No payment made or
contemplated under any Employee Plan or Benefit Arrangement constitutes an
"excess parachute payment" within the meaning of Section 280G of the Code.
(ix) Except as set forth in Section 2.1(t)(ix) of the Company
Disclosure Schedule, with respect to each Employee Plan and Benefit
Arrangement: (A) to the best knowledge of the Company, no breach of
fiduciary duty has occurred with respect to which the Company or any such
plan or arrangement or any fiduciary thereof may be liable or otherwise
materially damaged; (B) no disputes, claims, actions or investigations are
pending or, to the best knowledge of the Company, threatened; (C) to the
best knowledge of the Company, no prohibited transaction has occurred with
respect to which the Company or any such plan or arrangement or any
fiduciary thereof may be liable or otherwise materially damaged; (D) the
Company has expressly reserved in itself the right to amend, modify or
terminate any such written plan or arrangement, or any portion of it; and
(E) the Company has satisfied any bond coverage requirement of ERISA.
(x) No event has occurred or condition exists, with respect to
any Employee Plan, that has subjected or could subject the Company or any
ERISA Affiliate, or the Purchaser (by virtue of the transactions
contemplated hereby), or any Employee Plan to any material tax, fine,
penalty or other Liability.
(xi) The Company is, to the extent applicable, in material
compliance with all laws similar to ERISA of non-United States
jurisdiction.
(u) Certain Agreements. Except as set forth in Section 2.1(u) of the
Company Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of the Company from the Company, under any Employee Plan, Benefit
Arrangement or otherwise, (ii) with respect to any current or former director,
officer or key employee of the Company materially increase any benefits
otherwise payable under any Employee Plan or the Benefit Arrangement or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
(v) Insurance. Section 2.1(v) of the Company Disclosure Schedule
contains a list of all policies of Liability, theft, fidelity, fire, product
Liability, errors and omissions, workmen's compensation, indemnification of
directors and officers and other similar forms of insurance held by the Company
(specifying the insurer, the amount of coverage, the type of insurance, the
policy number and any pending claims thereunder) and a history of all claims
made by the Company thereunder and the status thereof. All such policies of
insurance are in full force and effect and all premiums with respect thereto are
currently paid and, to the best knowledge of the Company, no basis exists for
termination of any thereof on the part of the insurer. The amounts of coverage
under such policies of insurance are of the type and in amounts customarily
carried by persons conducting businesses similar to the Company and
18
adequate for the assets and properties of the Company. The Company has not,
during the last three fiscal years, been denied or had revoked or rescinded any
policy of insurance.
(w) Bank Accounts, Powers of Attorney. Section 2.1(w) of the Company
Disclosure Schedule sets forth a true and complete list of (i) all bank accounts
and safe deposit boxes of the Company and all persons who are signatories
thereunder or who have access thereto and (ii) the names of all persons, firms,
associations, corporations or business organizations holding general or special
powers of attorney from the Company and a summary of the terms thereof.
(x) Brokers. Neither the Company, nor any of the officers,
directors, securityholders, employees or agents of the Company, employed any
broker or finder or incurred or shall incur any Liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(y) Related Transactions. No current or former director, officer or
securityholder of the Company that is an affiliate of the Company or any
associate (as defined in the rules promulgated under the Exchange Act (as
defined herein)) thereof, is now, or has been at any time since the time of the
Company's incorporation, (i) a party to any transaction with the Company
(including, but not limited to, any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or borrowing money from, or otherwise requiring payments to, any
such director, officer or affiliated stockholder of the Company or associate
thereof), or (ii) the direct or indirect owner of an interest in any
corporation, firm, association or business organization which is a present or
potential competitor, supplier or customer of the Company (other than
non-affiliated holdings in publicly-held companies), nor does any such person
receive income from any source other than the Company which relates to the
business of, or should properly accrue to, the Company.
(z) Customers. Section 2.1 (z) of the Company Disclosure Schedule
sets forth a true and complete list of all of the customers of the Company
during the last fiscal year ended, which list specifies the products and/or
services supplied to each of such customers. The Company has a good, ongoing
relationship with each of such customers and none of such customers has reduced,
or expressed any intention of reducing, the dollar amount of its business with
the Company or terminated, or expressed to the Company any intention of
terminating, its business relationship with the Company. Nothing contained
herein shall be deemed to be a representation that such customers shall not
request a reduction of ongoing services after the date hereof or that upon
completion of current projects, such customers shall extend or renew services of
the Company.
(aa) Minute Books. The minute books of the Company have been
provided to Purchaser for review and contain all available summaries of all
meetings of and actions by directors and stockholders of the Company from the
time of its incorporation to the date hereof and reflect all actions referred to
in such minutes accurately in all material respects. Such summaries of meetings
and actions contained in the minute books of the Company provided to the
Purchaser reflect all approvals for the issuance of securities of the Company
and all approvals of material transactions.
19
(bb) Inventory. All items in the inventory reflected in the Company
balance sheet included in the Financial Statements or as currently owned by the
Company for use in the operation of the business (i) have been valued at cost or
at market, whichever is lower, on a first in, first-out (FIFO) basis in
accordance with GAAP consistently applied and (ii) are of a quality and quantity
usable and salable in the ordinary course of business.
(i) The Company's inventories of finished products, raw
materials, intermediates, work in process, supplies, parts and packaging
and labeling materials as of March 31, 2002, the approximate quantities
thereof, and their location are set forth in Section 2.1(bb) to the
Company Disclosure Schedule.
(ii) The Company is not aware of any adverse condition
affecting the quality or supply of raw materials, intermediates, supplies,
parts and other materials available to the Company that are necessary to
manufacture, package or label the products or are otherwise used in the
business.
(cc) Disclosure. The representations and warranties in this Section
2.1 (including the Company Disclosure Schedule) do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements or facts contained herein and therein not misleading in
light of the circumstances under which they were made. All information and
documentation requested by the Purchaser of the Company in connection with the
Purchaser's due diligence investigation of the Company has been furnished or
made available to the Purchaser.
(dd) Available Cash. As of the date hereof, the Company has, in the
aggregate in all of its operating accounts, not less than approximately $158,000
in cash.
(ee) Knowledge Definition. As used in this Section 2.1, the term
"best knowledge" and like phrases shall mean and include (i) actual knowledge of
the party making the representation or warranty and (ii) that knowledge which a
prudent business person (including the officers, directors, and employees of the
Company) could have obtained in the management of his or her business affairs
after making due inquiry and exercising due diligence with respect thereto. In
connection therewith, the knowledge (both actual and constructive) of any
officer, director, or key employee of the Company shall be imputed to be the
knowledge of the Company.
2.2 Several Representations and Warranties of the Stockholders. Each
Stockholder severally (and not jointly) represents and warrants to Purchaser
with respect to herself, himself or itself on and as of the date hereof as
follows:
(a) Title; Absence of Certain Agreements. Such Stockholder is the
lawful and record and beneficial owner of, and has good and marketable title to
the shares of Company Stock, all of which is Company Common Stock, set forth
opposite the name of such Stockholder on Schedule I attached hereto, with the
full power and authority to vote such Company Stock and transfer and otherwise
dispose of such Stockholder's Company Stock and any and all rights and benefits
incident to the ownership thereof free and clear of all Encumbrances, and there
are no agreements or understandings between such Stockholder and any other
stockholder of the
20
Company or any other person with respect to the voting, sale or other
disposition of Company Stock.
(b) Organization, Good Standing and Power. In the case of any
Stockholder that is not a natural person, such Stockholder is duly organized or
formed and validly existing under the laws of the jurisdiction of its
incorporation or formation and has the corporate or other organizational power
and authority under such laws to enter into this Agreement and the Related
Agreements to which such Stockholder is a party, to perform its obligations
hereunder and to consummate the transactions contemplated hereby or thereby.
(c) Authority - General. Such Stockholder has full and absolute
power and authority to enter into this Agreement and, if applicable, each
Related Agreement being executed and delivered by such Stockholder
simultaneously herewith and this Agreement and each Related Agreement to which
such Stockholder is a party, and has, in the case of a Stockholder that is not a
natural person, been duly authorized by all requisite action on the part of such
Stockholder; and this Agreement and each Related Agreement to which such
Stockholder is a party has been duly executed and delivered by such Stockholder,
and is the valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms. Neither the execution, delivery
and performance of this Agreement and each Related Agreement to which such
Stockholder is a party, nor the consummation of the transactions contemplated
hereby or thereby nor compliance by such Stockholder with any of the provisions
hereof or thereof will (i) (A) conflict with, (B) result in any violations of,
(C) cause a default under (with or without due notice, lapse of time or both),
(D) give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any material benefit
under or (E) result in the creation of any Encumbrance upon or against any
assets, rights or property of the Company (or against any Company Stock or
Purchaser capital stock), under any term, condition or provision of (x) any
agreement or instrument to which such Stockholder is a party, or by which such
Stockholder or any of his or its properties, assets or rights may be bound, (y)
any law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable to
such Stockholder or any of his or its properties, assets or rights or (z) in the
case of any Stockholder that is not a natural person, such Stockholder's Charter
or by-laws or similar instruments of organization, as amended and/or restated
through the date hereof, which conflict, breach, default or violation or other
event would prevent the consummation of the transactions contemplated by this
Agreement or any Related Agreement to which such Stockholder is a party. No
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by such Stockholder of
this Agreement, each Related Agreement to which such Stockholder is a party or
the consummation by such Stockholder of the transactions contemplated hereby or
thereby.
(d) Investment Representations.
(i) Such Stockholder:
(A) is acquiring the Acquisition Shares being issued to such
Stockholder for investment and for such Stockholder's own account and not
as a nominee or agent for any other person and with no present intention
of distributing or reselling such shares or
21
any part thereof in any transactions that would be in violation of the
Securities Act of 1933, as amended (the "Securities Act") or any state
securities or "blue-sky" laws;
(B) understands (A) that the Acquisition Shares to be issued to him
or it have not been registered for sale under the Securities Act or any
state securities or "blue-sky" laws in reliance upon exemptions therefrom,
which exemptions depend upon, among other things, the bona fide nature of
the investment intent of such Stockholder as expressed herein, (B) that
such Acquisition Shares must be held indefinitely and not sold until such
shares are registered under the Securities Act and any applicable state
securities or "blue-sky" laws, unless an exemption from such registration
is available, (C) that, except as provided in the Registration Rights
Agreement (attached as Exhibit B hereto) (the "Registration Rights
Agreement"), Purchaser is under no obligation to so register such
Acquisition Shares and (D) that the certificates evidencing such
Acquisition Shares will be imprinted with a legend in the form set forth
in Section 5.2(b) that prohibits the transfer of such shares, except as
provided in Section 5.2;
(C) has read and reviewed the Purchaser SEC Documents (as defined
herein), which are available to such Stockholder online at xxx.xxx.xxx;
(D) has had an opportunity to ask questions of and has received
satisfactory answers from the officers of the Purchaser or persons acting
on the Purchaser's behalf concerning the Purchaser and the terms and
conditions of an investment in the Acquisition Shares;
(E) is aware of Purchaser's business affairs and financial condition
and has acquired sufficient information about Purchaser to reach an
informed and knowledgeable decision to acquire the Acquisition Shares to
be issued to him or it;
(F) can afford to suffer a complete loss of his or its investment in
such Acquisition Shares;
(G) is familiar with the provisions of Rule 144 promulgated under
the Securities Act ("Rule 144') which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly,
from the issuer thereof, in a non-public offering subject to the
satisfaction of certain circumstances which require among other things:
(A) the availability of certain public information about the issuer, (B)
the resale occurring not less than one year after the party has purchased,
and made full payment for, within the meaning of Rule 144, the securities
to be sold; and, in the case of an affiliate, or of a non-affiliate who
has held the securities less than two years, the amount of securities
being sold during any three month period not exceeding the specified
limitations stated therein, if applicable and (C) the sale being made
through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as defined under the Exchange
Act);
(H) understands that in the event all of the applicable requirements
of Rule 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the
22
fact that Rule 144 is not exclusive, the Staff of the Securities and
Exchange Commission (the "SEC") has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk; and
(I) is an "accredited investor" within the meaning of Rule 501 (a)
promulgated under the Securities Act.
(e) Ownership. Prior to the Closing, no Stockholder and none of such
Stockholder's affiliates (as such term is defined by Rule 12b-2 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) is the
beneficial owner (as such term is defined in Rule 13d-3 of the Exchange Act) or
is a member of a group having beneficial ownership (as such term is defined in
Rule 13d-3 of the Exchange Act) of any shares of capital stock of the Purchaser
or any Purchaser Voting Securities Equivalents (as defined herein). For purposes
hereof, "Purchaser Voting Securities Equivalents" shall mean any securities of
the Purchaser entitled to vote with respect to the election of directors of the
Purchaser ("Purchaser Voting Securities") or any security exercisable for or
convertible or exchangeable into, directly or indirectly, shares of Purchaser
Common Stock or any Purchaser Voting Securities
(f) Brokers. No Stockholder has employed any broker or finder or
incurred or shall incur any Liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
(g) Representation by Legal Counsel; Review of Agreement. Such
Stockholder has been advised by the Company to seek, and has sought, legal
counsel in connection with the negotiation and execution of this Agreement and
the Related Agreements. Such Stockholder has carefully read and reviewed this
Agreement and, to the extent he or it believed necessary, has discussed with his
legal, accounting and other professional advisors the representations,
warranties and agreements which the Stockholder is making herein and the terms
and conditions of the Acquisition.
2.3 Representations and Warranties of Purchaser. Purchaser represents and
warrants to the Company and each of the Stockholders that, except as disclosed
in the disclosure schedule attached hereto as Exhibit C (which disclosure
schedule shall contain specific references to the representations and warranties
to which the disclosures contained therein relate) (the "Purchaser Disclosure
Schedule"):
(a) Organization; Good Standing; Qualification and Power. Purchaser
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the State of New York, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted, to enter into this Agreement and each of
the Related Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby and (iii) is duly qualified and in good standing to do business in
those jurisdictions in which the failure to be so qualified and in good standing
could reasonably be expected to have a Purchaser
23
Material Adverse Effect. "Purchaser Material Adverse Effect" shall mean a
material adverse effect on the business, condition (financial or otherwise),
assets, properties, operations, results of operations, prospects, affairs or
Liabilities of Purchaser and its subsidiaries taken as a whole.
(b) Authority. The execution, delivery and performance by Purchaser
of this Agreement and each of the Related Agreements to which the Purchaser is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of
Purchaser; and this Agreement and each of the Related Agreements to which the
Purchaser is a party, when executed and delivered by the Company, will have been
duly and validly executed and delivered by Purchaser, and this Agreement and the
Related Agreements to which the Purchaser is a party shall be valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
respective terms, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by principles
of equity regardless of whether such enforceability is considered a proceeding
in law or equity. Neither the execution, delivery and performance by Purchaser
of this Agreement and the Related Agreements to which Purchaser is a party, nor
the consummation of the transactions contemplated hereby or thereby, will (A)
conflict with, (B) result in any violations of, (C) cause a default under (with
or without due notice, lapse of time or both), (D) give rise to any right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any material benefit under, (E) result in the creation of any
Encumbrance on or against any assets, rights or property of Purchaser under any
term, condition or provision of (x) any instrument (including any outstanding
securities of Purchaser) or agreement to which Purchaser is a party, or by which
Purchaser or any of its properties, assets or rights may be bound, (y) any law,
statute, rule, regulation, order, writ, injunction, decree, permit, concession,
license or franchise of any Governmental Authority applicable to Purchaser or
any of its properties, assets or rights or (z) Purchaser's Charter or by-laws,
as amended through the date hereof, respectively, which conflict, breach,
default, violation or other event would prevent or materially adversely affect
the consummation of the transactions contemplated by this Agreement or any
Related Agreement to which Purchaser is a party. Except as contemplated by this
Agreement or any Related Agreement, no permit, authorization, consent or
approval of or by, or any notification of or filing with, any Governmental
Authority or other person is required in connection with the execution, delivery
and performance by Purchaser of this Agreement or the Related Agreements to
which it is a party or the consummation of the transactions contemplated hereby
or thereby, other than (i) the filing with the SEC of such reports and
information under the Exchange Act, and the rules and regulations promulgated by
the SEC thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, and the filing of a registration statement
with the SEC under the Securities Act pursuant to the terms of the Registration
Rights Agreement, (ii) the filing of such documents with, and the obtaining of
such orders from, various state securities and blue-sky authorities as are
required in connection with the transactions contemplated hereby, (iii) the
filing of a notification with the Nasdaq Stock Market setting forth a
description of the transactions contemplated by this Agreement and the Related
Agreements, and (iv) such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would not have a
Purchaser Material Adverse Effect or materially impair the ability of Purchaser
to consummate the transactions contemplated by this Agreement.
24
(c) SEC Documents.
(i) Purchaser has furnished or made available to the
Stockholders a correct and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Purchaser with the SEC on or
after the date of filing with the SEC of Purchaser's Annual Report on Form 10-K
for the fiscal year ended December 31, 2001 (the "2001 10-K") through the date
hereof (collectively, the "Purchaser SEC Documents"). As of their respective
filing dates, or in the case of registration statements, their respective
effective dates, none of the Purchaser SEC Documents (including all exhibits and
schedules thereto and documents incorporated by reference therein) 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 were made, not misleading, and the
Purchaser SEC Documents complied when filed, or in the case of registration
statements, as of their respective effective dates, in all material respects
with the then applicable requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations promulgated by the SEC
thereunder. The Purchaser has not failed to file any report or schedule required
to be filed pursuant to the Securities Act or the Exchange Act.
(ii) The financial statements of Purchaser included in the
2001 10-K and the Form 10-Q for the quarter ended March 31, 2002 complied as to
form in all material respects with the then applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP during the periods involved (except as may have
been indicated in the financial statements or the notes thereto and except for
the absence of complete footnote disclosure as required by GAAP and subject to
changes, if applicable, resulting from normal year-end audit adjustments) and
fairly present the financial position of Purchaser as at the dates thereof and
the results of their operations, stockholders' equity and cash flows for the
periods then ended.
(d) When issued in accordance with the terms of Article I, the
Acquisition Shares will be validly issued, fully paid and nonassessable and free
of preemptive rights.
ARTICLE III
RELATED AGREEMENTS
3.1 Related Agreements. Simultaneously with or prior to the execution and
delivery of this Agreement, the following agreements (such agreements being
herein collectively referred to as the "Related Agreements") are being executed
and delivered by the respective parties thereto:
(a) Registration Rights Agreement. The Purchaser and the
Stockholders are entering into a Registration Rights Agreement, effective as of
the Closing Date, substantially in the form of Exhibit B attached hereto,
providing for certain registration rights with respect to the Acquisition
Shares.
(b) Lock-up Agreements. Each Stockholder is executing and delivering
to the Purchaser a lock-up agreement effective as of the Closing Date,
substantially in the form of
25
Exhibit D attached hereto, providing for transfer restrictions and stop transfer
orders with respect to the Acquisition Shares as set forth therein.
(c) Release and Waiver. Each Stockholder is executing and delivering
to the Purchaser a release and waiver effective as of the Closing Date,
substantially in the form of Exhibit E attached hereto.
(d) Employment Agreements. The Purchaser and/or the Company and each
of Xxxxxxx Xxxxxxx, Xxxx Xxxxxxxx and Xxxxx Xxxxxxxxxxx are entering into
Employment Agreements (the "Employment Agreements"), effective as of the Closing
Date, in form and substance reasonably acceptable to the respective parties and
in substantially the form set forth as Exhibit F-1, Exhibit F-2, and Exhibit F-3
hereof. The Employment Agreements shall not contain any provision which shall
provide that the breach of such Employment Agreement shall result in any
forfeiture of the right of any Stockholder to receive the Deferred Payments.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of the Purchaser, the Stockholders and the
Company. The obligations of each party to perform this Agreement and to effect
the Acquisition are subject to the satisfaction of the following conditions
unless waived (to the extent such conditions can be waived) by all parties
hereto:
(a) Approvals. All authorizations, consents, orders or approvals of,
or declarations or filings with or expiration of waiting periods imposed by any
Governmental Authority necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made or shall have occurred.
(b) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Acquisition shall have been issued by any Federal or state court or other
Governmental Authority and remain in effect.
4.2 Conditions to Obligations of Purchaser. The obligations of Purchaser
to purchase and pay for the Stockholder Shares pursuant to this Agreement are
subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by Purchaser:
(a) Representations and Warranties of the Stockholders. The
representations and warranties of each of the Company and the Stockholders set
forth in Sections 2.1 and 2.2 hereof shall be true and correct in all material
respects (except for any representation or warranty that by its terms is
qualified by materiality, in which case it shall be true and correct in all
respects) as of the date of this Agreement and as of the Closing Date as though
made on and as of such date, and Purchaser shall have received certificates
signed by the President and Chief Executive Officer of the Company and each
Stockholder, as to his or its representations and warranties set forth in
Section 2.1 and 2.2 hereof to that effect.
26
(b) Options and Rights to Purchase Company Common Stock. All shares
of capital stock of the Company held in its treasury shall be cancelled. Each
holder having direct or indirect beneficial ownership of any security
(including, but not limited to any rights, options or warrants) of the Company
which such holder may exercise, exchange and/or convert, directly or indirectly,
into Company Common Stock shall have exercised, exchanged and/or converted such
securities into or for Company Common Stock or otherwise canceled or terminated
such securities, such that as of the Closing there shall be no security of the
Company outstanding other than the Company Common Stock. Furthermore, all
rights, whether granted by agreement or otherwise, to purchase or subscribe for
shares of Company Common Stock shall have been terminated prior to the Closing.
(c) Performance of Several Obligations of the Company and the
Stockholders. Each of the Company and the Stockholders shall have performed the
obligations required to be performed by it or them under this Agreement prior to
or as of the Closing Date, and the Purchaser shall have received a certificate
signed by the President or Chief Executive Officer of the Company and
certificates signed by each Stockholder as to the performance by the Company and
each such Stockholder, respectively, of his or its obligations, if any.
(d) Certificates of Secretary of Company and Stockholders;
Additional Deliveries. The Purchaser shall have been provided with a certificate
executed by the Secretary of the Company certifying as to (i) the resolutions
(which shall be attached to such certificate) duly adopted by the Board of
Directors of the Company authorizing the execution of this Agreement and the
execution, performance and delivery of all Related Agreements, documents and
transactions contemplated hereby, (ii) the Charter and by-laws of the Company
(each of which shall be attached to such certificate), as in effect immediately
prior to the Closing, and (iii) the incumbency of the officers of the Company
executing this Agreement and all Related Agreements and documents contemplated
hereby. As to each Stockholder which is not a natural person, such Stockholder
shall provide a certificate signed by the Secretary or equivalent officer or
member of such Stockholder which shall contain such information regarding such
Stockholder as set forth in the foregoing sentence. In addition, such other
closing documents (including, by way of example but not in limitation thereof,
good standing and franchise tax certificates from the secretary of state of all
relevant jurisdictions) customary in transactions of this type shall have been
provided to the Purchaser.
(e) Authorization of Acquisition by the Company and Stockholders.
All action necessary to authorize the execution, delivery and performance of
this Agreement and the Related Agreements by the Company and the Stockholders
and the consummation of the transactions contemplated hereby and thereby shall
have been duly and validly taken by the Board of Directors of the Company and by
such similar body of any Stockholder which is other than a natural person, and
the Company and the Stockholders shall have full power and right to effect the
Acquisition on the terms provided herein and therein.
(f) Authorization of Acquisition by the Purchaser. All action
necessary to authorize the execution, delivery and performance of this Agreement
and the Related Agreements by the Purchaser, and the consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
taken.
27
(g) Opinion of the Company's and the Stockholders' Counsel.
Purchaser shall have received an opinion dated the Closing Date of Xxxxxx and
Xxxxxxx, Esqs., counsel to the Company and the Stockholders, in form and
substance satisfactory to Purchaser.
(h) Government Consents, Authorizations, Etc. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by the Company of this Agreement and the Related
Agreements and the consummation by the Company and the Stockholders of the
transactions contemplated hereby and thereby shall have been obtained or made.
(i) Related Agreements. Each of the Related Agreements executed and
delivered by the Company and/or the Stockholders prior to the Closing shall be
in full force and effect as of the Closing and become effective in accordance
with the respective terms thereof and the actions required to be taken
thereunder by the parties thereto immediately prior to the Closing shall have
been taken.
(j) Acquisition of Shares. Effective immediately upon Closing,
Purchaser shall have acquired 100% of the outstanding capital stock of the
Company measured on a Fully Diluted Basis.
(k) Absence of a Material Adverse Change.. There shall have been no
Material Adverse Change of the Company prior to the Closing.
(l) Third Party Consents. Duly executed copies of all third party
consents and approvals contemplated by this Agreement or the Company Disclosure
Schedule, in form and substance satisfactory to the Purchaser shall have been
delivered to the Purchaser.
(m) Expenses. A true, correct and complete schedule (the "Schedule
of Expenses") of all Expenses (as defined herein) paid or incurred or to be
incurred by or on behalf of the Company and/or the Stockholders through the
Closing Date, accompanied by a certificate signed by the Chief Financial Officer
of the Company and each Stockholder certifying the accuracy and completeness
thereof, shall have been delivered by the Company and the Stockholders. For
purposes of this Agreement, Expenses shall mean, with respect to any party, all
actual, out-of-pocket expenses (including without limitation, any brokerage or
finders fees, attorney's fees and expenses, accountants' fees and expenses, tax
advisor's fees and expenses and investment banking fees) incurred by such party
to third parties, in connection with this Agreement, the Related Agreements, the
Acquisition and all other transactions provided for herein and therein.
(n) Expenses Releases. A written instrument in form and substance
reasonably satisfactory to the Purchaser is being delivered by each third party
identified on the Schedule of Expenses acknowledging that they have received
full payment of the amount of fees and expenses of such party reflected in a
detailed invoice of such party and accompanying such instrument, such party
shall be deemed to have released the Purchaser, the Company and the Stockholders
from any liabilities or obligations in respect of the payment of any fees and
expenses that are or may be characterized as Expenses.
28
(o) Accountant Consent. The Company shall have delivered a signed,
written consent, in customary form, of the Company's Accountants pursuant to
which the Company's Accountants shall have given its or their consent to the use
of any audited or unaudited financial statements of the Company prepared by the
Company's Accountants in any public filings which the Purchaser shall be
required to make under the Securities Act or the Exchange Act.
(p) FIRPTA Certificate. The Company shall, prior to the Closing
Date, provide Purchaser with a properly executed FIRPTA Notification Letter and
a form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2), each in form and
substance satisfactory to the Purchaser, along with written authorization for
Purchaser to deliver such notice form to the Internal Revenue Service on behalf
of the Company upon the Closing.
(q) Stock Certificates. Each Stockholder shall have tendered his or
its certificates representing shares of Company Common Stock (or affidavit of
loss relating thereto) and the transfer documentation necessary to exchange such
Company Common Stock for such Stockholder's Acquisition Shares.
(r) Default Under Agreements. The consummation of the transactions
contemplated hereby and by the Related Agreements shall not cause the Company or
any Stockholder to be in default under any material agreement or instrument to
which it or he is a party or by which it or he or any of its or his properties
are bound, the result of which would result, respectively, in a Material Adverse
Change or any material adverse change in the businesses, conditions (financial
or otherwise), assets, properties, operations, results of operations, prospects,
affairs or Liabilities of such Stockholder.
(s) Resignations. The Company shall deliver to the Purchaser
resignations of each member of the Board of Directors and each officer of the
Company, effective upon the Closing, in form and substance reasonably acceptable
to Purchaser.
(t) Revenue Run Rate. As of the last full month ended prior to the
Closing Date, the Company shall have revenues of at least five million seven
hundred thousand dollars ($5,700,000) calculated on an annualized basis.
(u) Bank Approval; Amended Agreement. Purchaser shall have received
the written approval of Keltic Financial Services LLC ("Keltic") for the
transactions contemplated hereby and by the Related Agreements. Purchaser shall
have entered into an amendment of its existing credit agreement in form and
substance acceptable to Purchaser, which amendment shall provide for a
substantial reduction in the amount of the personal guarantee executed in
connection therewith and the inclusion of the Company's accounts receivable in
the borrowing base of the credit line.
(v) Subordination Agreements. Each of the Stockholders,
collectively, and Xxxxx Xxxxxxxxxxx, individually, shall execute and deliver to
Keltic subordination agreements in form and substance satisfactory to Keltic and
the Purchaser (together, the "Subordination Agreements").
29
(w) Fairness Opinion. Purchaser shall have received a "fairness
opinion" from X.X. Xxxxxxxxxx & Co., Inc. in form and substance satisfactory to
the Purchaser.
(x) Acceptance by Counsel to Purchaser. The form and substance of
all legal matters contemplated hereby and of all papers delivered hereunder
shall be reasonably acceptable to Orrick, counsel to Purchaser.
(y) Company Lines of Credit. The lines of credit with Commerce Bank,
N.A. and Sovereign Bank (the "Lines of Credit") shall have been terminated and
be of no further force or effect and the Company shall deliver to the Purchaser
UCC-3 termination statements duly executed by Commerce Bank, N.A. and Sovereign
Bank for each jurisdiction in which either of such entities had filed a UCC-1
financing statement.
(z) Non-Disclosure Agreements. Each officer of the Company and at
least two-thirds of the employees and consultants as of the Closing Date of the
Company shall have executed and delivered a non-disclosure agreement
substantially in the form of the non-disclosure agreement attached hereto as
Exhibit G (an "NDA").
(aa) Deferred Bonus Agreements. The Company and each employee who
has the right to a deferred bonus payable by the Company in excess of $20,000 as
of the date hereof or as of the Closing shall deliver an agreement, in form and
substance reasonably satisfactory to the Purchaser, evidencing the employee's
agreement that any deferred bonus shall be paid consistent with past practice
and that no monthly bonus payment shall exceed $10,000 (in addition to such
employee's salary), whether employee remains employed, resigns or is terminated.
(bb) Employment Agreements. All existing agreements, whether written
or oral, related to the employment by the Company of each of Xxxx Xxxxxxxx,
Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxxxxxx shall have been terminated and be of no
further force or effect.
(cc) Amendment to Note Payable. The Company and Xxxxx Xxxxxxxxxxx
shall have amended any and all promissory notes made by the Company in favor of
Xxxxx Xxxxxxxxxxx to eliminate any provision providing for the acceleration of
the payment of the principal and interest owing thereunder as a result of the
transactions contemplated hereby or by the Related Agreements.
(dd) Receivables Guarantee. Xxxxx Xxxxxxxxxxx shall deliver to the
Purchaser an agreement to guarantee payment of the Company's account receivable
with respect to American Software Factory Corp., Inc. in the amount of $5,000,
such guarantee agreement to be in form and substance reasonably acceptable to
Purchaser.
4.3 Conditions to Obligations of the Company and the Stockholders. The
several obligation of each Stockholder to sell his or its Stockholder Shares
pursuant to this Agreement and the acceptance of the obligations of the Company
pursuant to this Agreement are subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by such
Stockholder or the Company:
30
(a) Representations and Warranties of the Purchaser. The
representations and warranties of the Purchaser set forth in Section 2.3 hereof
shall be true and correct in all material respects (except for any
representation or warranty that by its terms is qualified by materiality, in
which case it shall be true and correct in all respects) as of the date of this
Agreement and as of the Closing Date as though made at and as of such date, and
the Company shall have received a certificate signed by the President or Chief
Executive Officer of Purchaser to that effect, which such certificate may be
relied upon by each Stockholder.
(b) Performance of Obligations of Purchaser. Purchaser shall have
performed in all material respects its obligations required to be performed by
it under this Agreement prior to or as of the Closing Date and the Company shall
have received a certificate signed by the President or Chief Executive Officer
of the Purchaser to that effect, which such certificate may be relied upon by
each Stockholder.
(c) Certificate of Secretary of Purchaser. The Company shall have
been provided with a certificate executed by the Secretary of the Purchaser
certifying as to (i) the resolutions (which shall be attached to such
certificate) duly adopted by the Board of Directors and the shareholders of the
Purchaser authorizing the execution of this Agreement and the execution,
performance and delivery of all Related Agreements, documents and transactions
contemplated hereby, (ii) the Charter and by-laws of the Purchaser (each of
which shall be attached to such certificate), as in effect immediately prior to
the Closing, and (iii) the incumbency of the officers of the Purchaser executing
this Agreement and all Related Agreements and documents contemplated hereby. In
addition, such other closing documents (including, by way of example but not in
limitation thereof, good standing and franchise tax certificates from the
secretary of state of all relevant jurisdictions) customary in transactions of
this type shall have been provided to the Company.
(d) Authorization of Acquisition by the Purchaser. All action
necessary to authorize the execution, delivery and performance of this Agreement
and the Related Agreements by Purchaser and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(e) Government Consents, Authorizations, Etc. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by the Purchaser of this Agreement and the Related
Agreements and the consummation by the Purchaser of the transactions
contemplated hereby or thereby shall have been obtained or made.
(f) Board of Directors. The Purchaser shall have taken all necessary
and advisable actions (including, but not limited to amending the Charter and/or
by-laws of the Purchaser) to (i) provide that effective upon Closing the number
of members of the Board of Directors of the Purchaser shall be fixed at five (5)
members and (ii) elect or appoint to the Board of Directors of the Purchaser, in
accordance with the Purchaser's Charter and by-laws, Xxxxxxx Xxxxxx.
(g) Related Agreements. Each of the Related Agreements executed and
delivered by the Purchaser prior to the Closing shall be in full force and
effect as of the Closing
31
and become effective in accordance with the respective terms thereof and the
actions required to be taken thereunder by the parties thereto immediately prior
to the Closing shall have been taken.
(h) Absence of a Material Adverse Change. There shall have been no
Material Adverse Change of the Purchaser prior to the Closing.
(i) Delivery of Stock Certificates. The Purchaser shall deliver to
each Stockholder or to each Stockholder's representative a stock certificate (a
"Purchaser Certificate"), registered in the name of such Stockholder,
representing that number of unregistered Acquisition Shares set forth opposite
the name of such Stockholder on Schedule II attached hereto under the column
entitled "Acquisition Shares".
(j) Guarantee. The Purchaser shall deliver an agreement to guarantee
the payments of the Company under the promissory note payable to Xxxxx
Xxxxxxxxxxx, in form and substance reasonably satisfactory to counsel to Xxxxx
Xxxxxxxxxxx.
(k) Stock Options. Each of the Company employees listed on Schedule
III who are employed by the Company as of the Closing Date and who shall have
executed and delivered to the Purchaser both the Purchaser's standard form Stock
Option Agreement and a NDA shall have received an option to purchase that number
of shares of Purchaser Common Stock as is reflected on Schedule III hereto.
ARTICLE V
ADDITIONAL AGREEMENTS; CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
5.1 Payment of Fees and Expenses. The Purchaser shall be responsible for
the payment of its own Expenses in connection with the negotiation and execution
of this Agreement, all Related Agreements and the transactions contemplated
herein and therein. The Stockholders shall be responsible for the payment of
their own Expenses and the Expenses of the Company in connection with the
negotiation and execution of this Agreement, all Related Agreements and the
transactions contemplated herein and therein; provided, however, that up to
$20,000 of the Expenses of the Company and the Stockholders may be paid by the
Company prior to the Closing. For purposes hereof, "Expenses" shall mean all
actual, out-of-pocket expenses (including, without limitation, any brokerage or
finders fees, attorney's fees and expenses and investment banking fees) incurred
by such party to third parties, but shall not in any event include general
overhead, the time spent by employees of such party internally, postage,
telephone, telecopy, photocopy and delivery expenses, permit and filing fees,
and other non-material expenses that are incidental to the ordinary course of
business.
5.2 Restrictions on Transfer.
(a) The Acquisition Shares to be issued to each Stockholder pursuant
to this Agreement (collectively, the "Restricted Securities") shall not be sold,
transferred, assigned, pledged, encumbered or otherwise disposed of (each, a
"Transfer") except upon the conditions specified in this Section 5.2, which
conditions are intended solely to insure compliance with the provisions of the
Securities Act. Each Stockholder shall observe and comply with the Securities
32
Act and the rules and regulations promulgated by the SEC thereunder as now in
effect or hereafter enacted or promulgated, and as from time to time amended, in
connection with any Transfer of Restricted Securities beneficially owned by such
Stockholder.
(b) Each certificate representing Restricted Securities issued to a
Stockholder and each certificate for such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions of Sections 5.2(c) and 5.2(e) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE U.S. STATE SECURITIES OR "BLUE-SKY" LAWS. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN SECTION 5.2 OF THE STOCK PURCHASE AGREEMENT DATED AS OF
JUNE 28, 2002, AMONG THE A CONSULTING TEAM, INC., INTERNATIONAL OBJECT
TECHNOLOGY, INC. AND ALL THE STOCKHOLDERS OF INTERNATIONAL OBJECT TECHNOLOGY,
INC. AND A LOCK-UP AGREEMENT EXECUTED IN CONNECTION THEREWITH AND NO TRANSFER OF
THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, THE A CONSULTING
TEAM, INC. HAS AGREED TO DELIVER TO THE HOLDER HEREOF A CERTIFICATE OF THE A
CONSULTING TEAM, INC., NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED
HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY
BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE A CONSULTING TEAM, INC."
(c) Each Stockholder agrees, prior to any Transfer of Restricted
Securities (other than pursuant to an effective registration statement or
pursuant to Rule 144) to give written notice to Purchaser of such Stockholder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 5.2. Each such notice shall describe the manner and
circumstances of the proposed Transfer and shall be accompanied by the written
opinion, addressed to Purchaser, of counsel for the holder of such Restricted
Securities, stating that in the opinion of such counsel (which opinion and
counsel shall be reasonably satisfactory to Purchaser) such proposed transfer
does not involve a transaction requiring registration or qualification of such
Restricted Securities under the Securities Act or the securities or "blue-sky"
laws of any relevant state of the United States or is otherwise exempted from
the application of United States securities laws. The holder thereof shall
thereupon be entitled to Transfer such Restricted Securities in accordance with
the terms of the notice delivered by it to Purchaser. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any such
Restricted Securities (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Securities) shall bear the legend set
forth in Section 5.2(b) unless (x) in such opinion of counsel of Purchaser
registration of any future Transfer is not required by the
33
applicable provisions of the Securities Act or (y) Purchaser shall have waived
the requirement of such legends. No Stockholder shall Transfer any Restricted
Securities until such opinion of counsel has been given (unless waived by
Purchaser or unless such opinion is not required in accordance with the
provisions of this Section 5.2(c)).
(d) Notwithstanding the foregoing provisions of this Section 5.2,
the restrictions imposed by this Section 5.2 upon the transferability of
Restricted Securities shall cease and terminate when (i) any such shares are
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act or as otherwise contemplated by Section 5.2(c) and,
pursuant to Section 5.2(c), the securities so transferred are not required to
bear the legend set forth in Section 5.2(b) or (ii) the holder of such
Restricted Securities has met the requirements for Transfer of such Restricted
Securities pursuant to subparagraph (k) of Rule 144. Whenever the restrictions
imposed by this Section 5.2 shall terminate, as herein provided, the holder of
Restricted Securities as to which such restrictions have terminated shall be
entitled to receive from Purchaser, without expense, a new certificate not
bearing the restrictive legend set forth in Section 5.2(b) and not containing
any other reference to the restrictions imposed by this Section 5.2 and such
securities shall thereupon cease to be Restricted Securities. Nothing contained
herein shall be construed to limit the right of any Stockholder from availing
itself or himself of any other provision of Rule 144 otherwise permitting the
sale of its or his Restricted Securities in accordance with such provision(s).
(e) Each Stockholder understands and agrees that when a transfer is
prohibited by law or by this Section 5.2, Purchaser may cause stop transfer
orders to be placed with its transfer agent with respect to certificates for
Restricted Securities owned by such Stockholder but not as to certificates for
such shares of Purchaser Common Stock as to which the legend set forth in
paragraph (b) of this Section 5.2 is no longer required because one or more of
the conditions set forth in Section 5.2(d) shall have been satisfied.
5.3 Stockholder Assurance. Each Stockholder hereby agrees not to take any
action that would be inconsistent with the obligations and undertakings of the
Purchaser and such Stockholder under this Agreement and the Related Agreements.
5.4 Confidential Information.
(a) Each Stockholder agrees that from and after the Closing Date it
or he shall not directly or indirectly use or disclose any confidential or
proprietary information of or relating to the Purchaser or any subsidiary to any
person, firm, corporation, association or other entity, nor shall any
Stockholder make use of any such confidential or proprietary information for its
or his own purpose or for the benefit of any person, firm, corporation or other
entity except the Purchaser or any subsidiary or affiliate thereof. The
Stockholders hereby acknowledge that the Company and Purchaser would be
irreparably damaged if such confidential knowledge of the Company or Purchaser
was disclosed to or utilized on behalf of others in competition in any respect
with the Company or Purchaser. For the purpose of this Section, the term
"confidential or proprietary information" shall mean all information which is
known to any Stockholder or their respective affiliates or to their employees,
former employees, consultants or others in a confidential relationship with the
Company or Purchaser and relates to matters such as trade secrets, research and
development activities, books and records, customer lists, suppliers,
34
distribution channels, pricing information, private processes, formulae,
functional specifications, blueprints, know-how, data, improvements,
discoveries, designs, inventions, techniques, marketing plans, strategies,
forecasts, new products, business plans, budgets and financial statements, and
all intellectual property of the Company or Purchaser.
(b) It is the desire and intent of Purchaser that the foregoing
provisions of this Section 5.4 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Section shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of such provision of this Section 5.4 in the particular jurisdiction
in which such adjudication is made. In addition, in the event of a breach or
threatened breach by any Stockholder or any of the Stockholders of the
provisions of this Section 5.4, the Company and Purchaser shall be entitled to
an injunction restraining them or him, as the case may be, from such breach.
Nothing herein contained shall be construed as prohibiting the Company and
Purchaser from pursuing any other remedies available for such breach or
threatened breach.
5.5 Access to Records and Properties. From and after the date hereof until
the Closing (the "Executory Period"), the Company shall permit the Purchaser and
its consultants and professional advisors to conduct, and assist Purchaser and
its consultants and professional advisors in the conduct of, a full and complete
investigation of the Company's business and technology including, without
limitation, a market and competitive products and technology analysis and a
review of the Company's books and records, contracts, technology, intellectual
property, inventory, equipment, technical materials, customer records and other
assets, reasonable, non-disruptive access to, and communications with current
and former employees of the Company (the "Investigation"). The Investigation
shall be conducted during normal business hours. Under no circumstances shall
any information disclosed by the Stockholders or the Company to Purchaser, or
otherwise in Purchaser's possession, on or before the Closing, limit or restrict
in any manner any right of Purchaser to terminate this Agreement upon the terms
and conditions herein. During the Executory Period, the Company shall provide to
the Purchaser a copy of the minutes of any meeting of the Board of Directors or
stockholders of the Company or any written consent taken in lieu thereof
promptly after the date of such meeting or written consent, as the case may be.
5.6 Filings. Each party hereto agrees and covenants that he or it shall
use his or its best efforts, from the date hereof, to make all filings with the
SEC as it shall be required to make pursuant to the Securities Act, the Exchange
Act and all rules and regulations promulgated under each act (including, without
limitation, filing all Forms 3, 4 and 5, and Schedule 13's), for so long as each
party shall be legally required by the Securities Act or the Exchange Act.
5.7 Reserved.
5.8 Loans. Prior to the Closing, the Company and Xxxxx Xxxxxxxxxxx shall
have amended any and all promissory notes made by the Company in favor of Xxxxx
Xxxxxxxxxxx (the "Promissory Notes") to eliminate any provision providing for
the acceleration of the payment of the principal and interest owing thereunder
as a result of the transactions contemplated hereby or
35
by the Related Agreements. The Company shall have the right to prepay under the
Promissory Notes at or immediately prior to the Closing Date, an amount not to
exceed the amount of cash on hand at the Company as of immediately prior to the
Closing Date less the amounts of any unpaid payroll obligations (excluding the
amounts of any accrued bonuses), payroll taxes, Tax liabilities, Expenses and
prepayment or similar termination penalties with respect to the termination of
the Lines of Credit incurred or to be incurred by the Company up to and
including the Closing Date
5.9 Operation of Business of the Company. During the Executory Period, the
Company shall operate its business as now operated and only in, and the Company
shall not take any action except in, the normal and ordinary course and in a
manner consistent with past practice, and the Company and the Stockholders shall
use their respective best efforts to preserve intact its business and assets, to
keep available the services of the Company's officers, employees and consultants
and to maintain satisfactory relationships with the other persons with which the
Company has business relations. Without limiting the generality of the
foregoing, during the Executory Period, none of the Company nor any of the
Stockholders shall, without the prior written consent of Purchaser, (a) take any
action that would result in any of the representations and warranties of the
Company or the Stockholders herein becoming untrue or in any of the conditions
to the Acquisition not being satisfied, or (b) take or cause to occur any of the
actions or transactions described in Section 2.1(g)(iii) through (xvii).
5.10 Advice of Changes. During the Executory Period, the Company shall
confer with the Purchaser on a regular basis, report on operational matters and
promptly advise the Purchaser of any change, event or circumstance having, or
which, insofar as can reasonably foreseen, could have a Material Adverse Change
or which could impair (negatively or positively) the Company's financial
projections or forecasts.
5.11 Legal Conditions to Acquisition. Each party hereto shall take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on such party with respect to the Acquisition and will take all
reasonable action necessary to cooperate with and furnish information to the
other party in connection with any such requirements imposed upon such other
party in connection with the Acquisition. Each party hereto shall take all
reasonable actions necessary (a) to obtain (and will take all reasonable actions
necessary to promptly cooperate with the other party in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Authority, or other third party, required to be obtained or made by such party
(or by the other parties) in connection with the Acquisition or the taking of
any action contemplated by this Agreement, (b) to defend, lift, rescind or
mitigate the effect of any lawsuit, order, injunction or other action adversely
affecting the ability of such party to consummate the transactions contemplated
hereby and (c) to fulfill all conditions precedent applicable to such party
pursuant to this Agreement.
5.12 Consents. Each party hereto shall use its best efforts, and the other
parties shall cooperate with such efforts, to obtain any consents and approvals
of, or effect the notification of or filing with, each person or authority,
whether private or governmental, whose consent or approval is required in order
to permit the consummation of the Acquisition and the transactions contemplated
hereby and to enable the Company to conduct and operate its business
substantially as presently conducted and as proposed to be conducted.
36
5.13 Efforts to Consummate. Subject to the terms and conditions herein
provided, the parties hereto shall use their best efforts to do or cause to be
done all such acts and things as may be necessary, proper or advisable,
consistent with all applicable laws and regulations, to consummate and make
effective the transactions contemplated hereby and to satisfy or cause to be
satisfied all conditions precedent that are set forth in Article IV as soon as
reasonably practicable.
5.14 Notice of Prospective Breach. Each party hereto shall immediately
notify the other parties in writing upon the occurrence of any act, event,
circumstance or thing that is reasonably likely to cause or result in a
representation or warranty hereunder to be untrue at the Closing, the failure of
a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
5.15 Public Announcements. The parties hereto agree that, to the maximum
extent feasible, but subject, in the case of the Purchaser, to its public
disclosure and other legal and regulatory obligations, they shall advise and
confer prior to the issuance (and provide copies to the other party prior to
issuance) of any public announcement or reports or statements with respect to
the Acquisition; provided, however, that neither the Company nor any Stockholder
will issue any report, statement or release pertaining to this Agreement or any
transaction contemplated hereby, without the prior written consent of the
Purchaser.
5.16 Support of Acquisition by Officers and Directors. Each party hereto
shall use his or its best efforts to cause all of its officers and directors to
support the Acquisition and to take all actions and execute all documents
reasonably requested by the other parties hereto to carry out the intent of the
parties with respect to the transactions contemplated hereby.
5.17 Support of Acquisition by Stockholders. The Stockholders hereby agree
to use their reasonable best efforts to cause the Company to duly observe and
perform its obligations under this Agreement.
5.18 Management and Employees. The Purchaser shall have the right to
discuss and secure satisfactory assurances from management and certain other
existing employees of the Company that they have no present intention to
terminate their employment with the Purchaser or the Company following the
consummation of the Acquisition.
5.19 FIRPTA. The Company shall deliver to the Purchaser (i) a statement
(in such form as may be reasonably requested by counsel to the Purchaser)
conforming to the requirements of Section 1.897-2(h)(1)(i) of the Treasury
Regulations, which states that the Stockholder Shares do not constitute "United
States real property interests" under Section 897(c) of the Code for purposes of
satisfying the Purchaser's obligations under Treasury Regulation Section
1.1445-2(c)(3); and (ii) a form of notice to the Internal Revenue Service in
accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2),
along with written authorization for the Purchaser to deliver such notice form
to the Internal Revenue Service on behalf of the Company upon the Closing.
37
5.20 Negotiation With Others.
(a) During the Executory Period, neither the Company nor the
Stockholders shall, and they shall not authorize, cause or permit any of the
Company's or such Stockholder's employees, directors, officers, advisors,
consultants, stockholders or agents to, (i) directly or indirectly, solicit,
initiate, or engage in any discussions or negotiations with, irrespective of the
person performing such solicitation, initiation or engagement, or provide any
information to, or take any other action that facilitates or with the intent to
facilitate the efforts of, any third party relating to any possible agreement
(whether binding or in principle) or other arrangement involving (a) the
acquisition of all or any substantial interest in the Company or its business
(whether by way of merger, purchase of capital stock or other securities,
purchase of assets or otherwise); (b) any financing of, or investment in, the
Company; (c) the sale, license, disposition or encumbrance of the intellectual
property of the Company; or (d) otherwise take any action inconsistent with, or
that could reasonably be expected to delay the consummation of, or that renders
impractical or undesirable to the Purchaser, the transactions contemplated
hereby (each, a "Prohibited Transaction"); or (ii) authorize, execute,
consummate or enter into any agreement or commitment with respect to a
Prohibited Transaction. In addition, upon execution and delivery of this
Agreement, the Company and each Stockholder shall: (i) terminate any and all
discussions, if any, it or he may be having regarding a Prohibited Transaction
and (ii) immediately notify the Purchaser in writing if it or he thereafter
receives any inquiries or offers from any person regarding a Prohibited
Transaction, which notice shall identify such person or entity, the nature and
structure of the Prohibited Transaction as proposed and the material terms of
the proposal and to confirm that the inquiry regarding a Prohibited Transaction
was definitively rejected, and the Company and each Stockholder shall refuse to
discuss and immediately reject such inquiry or offer.
(b) The Company and each Stockholder acknowledges and agrees
that the transactions contemplated by this Agreement are unique and that in
reliance on the provisions of Section 5.20(a) (the "No-Shop"), the Purchaser has
committed, and expects to commit additional, significant resources and intends
for the No-Shop to be binding and enforceable against the Company and the
Stockholders as an inducement to enter into this Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification.
(a) From and after the Closing Date, each Stockholder (the
"Stockholder Indemnifying Persons") shall severally and not jointly, up to the
amount of such Stockholder's pro rata portion of the Maximum Liability (as
defined below), except in respect of Losses resulting from Taxes or Tax
liabilities, in which case each Stockholder shall severally and not jointly, up
to their pro rata portion of such actual amount of such Losses, protect, defend,
indemnify and hold harmless the Purchaser and its affiliates (including the
Company), officers, directors, employees, representatives and agents (each a
"Purchaser Indemnified Person" and collectively "Purchaser Indemnified Persons")
from and against any and all losses, claims,
38
shortages, costs, damages, liabilities, fees (including without limitation
attorneys' fees and expenses generally and attorney's fees and expenses
specifically related to enforcement of, or assertion of, claims pursuant to this
Article VI (collectively, the "Losses") and expenses that any of the Purchaser
Indemnified Persons incurs or reasonably anticipates incurring by reason of or
in connection with (i) any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of the Company or any
Stockholder contained in this Agreement, including any exhibits or schedules
attached hereto, or any fact or circumstance constituting a misrepresentation,
breach of or default in such representations or warranties, (ii) any Losses that
any of the Purchaser Indemnified Persons incurs or reasonably anticipates
incurring as by reason of or in connection with any Action affecting the Company
or any Stockholder, (iii) all Taxes of, or imposed on, or with respect to, or
resulting from the operations of, the Company for all periods up to and
including the Closing Date (except with respect to the amount of Taxes that the
Company has monies on hand at the time of Closing available to pay Taxes), and
Taxes resulting from the Company converting from the cash method to the accrual
method of accounting for income tax purposes (except to the extent that the
amount of Taxes for such conversion is properly reflected as a deferred Tax
liability in the 2002 Financial Statements), and (iv) any Tax liability of the
Company with respect to a period up to and including the Closing Date under
Treasury Regulation Section 1.1502-6 or any similar provision of state or local
law or as a result of an indemnification obligation for Taxes pursuant to a
contract, being a successor or transferee or otherwise; provided, however that
the maximum liability for indemnification for Losses (other than Losses relating
to Taxes and Tax liabilities) shall not exceed an amount equal to the sum of (A)
the amount of the Deferred Payments and (B) the product of (i) the Average Price
and (ii) 1,270,000 (the "Maximum Liability"); provided, further, however, that
the Maximum Liability shall not apply to any Losses resulting from Taxes or Tax
liabilities of the Company; provided, further, however, that the maximum
liability for indemnification for Losses arising out of the Company's violation
of the Immigration and Naturalization Act and the rules and regulations
promulgated thereunder solely with respect to any of its employee's status as an
H-1B employee shall be $25,000, though no such maximum liability shall apply
with respect to any willful violation of such Act or the rules and regulations
promulgated thereunder. Subject to the last sentence of this Section 6.1(a),
each Stockholder's pro rata portion of (i) the Maximum Liability, (ii) Losses
resulting from Taxes or Tax liabilities, or (iii) Losses resulting from an ERP
Shortfall (as defined below) shall be based upon such Stockholder's pro rata
portion of the Aggregate Purchase Price. "Stockholder Indemnifying Persons"
shall include Xxxxxx Xxxxxx or Xxxxxxx Xxxxxx only to the extent any Purchaser
Indemnified Person suffers Losses as a result of a breach of a representation or
warranty made by either Xxxxxx Xxxxxx or Xxxxxxx Xxxxxx, as the case may be, in
Section 2.2 hereof, and neither Xxxxxx Xxxxxx nor Xxxxxxx Xxxxxx shall have any
other liability to the Purchaser whatsoever under the terms of this Agreement.
The foregoing indemnification shall apply solely to Losses incurred by any of
the Purchaser Indemnified Persons in excess of an aggregate of $25,000 (the
"Threshold"); provided, however, that any Losses arising out of the Company's
violation of the Immigration and Naturalization Act and the rules and
regulations promulgated thereunder shall not be subject to the Threshold.
Notwithstanding anything to the contrary contained herein, any amount not paid
to the Company or the Purchaser with respect to the Company's account receivable
of ERP-Link Corp. in the amount of $38,790 (an "ERP Shortfall") shall be
deducted dollar for dollar from the Deferred Payment payable by the Purchaser on
April 1, 2004 pro rata among the Stockholders.
39
Notwithstanding the foregoing, any Losses resulting from Taxes or Tax
liabilities shall be borne by the Stockholder Indemnifying Persons as follows:
(i) Xxxxx Xxxxxxxxxxx shall bear 100% of any indemnification obligation relating
to Losses resulting from Taxes or Tax liabilities incurred by the Company for
the period beginning on the date of incorporation of the Company and ending
January 13, 2000, (ii) Xxxxx Xxxxxxxxxxx and Xxxxxxx Xxxxxxx shall each bear 50%
of any indemnification obligation relating to Losses resulting from Taxes or Tax
liabilities incurred by the Company for the period beginning January 14, 2000
and ending December 31, 2000, and (iii) Xxxxx Xxxxxxxxxxx and Xxxxxxx Xxxxxxx
shall each bear 46.4% and Xxxx Xxxxxxxx shall bear 7.2% of any indemnification
obligation relating to Losses resulting from Taxes or Tax liabilities incurred
by the Company for the period beginning January 1, 2001 and ending on the
Closing Date.
(b) From and after the Closing Date, the Purchaser shall protect,
defend, indemnify and hold harmless each Stockholder (each a "Company
Indemnified Person" and collectively the "Company Indemnified Persons") from and
against any and all Losses, that any of the Company Indemnified Persons incurs
or reasonably anticipates incurring by reason of or in connection with any
claim, demand, action or cause of action alleging misrepresentation, breach of,
or default in connection with, any of the representations, warranties, covenants
or agreements of the Purchaser contained in this Agreement, including any
exhibits or schedules attached hereto, or any factor or circumstance
constituting a misrepresentation, breach of or default in such representations
or warranties. The maximum liability of the Purchaser Indemnifying Persons
pursuant to this Article VI shall be equal to the Maximum Liability less the
amount of any Deferred Payments previously paid by the Purchaser; provided,
however, that the foregoing indemnification shall apply solely to Losses
incurred by any of the Stockholder Indemnified Persons in excess of an aggregate
of $25,000.
(c) No claim shall be brought under this Section 6.1 unless either
the Company Indemnified Persons or the Purchaser Indemnified Persons
(hereinafter being referred to as the "Indemnified Person," with each reference
being made to the applicable party or parties as appropriate in the context), or
any of them, at any time prior to the applicable Survival Date (as defined
herein), give each of the Company Indemnifying Persons or Purchaser Indemnifying
Persons (hereinafter being referred to as the "Indemnifying Persons," with each
reference being made to the applicable party or parties as appropriate in the
context) prompt written notice (a "Notice") after the Indemnified Party has
actual knowledge of the basis for such claim, of the existence of any such
claim, specifying the nature and basis of such claim and the amount thereof, to
the extent known or prompt written notice of any third party claim, the
existence of which might give rise to such a claim, but the failure so to
provide such notice to the Indemnifying Persons will not relieve the
Indemnifying Persons from any liability which they may have to the Indemnified
Persons under this Agreement (unless and only to the extent that such failure
results in the loss or compromise of any material rights or defenses of the
Indemnifying Persons and they were not otherwise aware of such action or claim)
or otherwise. In the event each of the Indemnifying Persons do not respond to
the Notice within ten (10) business days of receipt thereof, the Indemnifying
Persons shall pay to the Indemnified Persons the amount of the claim set forth
in the Notice in accordance with Section 6.4 hereof. In the event the
Indemnifying Persons dispute the nature or amount of the claim set forth in the
Notice, the Indemnified Persons and the Indemnifying Persons shall attempt to
reach a mutually agreeable resolution to such claim. In the event that no
resolution is reached, the Indemnified
40
Persons, or any of them, shall have the right to commence legal proceedings
until one year from the Survival Date for the enforcement of their rights
pursuant to this Section 6.1 with respect to the matters described in the
Notice.
(d) The obligations and liabilities of the Purchaser, the Company
and each Stockholder, as applicable, with respect to Losses resulting from the
assertion of liability by third parties that could render the Purchaser's, the
Company's or such Stockholder's, as applicable, representations and warranties
false or misleading (each, a "Third Party Claim") shall be subject to the
following terms and conditions:
(i) The Indemnified Persons shall promptly give written notice
to the Indemnifying Persons of any Third Party Claim that might give rise
to any Loss by the Indemnified Persons, stating the nature and basis of
such Third Party Claim, and the amount thereof to the extent known. Such
notice shall be accompanied by copies of all relevant documentation with
respect to such Third Party Claim, including, without limitation, any
summons, complaint or other pleading that may have been served, any
written demand or any other document or instrument. Notwithstanding the
foregoing, the failure to provide notice as aforesaid to the Indemnifying
Persons will not relieve the Indemnifying Persons from any liability which
they may have to the Indemnified Persons under this Agreement (unless and
only to the extent that such failure results in the loss or compromise of
any material rights or defenses of the Indemnifying Persons and they were
not otherwise aware of such action or claim) or otherwise.
(ii) The Indemnifying Persons will have the right, upon
delivery of a written acknowledgement to the Indemnified Persons of their
indemnification liability pursuant to this Article VI, to assume the
defense of the Third Party Claim with counsel of his or its choice within
twenty (20) days after the Indemnified Person has given notice of the
Third Party Claim; provided, however, that Indemnifying Persons must
conduct the defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard; and provided
further that Indemnified Person may retain separate counsel, with the
reasonable fees and expenses to be paid by the Indemnifying Persons, if
such Indemnified Person upon advice of legal counsel shall have reasonably
concluded that representation of such indemnified party or parties by the
counsel retained by the Indemnifying Persons would be inappropriate due to
actual or potential differing interests between such Indemnified Person
and any other party represented by such counsel in such proceeding
(provided that the Indemnifying Person shall not be responsible for the
fees and expenses of more than one additional counsel for all Indemnified
Persons). No Indemnifying Persons, in the defense of any claim or
litigation shall, except with the consent of each Indemnified Person,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Person of a release from all liability in
respect to such claim or litigation.
(iii) In the event that the Indemnifying Persons does not
assume and conduct the defense of the Third Party Claim, the Indemnified
Persons shall defend any Third Party Claims with counsel of their own
choosing, which counsel shall be reasonably satisfactory to the
Indemnifying Persons, and shall act reasonably and in
41
accordance with their good faith business judgment in handling such Third
Party Claims and shall not effect any settlement without the consent of
the Indemnifying Persons which consent shall not unreasonably be withheld
or delayed. The Indemnifying Persons and the Indemnified Persons shall
make available to each other and their counsel and accountants all books
and records and information relating to any Third Party Claims, keep each
other fully apprised as to the details and progress of all proceedings
relating thereto and render to each other such assistance as may be
reasonably required to ensure the proper and adequate defense of any and
all Third Party Claims.
6.2 Fraud. Nothing contained in Section 6.1 shall in any way limit,
impair, modify or otherwise affect the rights of the Indemnified Persons (i) to
bring against any Indemnifying Person any claim, demand, suit or cause of action
otherwise available to the Indemnified Persons based upon an allegation or
allegations that the Purchaser, on the one hand, or the Company and/or a
Stockholder, as the case may be, on the other hand, had an intent to defraud or
made an intentional willful misrepresentation or an intentional willful omission
of a material fact in connection with this Agreement or the Related Agreements
and the Acquisition or (ii) to enforce against any Indemnifying Person any
judgment of a court of competent jurisdiction which finds or determines that
such party or parties, or any of them, had an intent to defraud or made an
intentional willful misrepresentation or intentional willful omission of a
material fact in connection with this Agreement or the Related Agreements and
the Acquisition.
6.3 Survival of Representations and Warranties. Subject to the further
provisions of this Section 6.3, the representations and warranties contained in
Sections 2.1, 2.2 and 2.3 shall survive the Closing Date until the eighteen (18)
month anniversary of the Closing Date, other then the representations and
warranties contained in Section 2.1 (h) which shall survive in accordance with
the applicable statute of limitations related to any claims with respect
thereto. For convenience of reference, the date upon which any representation
and warranty contained herein shall terminate is referred to herein as the
"Survival Date." Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company contained in this Agreement
(including, without limitation, the Company Disclosure Schedule) (i) are being
given by the Company on behalf of the Stockholders and for the purpose of
binding the Stockholders to the terms and provisions of this Article VI, and as
an inducement to Purchaser to enter into this Agreement and the Related
Agreements and to consummate the Acquisition and the transactions contemplated
hereby and thereby (and the Purchaser and the Stockholders acknowledge that
Purchaser has expressly relied thereon) and (ii) are solely for the benefit of
the Indemnified Persons and each of them. Accordingly, no third party
(including, without limitation, the Stockholders) or any other holder of
Purchaser Stock or anyone acting on behalf of any thereof) other than the
Indemnified Persons, and each of them, shall be a third party or other
beneficiary of such representations and warranties and no such third party shall
have any rights of contribution against the Purchaser or the Company with
respect to such representations or warranties or any matter subject to or
resulting in indemnification under this Article VI, or otherwise.
6.4 Claims. In the event the Purchaser is required to pay any amounts to
the Company Indemnified Persons pursuant to this Article VI, it shall do so in
cash pro rata based on the number of Acquisition Shares received by such Company
Indemnified Persons on the Closing Date. In the event the Stockholder
Indemnifying Persons are required to pay any
42
amounts to the Purchaser pursuant to this Article VI, the Purchaser shall be
expressly authorized to retain any Deferred Payments not yet paid up to the
amount of the Losses sustained by the Purchaser. In the event the Deferred
Payments not yet paid are less than the amount of the Losses sustained or to be
sustained by the Purchaser, the Stockholder Indemnifying Persons shall pay to
the Purchaser cash in the amount of any shortfall after the retention of any
Deferred Payment not yet paid pro rata based on the number of Acquisition Shares
received by such Stockholder Indemnifying Persons on the Closing Date.
ARTICLE VII
MISCELLANEOUS
7.1 Entire Agreement. This Agreement (including the Purchaser Disclosure
Schedule, the Company Disclosure Schedule and the Exhibits attached hereto), the
Related Agreements and the other writings referred to herein contain the entire
agreement among the parties hereto with respect to the transactions contemplated
hereby and supersede all prior agreements or understandings, written or oral,
among the parties with respect thereto.
7.2 Descriptive Headings. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
7.3 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by internationally-recognized overnight courier or by registered or
certified mail, postage prepaid, return receipt requested or by telecopier with
confirmation and followed by a hard copy, with confirmation as provided above
addressed as follows:
(a) if to Purchaser, to:
The A Consulting Team, Inc.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
Telecopier: (000) 000-0000;
with copies to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000;
(b) if to the Company, to:
International Object Technology, Inc.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxx Xxxxxx 00000
43
Attention: Xxxxxxx Xxxxxxx, Executive Vice President
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx, Esqs.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000; and
(c) if to the Stockholders, at their respective addresses set forth
on Schedule II attached hereto;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be delivered and received (a) in the case
of personal delivery or telecopy, on the next business day after the date of
such delivery, (b) in the case of internationally-recognized overnight courier,
on three (3) business days after the date when sent and (c) in the case of
mailing, on the tenth business day following the date on which the piece of mail
containing such communication was posted. As used in this Section 7.3, "business
day" shall mean any day other than a day on which banking institutions in the
City of New York to which delivery was made are legally closed for business.
7.4 Counterparts. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
7.5 Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed wholly therein (without
reference to any principles of conflicts of laws). The parties hereto hereby
agree that any suit, action or proceeding instituted with respect to this
Agreement shall be brought in a Federal court or state court located in the City
of New York, State of New York and no party shall institute or maintain any such
suit, action or proceeding in any court of any other jurisdiction, and such
parties hereby irrevocably waive any objection they may have or hereafter
acquire to, or any right of immunity on the ground of, venue, the convenience of
the forum of jurisdiction of such court or the execution of judgments resulting
therefrom, and the parties irrevocably accept and submit to the jurisdiction of
the aforesaid courts in any such suit, action or proceeding.
7.6 Benefits of Agreement. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, permitted assigns, legal representatives, heirs and
estate, as the case may be. This Agreement shall not be assignable by the
Company or any Stockholder without the consent of the other parties hereto.
Purchaser may assign and delegate any or all of its rights and obligations
hereunder (other than the obligation to issue Acquisition Shares).
44
7.7 Pronouns. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.
7.8 Amendment, Modification and Waiver. This Agreement shall not be
altered or otherwise amended except pursuant to an instrument in writing signed
by each party hereto; provided, however, that any party to this Agreement may
waive in writing any obligation owed to it by any other party under this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
7.9 Termination. This Agreement may be terminated, and the Acquisition
abandoned, notwithstanding the approval by the Purchaser, the Company and the
Stockholders of this Agreement, at any time prior to the Closing, by:
the mutual consent of each party hereto; or
(a) the Purchaser, if the conditions set forth in Section 4.1 hereof
shall not have been met by the date six (6) months from the date hereof, except
if such conditions have not been met solely as a result of the action or
inaction of the Purchaser; or
(b) the Purchaser, if the conditions set forth in Section 4.2 hereof
shall not have been met, and the Company if the conditions set forth in Section
4.3 hereof shall not have been met, in either case by the date six (6) months
from the date hereof, except if such conditions have not been met solely as a
result of the action or inaction of the party seeking to terminate;
(c) the Purchaser, or the Company, if either such party shall have
determined in its reasonable discretion, exercised in good faith, that the
Acquisition contemplated by this Agreement has become impracticable by reason of
the institution of any litigation or proceeding to restrain or prohibit the
consummation of the Acquisition, or which questions the validity or legality of
the transactions contemplated by this Agreement;
(d) the Purchaser, if any statute, rule, regulation or other
legislation shall have been enacted which would reasonably be expected to
materially adversely impair the conduct or operation of the Company;
(e) the Purchaser, in the event of a breach by the Company or any
Stockholder of any representation, warranty or agreement contained herein that
would result in the failure of the conditions set forth in Section 4.2(a) and
4.2(c) and that has not been cured, or as to which best efforts are not being
employed to cure within thirty (30) days after notice thereof is given to the
Purchaser; or
(f) the Company, in the event of a breach by the Purchaser of any
representation, warranty or agreement contained herein that would result in the
failure of the conditions set forth in Section 4.3(a) and 4.3(c) and that has
not been cured, or as to which best efforts are not being employed to cure
within thirty (30) days after notice thereof is given to the breaching party.
45
Any termination pursuant to this Section 7.9 (other than a termination
pursuant to Section 7.9(a) hereof) shall be effected by written notice from the
party or parties so terminating to the other parties hereto.
[Remainder of Page Intentionally Left Blank]
46
IN WITNESS WHEREOF, each of the parties hereto has caused this Stock
Purchase Agreement to be executed on its behalf as of the day and year first
above written.
THE A CONSULTING TEAM, INC.
By: /s/ Xxxxxx XxxXxx
Name: Xxxxxx XxxXxx
Title: Chief Executive Officer and President
INTERNATIONAL OBJECT TECHNOLOGY, INC.
By: /s/ Xxxxx Xxxxxxxxxxx
Name: Xxxxx Xxxxxxxxxxx
Title: Chief Executive Officer and President
COUNTERPART SIGNATURE PAGES OF STOCKHOLDERS ARE ATTACHED HERETO
47
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 28, 2002 (THE "AGREEMENT"), AMONG
THE A CONSULTING TEAM, INC.,
INTERNATIONAL OBJECT TECHNOLOGY, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of The A Consulting Team, Inc., International Object
Technology, Inc. and the other parties to the Agreement shall constitute
counterpart copies of the Agreement in accordance with the terms of the
Agreement.
------------------------------------------------
Print Name of Entity (if applicable)
/s/ Xxxxx Xxxxxxxxxxx
------------------------------------------------
Signature
Xxxxx Xxxxxxxxxxx
------------------------------------------------
Print Name
------------------------------------------------
Print Title (if applicable)
48
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 28, 2002 (THE "AGREEMENT"), AMONG
THE A CONSULTING TEAM, INC.,
INTERNATIONAL OBJECT TECHNOLOGY, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of The A Consulting Team, Inc., International Object
Technology, Inc. and the other parties to the Agreement shall constitute
counterpart copies of the Agreement in accordance with the terms of the
Agreement.
------------------------------------------------
Print Name of Entity (if applicable)
/s/ Xxxxxxx Xxxxxxx
------------------------------------------------
Signature
Xxxxxxx Xxxxxxx
------------------------------------------------
Print Name
------------------------------------------------
Print Title (if applicable)
48
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 28, 2002 (THE "AGREEMENT"), AMONG
THE A CONSULTING TEAM, INC.,
INTERNATIONAL OBJECT TECHNOLOGY, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of The A Consulting Team, Inc., International Object
Technology, Inc. and the other parties to the Agreement shall constitute
counterpart copies of the Agreement in accordance with the terms of the
Agreement.
bCompliant, Inc.
------------------------------------------------
Print Name of Entity (if applicable)
/s/ Xxxxxxx X. Xxxxxx
------------------------------------------------
Signature
Xxxxxxx X. Xxxxxx
------------------------------------------------
Print Name
Chairman and President
------------------------------------------------
Print Title (if applicable)
48
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 28, 2002 (THE "AGREEMENT"), AMONG
THE A CONSULTING TEAM, INC.,
INTERNATIONAL OBJECT TECHNOLOGY, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of The A Consulting Team, Inc., International Object
Technology, Inc. and the other parties to the Agreement shall constitute
counterpart copies of the Agreement in accordance with the terms of the
Agreement.
------------------------------------------------
Print Name of Entity (if applicable)
/s/ Xxxx Xxxxxxxx
------------------------------------------------
Signature
Xxxx Xxxxxxxx
------------------------------------------------
Print Name
------------------------------------------------
Print Title (if applicable)
48
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 28, 2002 (THE "AGREEMENT"), AMONG
THE A CONSULTING TEAM, INC.,
INTERNATIONAL OBJECT TECHNOLOGY, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of The A Consulting Team, Inc., International Object
Technology, Inc. and the other parties to the Agreement shall constitute
counterpart copies of the Agreement in accordance with the terms of the
Agreement.
------------------------------------------------
Print Name of Entity (if applicable)
/s/ Xxxxxx X. Xxxxxx
------------------------------------------------
Signature
Xxxxxx X. Xxxxxx
------------------------------------------------
Print Name
------------------------------------------------
Print Title (if applicable)
48
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 28, 2002 (THE "AGREEMENT"), AMONG
THE A CONSULTING TEAM, INC.,
INTERNATIONAL OBJECT TECHNOLOGY, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of The A Consulting Team, Inc., International Object
Technology, Inc. and the other parties to the Agreement shall constitute
counterpart copies of the Agreement in accordance with the terms of the
Agreement.
------------------------------------------------
Print Name of Entity (if applicable)
/s/ Xxxxxxx X. Xxxxxx
------------------------------------------------
Signature
Xxxxxxx X. Xxxxxx
------------------------------------------------
Print Name
------------------------------------------------
Print Title (if applicable)
48
SCHEDULE I
Number of Shares of Capital Stock of the Company Owned by the Stockholders
Xxxxx Xxxxxxxxxxx 5,000,001 shares of common stock
Xxxxxxx Xxxxxxx 5,000,001 shares of common stock
bCompliant, Inc. 752,715 shares of common stock
Xxxx Xxxxxxxx 777,777 shares of common stock
Xxxxxx X. Xxxxxx 150,000 shares of common stock
Xxxxxxx X. Xxxxxx 150,000 shares of common stock
49
SCHEDULE II
Payment of Aggregate Purchase Price
Stockholder Acquisition Deferred Deferred Deferred Deferred
----------- Shares* Payment Payment Payment Payment
----------- One** Two*** Three**** Four*****
-------- -------- --------- ---------
Xxxxx Xxxxxxxxxxx
00 Xxxx Xxxx Xxxx
Xxxxx Xxxxx, XX
00000
536,749 $59,169.13 $88,753.70 $42,263.67 $84,527.33
Xxxxxxx Xxxxxxx
00 Xxxxxxx Xxxxx
Xxx
Xxxxxx, XX 00000
536,749 $59,169.13 $88,753.70 $42,263.67 $84,527.33
bCompliant, Inc.
00 Xxxx 00xx Xx. Xxxxx
0X
Xxx Xxxx, XX 00000
80,804 $8,907.50 $13,361.25 $6,362.50 $12,725.00
Xxxx Xxxxxxxx
00 Xxxx Xxxxx
Xxxxxxx, XX 00000
83,494 $9,204.10 $13,806.13 $6,574.34 $13,148.70
Xxxxxx Xxxxxx
00 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
16,102 $1,775.07 $2,662.61 $1,267.91 $2,535.82
Xxxxxxx Xxxxxx
00 Xxxx 00xx Xx
Xxxxx 0X
Xxx Xxxx, XX 00000 16,102 $1,775.07 $2,662.61 $1,267.91 $2,535.82
Total 1,270,000 $140,000.00 $210,000.00 $100,000.00 $200,000.00
* Payable at Closing
** Payable on or before the date that is forty five (45) days after the
Closing Date
*** Payable on or before April 1, 2003
**** Payable on or before April 1, 2004
***** Payable on or before January 2, 2005
50
SCHEDULE III
Employee Options
Employee Number of Options
-------- -----------------
Xxxxx Xxxxx 2,000
Xxxxx Xxxxx 15,000
Xxxxxxx Xxxxxxx 4,000
Xxxxx Xxxxxxxx 5,000
Xxxxxx Xxxxx 4,000
Ganesh Oak 8,000
Xxxxxx Xxxx 5,000
Xxxxxx Xxxxxxx 8,000
Xxxxx Xxxxxxx 3,000
51
SCHEDULES
Schedule I Number of Shares of Capital Stock of the Company Owned
by the Stockholders
Schedule II Payment of Aggregate Purchase Price
Schedule III Employee Options
EXHIBITS
Exhibit A Company Disclosure Schedule
Exhibit B Form of Registration Rights Agreement
Exhibit C Purchaser Disclosure Schedule
Exhibit D Form of Lock-up Agreement
Exhibit E Form of Release and Waiver
Exhibit F-1 Form of Welling Employment Agreement
Exhibit F-2 Form of Nachmany Employment Agreement
Exhibit F-3 Form of Zielczynski Employment Agreement
Exhibit G Form of Non-Disclosure Agreement
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT dated as
of June __, 2002 (the "Agreement"), among THE
A CONSULTING TEAM, INC., a New York
corporation (the "Company") and those persons
listed on Schedule I attached hereto who or
which are or become signatories hereto (the
"Stockholders").
Reference is made to the Stock Purchase Agreement (the "Purchase
Agreement") dated as of June __, 2002, among the Company, International Object
Technology, Inc., a [______] corporation ("IOT"), and the Stockholders,
providing for, among other things, the purchase by the Company of all of the
outstanding capital stock of IOT pursuant to which the Stockholders are
receiving shares of common stock, $0.01 par value, of the Company ("Common
Stock"), and certain of the Stockholders are receiving Deferred Payments, in
consideration of all of the capital stock purchased by the Company. All
capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Purchase Agreement.
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Business Day" shall mean any day other than a Saturday, Sunday or day
on which banks are permitted to close in the City and State of New York.
(b) "Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
(d) "NASD" shall mean the National Association of Securities Dealers, Inc.
(e) "Other Shares" shall mean at any time those Shares that do not
constitute Primary Shares or Registrable Shares.
(f) "Primary Shares" shall mean at any time all authorized but unissued
Shares.
(g) "Public Offering" shall mean a public offering of shares of Common
Stock of the Company registered pursuant to the Securities Act.
(h) "Registrable Shares" shall mean the Shares received by the
Stockholders pursuant to the Purchase Agreement, and any securities of the
Company that may be issued or
distributed with respect to, or in exchange or substitution for, or conversion
of, such Shares and such other securities issued or issuable with respect to
such securities pursuant to a stock dividend, stock split or other distribution,
merger, consolidation, recapitalization or reclassification or otherwise.
(i) "Rule 144" shall mean Rule 144 promulgated under the Securities Act or
any successor or complementary rule thereto.
(j) "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
(k) "Stockholders" shall mean any person or entity (i) that is receiving
Shares pursuant to the Purchase Agreement, and (ii) who or which executes and
delivers a counterpart signature page to this Agreement.
(l) "Shares" shall mean shares of the Company's Common Stock.
2. Registration.
(a) Subject to the terms and conditions set forth in this Agreement, the
Company shall use its reasonable commercial efforts to file a Registration
Statement on Form S-3 (or on such other form as may be available to the Company)
(the "Registration Statement") with the Commission for the public sale of the
Shares on or before the six (6) month anniversary of the date hereof, and shall
use its reasonable commercial efforts to have the Registration Statement
declared effective as soon as practicable thereafter.
With respect to the registration pursuant to this Section 2, the Company may
include in such registration any Primary Shares or Other Shares.
3. Right of Suspension. Notwithstanding any other provision of this
Agreement, the Purchase Agreement or any Related Agreement (other than this
Agreement) the Company shall have the right at any time to prohibit or suspend
offers and sales of Registrable Shares covered by a Registration Statement
contemplated by this Agreement whenever, and for so long as, in the sole
reasonable judgment of the Company (i) there exists a material development or a
potential material development with respect to or involving the Company that the
Company would be obligated to disclose in the prospectus or offering circular
used in connection with the Registration Statement, which disclosure would in
the judgment of the Company be premature or otherwise inadvisable at such time,
or (ii) an event has occurred that makes any statement made in the Registration
Statement or related prospectus or offering circular or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or which requires the making of any changes in the Registration
Statement, prospectus or offering circular so that it will not contain any
untrue statement of a material fact required to be stated therein or necessary
to make the statements therein not misleading or omit to state any material fact
required to be stated therein or necessary to make the statement therein, in the
light of the circumstances under which they were made, not misleading. In the
event that the Company shall determine to so prohibit or suspend offers and
sales, the Company shall, in addition to performing those acts required to be
performed by the Securities Act and/or the Exchange Act, or
2
as may be deemed advisable by the Company, deliver a certificate in writing to
each of the Stockholders signed by the Chief Financial Officer or Chief
Executive Officer of the Company and, upon receipt of such certificate, the use
of the Registration Statement and prospectus or offering circular, as the case
may be, will be deferred or suspended and will not recommence until, in addition
to those acts required to be performed by the Securities Act and/or the Exchange
Act, or as may be deemed advisable by the Company, (x) such Stockholders'
receipt from the Company of copies of the supplemented or amended prospectus or
offering circular or (y) the Stockholders are advised in writing by the Company
that the prospectus or offering circular may be used. The Company will exercise
reasonable commercial efforts to ensure that the use of the Registration
Statement and prospectus or offering circular may be resumed as quickly as
practicable, and will provide prompt notice to the Stockholders when such use
may be resumed.
4. Filing Obligations of the Company. In connection with the registration
of the Registrable Shares effected pursuant to Section 2 the Company shall:
(a) prepare and file with the Commission the Registration Statement and
such amendments (including post effective amendments) and supplements to the
Registration Statement and the prospectus or offering circular used in
connection therewith as may be necessary to keep the Registration Statement
current and effective at all times until the earlier of (i) the date as of which
the Stockholders may sell or transfer all of the Registrable Shares covered by
the Registration Statement in a three-month period under Rule 144 or (ii) the
date on which the Stockholders shall have sold all the Registrable Securities
covered by the Registration Statement (the "Registration Period"), and to comply
with the provisions of the Securities Act and the rules and regulations
thereunder with respect to the disposition of all the Registrable Shares covered
by the Registration Statement for the period required to effect the distribution
thereof, to use reasonable commercial efforts to make any corrections or updates
to the Registration Statement or prospectus as promptly as practicable and to
exercise best efforts to cause the Commission to declare the Registration
Statement effective once filed;
(b) furnish to the Stockholders such number of copies of any prospectus or
offering circular, including a preliminary prospectus, and of a full
Registration Statement and exhibits in conformity with the requirements of the
Securities Act and rules and regulations thereunder, as each Stockholder may
reasonably request in order to facilitate the disposition of the Registrable
Shares;
(c) use its best efforts to register or qualify the Registrable Shares
covered by the Registration Statement under the securities or blue sky laws of
such state jurisdictions of the United States as the Stockholders may reasonably
request, and accomplish any and all other acts and things which may be necessary
or advisable to permit sales in such jurisdictions of such Registrable Shares
and to keep such registration or qualification in effect for so long as the
Registration Statement remains in effect; provided, however, that the Company
shall not be required to consent to general service of process for all purposes,
or to qualify as a foreign corporation, in any jurisdiction where it is not then
qualified or to register or qualify the Registrable Shares covered by the
Registration Statement in any jurisdiction which would require the Company to
amend its certificate of incorporation or by-laws or covenant or
3
undertake to do any other act or make any other change regarding its
capitalization or share ownership prior to the effectiveness of such
registration or qualification;
(d) if such registration is an underwritten Public Offering, to enter into
an underwriting agreement in form and substance customary under the
circumstances; and
(e) notify each holder of Registrable Shares promptly upon the issuance by
the Commission of any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose.
5. Conditions to Registration Obligations. The Company shall not be
obligated to effect the registration of the Registrable Shares pursuant to
Section 2 unless the holders of Registrable Shares being included in the
Registration Statement consent to customary conditions of a reasonable nature
that are imposed by the Company, including, but not limited to, the following:
(a) conditions prohibiting the sale of Registrable Shares by each
Stockholder until the registration shall have been declared effective by the
Commission;
(b) conditions requiring each Stockholder to comply with all applicable
provisions of the Securities Act and the Exchange Act including, but not limited
to, the prospectus delivery requirements of the Securities Act; and
(c) if such registration is an underwritten Public Offering, conditions
requiring each Stockholder to enter into an underwriting agreement in form and
substance customary under the circumstances.
6. Information Provided by the Stockholders. Whenever under this Agreement
Registrable Shares are being registered, each Stockholder, as a condition to the
inclusion of Registrable Shares held by such Stockholder in such registration,
shall provide the Company on a timely basis with such information and materials
as the Company may reasonably request in order to effect the registration of the
Registrable Shares and the Company shall not be obligated to register such
Stockholder's Registrable Shares if such Stockholder fails within ten (10)
Business Days after written request to provide such information and materials to
the Company.
7. Rule 144. With a view to making available to the Stockholders the
benefits of Rule 144 under the Securities Act, the Company agrees to use
commercially reasonable efforts to make available adequate current public
information with respect to it within the meaning of, and as required pursuant
to, Rule 144(c).
8. Terms and Conditions of Registration. In connection with the
registration pursuant to this Agreement, and subject to the other terms and
conditions of this Agreement, the Company shall in its sole discretion determine
the terms and conditions of such registration, including, without limitation,
the timing thereof; the scope of the offering contemplated thereby (i.e.,
whether the offering shall be a combined primary offering and a secondary
offering or limited only to a secondary offering); the manner of distribution of
Registrable Shares consistent with the plan of distribution agreed upon by the
Company and the Stockholders; the period of effectiveness of registration for
permissible sales of Registrable Securities thereunder subject to
4
the provisions of Section 4(a) hereof; and all other material aspects of the
registration and the registration process to the extent consistent herewith. In
connection therewith, the Company may require that any such registration be
underwritten, in which event (i) the managing underwriter shall be selected by
the Company and (ii) the inclusion of Registrable Shares in such registration
shall be conditioned upon each holder thereof entering into an underwriting
agreement in customary form with such underwriters participating in such
registration.
9. Expenses. All expenses incurred by the Company in effecting a
registration under this Agreement, including, without limitation, all
registration and filing fees (including all expenses incident to any filing with
any exchange or quotation system), fees and expenses of complying with
securities and "blue-sky" laws, printing expenses, the fees and expenses of the
Company's counsel and accountants, shall be paid by the Company; provided,
however, that all underwriting discounts and selling commissions applicable to
the Registrable Shares and the fees and expenses of any counsel to the
Stockholder or Stockholders, shall be borne by the Stockholders, in proportion
to the number of Registrable Shares sold by such Stockholder or Stockholders.
10. Indemnification.
(a) In connection with the registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless the Stockholders and in the case of a Stockholder that is not a
natural person, such Stockholder's directors and officers, each underwriter,
broker or other person acting on behalf of the Stockholders and each person that
controls any of the foregoing (the "Stockholder Indemnified Persons") against
any losses, claims, damages or liabilities, joint or several (or actions in
respect thereof), to which the Stockholder Indemnified Persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in said Registration Statement, preliminary prospectus, final
prospectus, amendment, supplement or document incident to registration or
qualification of any Registrable Shares in reliance upon and in strict
conformity with information furnished in writing to the Company by any such
Stockholder with respect to information regarding any such Stockholder expressly
for inclusion therein; provided, further, that the Company shall not be liable
in any such case if the Stockholder failed to deliver an amendment or supplement
to a prospective purchaser, if such amendment or supplement was provided to the
Stockholder in sufficient time to deliver to the prospective purchaser and it
corrected the untrue statement or alleged untrue statement or omission or
alleged omission.
5
(b) In connection with the registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each Stockholder shall severally and
not jointly indemnify and hold harmless the Company, each director of the
Company, each officer of the Company, each underwriter, broker or other person
acting on behalf of the Company and each person who controls any of the
foregoing persons within the meaning of the Securities Act against any losses,
claims, damages or liabilities joint or several (or actions in respect thereof),
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, to the extent, but only to the extent, such statement or omission
was made in reliance upon and in strict conformity with information furnished to
the Company or such underwriter, in writing, by such Stockholder for use in
connection with the Registration Statement, preliminary prospectus, final
prospectus, amendment, supplement or document, provided, that the maximum
liability of such Stockholder under this Section 10(b) shall be limited to an
amount equal to the gross proceeds received by such Stockholder upon the sale of
Registrable Shares by such Stockholder pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 10, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice to
such indemnifying party of the commencement of such action; provided, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Agreement unless
the indemnifying party is materially prejudiced thereby. In case any such action
is brought against an indemnified party, the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the reasonable fees
and expenses to be paid by the indemnifying party, if such indemnified party
upon advice of legal counsel shall have reasonably concluded that representation
of such indemnified party or parties by the counsel retained by the indemnifying
party or parties would be inappropriate due to actual or potential differing
interests between such indemnified party or parties and any other party
represented by such counsel in such proceeding (provided that the indemnifying
party shall not be responsible for the fees and expenses of more than one
additional counsel for all indemnified parties). No indemnifying party, in the
defense of any such claim or litigation shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation. Each
6
indemnified party shall furnish such information regarding itself or the claim
in question as an indemnifying party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11
(f) of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
11. Termination. The registration rights granted pursuant to this
Agreement shall terminate on the earlier of (i) the date as of which the
Stockholders may sell or transfer all of the Registrable Shares covered by the
Registration Statement in a three-month period under Rule 144, (ii) the date on
which the Stockholders have sold or transferred all of the Registrable Shares
covered by the Registration Statement or (iii) the three year anniversary of
this Agreement; provided, that the provisions of Section 10 shall survive
termination.
12. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the Company, the Stockholders and, subject to Section 14, the
respective successors, permitted assigns, heirs and legal representatives (as
the case may be) of the Company and each Stockholder.
13. Confidentiality. Each Stockholder hereby agrees to and shall keep
strictly confidential and will not disclose or divulge any confidential,
proprietary or secret information which such Stockholder may obtain from the
Company in connection with this Agreement, unless required to be disclosed by
law or pursuant to any judgment, order, subpoena or decree of any court having
competent jurisdiction, or unless such information is or becomes publicly known
(other than as a result of a violation of this Section 13), or unless the
Company gives its written consent to the release by such Stockholder of such
information, except that no such written consent shall be required (and such
Stockholder shall be free to release such information) if such information is to
be provided to a lawyer or accountant of such Stockholder who is instructed to
comply with this provision. Each Stockholder shall be responsible for making
sure its lawyer and accountant comply with this Section 13. In the event the
Stockholder becomes legally compelled to disclose any confidential information
pursuant to a subpoena, summons, order or other judicial or governmental
process, the Stockholder shall provide the Company with prompt notice thereof so
that the Company may seek a protective order or another appropriate
7
remedy, or waive compliance with the relevant provisions of this agreement. In
the event such a protective order or other remedy is not obtained, or that such
a waiver is granted, the Stockholder shall furnish only that portion of such
confidential information that is legally required.
14. Assignment. A Stockholder may not assign its rights under this
Agreement to any purchaser or transferee of Registrable Shares without the prior
written consent of the Company.
15. Entire Agreement. This Agreement and the Purchase Agreement and the
other writings referred to herein and therein contain the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous arrangements or understandings with respect to the subject
matter hereof.
16. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested or by telecopier, with
confirmation as provided above addressed as follows:
(a) if to the Company, to:
The A Consulting Team, Inc.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
Telecopier: (000) 000-0000;
with copies to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000; and
(b) If to the Stockholders, to the addresses set forth on Schedule I
attached hereto;
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. All
such notices or communications shall be deemed to be received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of facsimile transmission or telecopier upon
confirmed receipt and (d) in the case of mailing, on the third Business Day
following the date on which the piece of mail containing such communication was
posted.
17. Modifications; Amendments; Waivers. The terms and provisions of this
Agreement may only be amended or waived either (a) with the written consent of
the Company
8
and the holders of a majority of the Registrable Shares, or (b) in a writing by
the party or parties against whom such amendment or waiver is sought to be
enforced.
18. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
19. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without reference to its
conflicts of laws principles).
21. Consent to Jurisdiction. Each of the parties hereto hereby absolutely
and irrevocably consents and submits to the jurisdiction of the courts in the
State of New York and of any Federal court located in the City and County of New
York in connection with any actions or proceedings brought against them by any
of the other parties hereto. In any such action or proceeding, the parties
hereto each hereby absolutely and irrevocably (i) waives any objection to
jurisdiction or venue, (ii) waives personal service of any summons, complaint,
declaration or other process, and (iii) agrees that the service thereof may be
made by certified or registered first-class mail directed to such party, as the
case may be, at their respective addresses as set forth in Section 16 hereof.
[Remainder of this Page Intentionally Left Blank]
9
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed and delivered as of the date first above
written.
THE A CONSULTING TEAM, INC.
By:
---------------------------------------
Name:
Title:
[Counterpart signature page follows]
[Counterpart Signature Page to Registration Rights Agreement]
STOCKHOLDER:
If an individual Stockholder:
------------------------------------
(signature)
------------------------------------
(print name)
If an entity Stockholder:
------------------------------------
(print name of entity)
By:
---------------------------------
(signature)
---------------------------------
(print name)
---------------------------------
(print title)
Number of Registrable Shares Owned
by Stockholder:
---------------------------
SCHEDULE I
Number of Registrable
Stockholder Name and Address Shares
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxxxxx
00 Xxxx Xxxx Xxxx
Xxxxx Xxxxx, XX 00000
Xxxxxxx Xxxxxxx
00 Xxxxxxx Xxxxx Xxx
Xxxxxx, XX 00000
Xxxx Xxxxxxxx
00 Xxxx Xxxxx
Xxxxxxx, XX 00000
bCompliant, Inc.
00 Xxxx 00xx Xx., Xxxxx 0X
Xxx Xxxx, XX 00000
Xxxxxxx X. Xxxxxx
00 Xxxx 00xx Xx., Xxxxx 0X
Xxx Xxxx, XX 00000
Xxxxxx X. Xxxxxx
00 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
EXHIBIT D
The A Consulting Team, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
In order to induce The A Consulting, Inc. (together with its predecessors,
successors and assigns, the "Company") to enter into a Stock Purchase Agreement
with all of the holders of all of the issued and outstanding capital stock of
International Object Technology, Inc. ("IOT"), whereby all of the issued and
outstanding capital stock of IOT will be exchanged for shares of common stock,
$0.01 par value per share, of the Company (the "Acquisition Shares"), the
undersigned hereby agrees, that for a period of six (6) months from the date
hereof, will not, without the prior written consent of the Company, directly or
indirectly, issue, offer, agree or offer to sell, sell, sell short, grant an
option for the purchase or sale of, transfer, pledge, assign, hypothecate,
distribute or otherwise encumber or dispose of (whether pursuant to Rule 144 of
the General Rules and Regulations under the Securities Act of 1933, as amended,
or otherwise) any of the Acquisition Shares or any other shares of common stock
of the Company.
In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
transfer agent of the Company's securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned.
Dated: ___________________, 2002
_____________________________________
[______________]
EXHIBIT E
RELEASE AND WAIVER
Dated as of __, 2002
The undersigned (the "Releasor") has been informed that pursuant to
the Stock Purchase Agreement dated as of June __, 2002 (the "Stock Purchase
Agreement") among The A Consulting Team, Inc., a New York corporation ("TACT"),
International Object Technology, Inc., a New Jersey corporation (the "Company")
and all of the stockholders of the Company, whose names are set forth on the
signature pages thereto, all of the issued and outstanding capital stock of the
Company is being acquired (the "Acquisition") by TACT.
Effective as of the closing of the Acquisition and for good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the undersigned on his, her or
its behalf and on behalf of his, her or its (i) heirs, executors,
administrators, agents, successors and assigns or (ii) predecessors,
subsidiaries, affiliates and other related entities, as well as any current or
former benefit plan administrators and trustees, officers, directors,
shareholders or members (whether their ownership interests are held directly or
indirectly), partners, agents, attorneys, employees, successors and assigns (the
"Releasor Persons"), as applicable and to the extent legally possible, hereby
releases, waives and discharges TACT and the Company, and their respective
officers, directors, stockholders, managers, members, agents, successors and
assigns, as applicable (collectively, the "Released Parties"), from any and all
actions, causes of action, suits, debts, sums of money, covenants, contracts,
controversies, agreements, promises, damages, judgments, executions, claims and
demands whatsoever, whether known or unknown, liquidated or contingent, matured
or unmatured, including, but not limited to, claims for breach of contract
(including, without limitation, claims arising out of any employment agreement,
offer letter, nonqualified employee benefit plan, existing stock option rights
or severance agreement), tort, fraud, misrepresentation, violation of the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as
amended, Americans With Disabilities Act or other federal, state, or local civil
rights laws based on any protected class status, defamation, intentional or
negligent infliction of emotional distress, breach of the covenant of good faith
and fair dealing, promissory estoppel, negligence, wrongful termination of
employment, and any other claims for unlawful employment practices, in law or
equity (each a "Claim" and collectively, the "Claims") arising from the
Releasor's relationship with the Company prior to and including the date of the
closing of the Acquisition or the Releasor's status as a stockholder, director
or officer of the Company prior to and including the date of the closing of the
Acquisition. The undersigned agrees and promises that he, she or it will not
file any lawsuit asserting any such Claims. The undersigned shall not aid or
assist any other person in connection with the pursuit of any claim that could
not be brought by the undersigned hereunder, except in the case of a court order
or validly issued subpoena.
The undersigned hereby represents and warrants that in his, her or
its capacity as a stockholder, director, officer or employee of the Company, he,
she or it has no knowledge of any claims that the undersigned may have as a
stockholder, director, officer or employee of the Company against the Released
Parties.
EXHIBIT E
Effective as of the closing of the Acquisition, and for good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the Releasor (if the Releasor
is an officer or director of the Company), on his, her or its behalf and on
behalf of the Releasor Persons, hereby agrees that he, she or it will not make
any claim for indemnification against either of the Company or TACT and their
respective subsidiaries by reason of the fact that he or she was a director,
officer, employee, manager or agent of the Company or was serving at the request
of the Company as a partner, trustee, director, officer, manager, employee, or
agent of another entity during the period prior to the consummation of the
Acquisition (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim or
demand brought by TACT, the Company or their respective affiliates, successors
and assigns and the respective officers, managers, members and directors of each
of the foregoing, or by any stockholder of the Company against such Releasor or
Releasor Persons in connection with the Stock Purchase Agreement (including the
schedules and exhibits thereto) or any agreements entered into in connection
therewith or the transactions contemplated thereby or the representations made
therein, other than as shall be indemnified for by the Company's directors and
officers liability insurance policy.
Notwithstanding anything to the contrary provided herein, Releasor
is not hereby releasing or waiving, and this Release shall not apply to, any
claims, rights or actions of Releasor in its sole capacity as a stockholder of
the Company, that may arise pursuant to the Stock Purchase Agreement or any
Related Agreement (as defined therein).
The undersigned expressly agrees and understands that this Release
and Waiver applies to all unknown, unsuspected and unanticipated claims,
liabilities and causes of action which he, she or it may have against the
Released Parties.
The invalidity or unenforceability of any provision of this Release
and Waiver shall not affect or limit the validity or enforceability of any other
provision hereof and if any particular provision of this Release and Waiver
shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made.
This Release and Waiver shall terminate and become void in the event
of termination of the Stock Purchase Agreement pursuant to the terms of Section
7.9 thereof.
This Release and Waiver may not be changed except in a writing
signed by the person(s) against whose interest such change shall operate.
[Remainder of Page Intentionally Left Blank]
EXHIBIT E
IN WITNESS WHEREOF, the undersigned has duly executed this Release
and Waiver as of the date first written above.
-----------------------------------
(print or type name)
By:
-----------------------------------
Name:
Title (if applicable):
EXHIBIT F-1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of the ____ day of __________,
2002 (the "Effective Date") is made and entered into by and between The A
Consulting Team, Inc. (the "Company"), a New York corporation, having its
principal place of business at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
and Xxxxxxx Xxxxxxx ("Employee"), an individual residing at 00 Xxxxxxx Xxxxx
Xxx, Xxxxxx, Xxx Xxxxxx 00000.
1. The Company hereby employs Employee as Director - Strategic Partnerships
and Offshore Development. The Employee shall have such responsibilities
and duties as are typical and customary for a Director - Strategic
Partnerships and Offshore Development. Employee shall be based in the
metropolitan New York area, and the Company shall provide Employee with an
office and appropriate computer and communications at both of its offices
in that area. Employee hereby accepts employment in such capacity upon the
terms and conditions hereinafter set forth.
2. The term of this Agreement is for three (3) years, commencing on the
Effective Date reflected above (the "Term"). The entire period this
Agreement remains in effect is hereinafter referred to as the "Employment
Period."
It is expressly understood and agreed that any changes in Employee's
compensation, duties, location or title shall not invalidate this
Agreement. At the option of the parties, such changes may be incorporated
into an "Addendum" to this Agreement. Failure to so incorporate such
changes shall not affect the validity of, or the enforceability of, the
other terms herein.
3. The Company shall pay to Employee the following compensation for all
the services to be rendered by Employee in any capacity:
An initial gross salary at the rate of one hundred and sixty thousand
dollars ($160,000) per year (the "Annual Base Salary"), which reflects a
temporary reduction from one hundred and seventy five thousand dollars
($175,000) per year, payable twice a month, less all applicable and
required federal, state, local and authorized deductions. The Compensation
Committee of the Board of Directors of the Company shall review Employee's
Annual Base Salary in accordance with its existing procedures.
Upon approval by the Board of Directors of the Company, the Company shall
grant to Employee options to purchase 35,000 shares of Company Common
Stock in accordance with the terms of Company's Stock Option and Award
Plan. The options shall vest pursuant to the schedule set forth in Exhibit
A attached hereto. Notwithstanding the foregoing, in the event a
"Change-in-Control" (as defined in the Stock Option Agreement to be
entered into between the Company and the Employee) or a termination of the
Employee's employment by the Company without Cause (as defined herein)
occurs, such grant shall become immediately vested and exercisable.
1
EXHIBIT F-1
The Employee and the Company will jointly develop an annual bonus plan for
such Employee. The Compensation Committee of the Board of Directors of the
Company shall administer such bonus plan and determine the amount of the
Employee's bonus.
Employee shall be entitled to employee benefits, sick days and personal
days in accordance with the Company's then current benefits and PTO policy
for a level seven (7) employee, as it may be amended or modified from time
to time.
4. Employee shall perform such work as may be required of Employee by the
Company in accordance with the instructions, directions and control of the
Company and at such reasonable time and places as the Company may
determine. At all times during the Employment Period, Employee shall
adhere to all the rules and regulations that have been or that may
hereafter be established by the Company for the conduct of its employees
and further, Employee shall adhere to all the provisions of the Company's
handbook(s).
5. Employee hereby consents to a background check by the Company and/or the
Company's broker(s), customer(s) and/or client(s) to the full extent
permitted by law. Such a background check may include, but shall not be
limited to, a judgment and public criminal record check, fingerprinting,
and drug and/or alcohol screening. The Company shall maintain strict
confidentiality with regard to the results of any such background check
and shall not release the results to any other person or entity outside of
the Company other than to (i) agents or independent contractors bound to
confidentiality by written agreement or (ii) the Company's legal counsel
and independent auditors who shall have received prior notice of the
Company's obligations under this Agreement. The obligations of the Company
hereunder shall not apply to information or material which (i) has become
generally available to the public other than as a result of unauthorized
disclosure by the Company or one of its affiliates or (ii) is disclosed
pursuant to an order or requirement of a court, government administrative
agency or other governmental body, a self regulatory body (including the
Securities Exchange Commission, the NASD and Nasdaq) or applicable law.
Provided that the Company complies with the foregoing provisions of this
paragraph, the Employee agrees to hold the Company harmless from any
claims in connection with such checking or testing or the reporting of the
results thereof to the Company.
6. Employee shall devote full and complete attention and energies to the
business of the Company, and shall not during the term of this Agreement
be engaged in any other business activity, whether such business activity
is pursued for gain, profit or other pecuniary advantage and whether said
other business activity is directly or indirectly related to the business
activity of the Company, without the express written consent of the
Company, except as set forth on Exhibit B hereto. However, this shall not
be construed as preventing Employee from utilizing his free time for the
advancement of any business not competitive, either directly or
indirectly, with the Company, or investing Employee's assets in such form
or manner as shall not require any services on Employee's part in the
operation or the affairs of the company or companies in which such
investments are made; provided, however, that any investments made in any
non-public company shall not be made in any company that has allied,
related or competing business activities to the Company.
2
EXHIBIT F-1
7. The Company shall reimburse Employee for expenses incurred by Employee in
the course of his employment provided that such expenses are reimbursable
by the Company under its then current reimbursement policy, and further,
such expenses are authorized by the Company and an accounting is made to
the Company therefore, in accordance with the procedures of the Company
pertaining thereto.
8. The Company shall reimburse Employee for a car and related expenses in the
amount of $640.00 per month.
9. The Employment Period shall be terminated at the time of the death of
Employee or may be terminated by the Company if Employee shall fail to
render the services provided for hereunder for a continuous period of
sixty (60) days because of Employee's physical or mental disability.
Notwithstanding anything to the contrary herein, either party may
terminate the Employment Period, with or without Cause (as defined herein)
and for any reason whatsoever, by giving ten (10) business days prior
notice to the other party. In the event the Company terminates Employee
without Cause, Employee shall be entitled to receive as severance an
amount equal to (i) the Annual Base Salary multiplied by one and one half
(1.5), less (ii) one-twelfth (1/12) the Annual Base Salary (the "Monthly
Salary Amount"), multiplied by the number of months that Employee has been
employed by the Company after the Effective Date. Notwithstanding the
foregoing, upon the fifteen (15) month anniversary of the Effective Date,
Employee shall be entitled to receive as severance an amount equal to the
lesser of (i) the Monthly Salary Amount multiplied by three (3), and (ii)
the Monthly Salary Amount multiplied by the number of full months
remaining in the Term. For purposes of this Section 9, "Cause" shall mean:
(a) Employee's embezzlement, willful breach of fiduciary duty or fraud
with regard to the Company or any of the Company's assets or businesses,
(b) Employee's conviction of, or pleading of nolo contendere with regard
to a felony (other than a traffic violation) or any other crime involving
moral turpitude and involving activity related to the affairs of the
Company, or (c) any other breach by Employee of a material provision of
this Agreement that remains uncured for thirty (30) days after written
notice thereof is given to Employee. In the event the Company terminates
the employment of Employee for Cause, the Company's sole obligation is to
pay Employee for that period actually worked by Employee (plus any
commissions due for that period, if applicable). In the event of a
termination of the Employment Period with Cause, Employee shall not be
entitled to any payment in excess of the amount of his bi-monthly salary
due at the date of termination and any unreimbursed expenses properly
accrued and accounted for pursuant to Section 7 of this Agreement.
10. Employee recognizes and acknowledges that the Company's and its
subsidiaries' (including International Object Technology, Inc.) trade
secrets, customer, broker and client lists, private processes, prospective
customer, broker and client lists, and staff and prospective staff lists
are deemed to be the private and proprietary information of the Company
and are special, unique and significant proprietary assets of the
Company's business. Employee shall not, either during or subsequent to the
Employment Period, in whole or in part, disclose such trade secrets,
customer, broker, or client lists, staff or prospective staff lists,
prospective customer, broker or client lists or private processes to any
person, firm, corporation, association or other entity for any reason or
purpose
3
EXHIBIT F-1
whatsoever. In addition, Employee shall not make use of any of the above
for Employee's own purposes or for the benefit of any person, firm,
corporation, or other entity other than the Company under any
circumstances during the Employment Period or subsequent to employment.
11. Employee agrees that during the Employment Period and for a period of one
(1) year thereafter, Employee shall not directly or indirectly, or in any
capacity, individually or in any corporation, firm, association or other
business entity, compete or attempt to compete with the Company, any
parent, subsidiary, or affiliate of the Company, or any corporation merged
into, or merged or consolidated with the Company (a) by soliciting
business from any customer, broker and/or client of the Company with
which Employee was involved (directly or indirectly) during the Employment
Period, if such solicited business competes with the business of the
Company, or (b) inducing any personnel of the Company to leave the service
of the Company, or by employing or contracting with any such personnel.
The provisions of this Section 11 shall be construed as an Agreement
independent of any other provision contained herein and shall be
enforceable in both law and equity, including by temporary or permanent
restraining orders, notwithstanding the existence of any claim or cause of
action by Employee against the Company, whether predicated on this
Agreement or otherwise.
12. Employee hereby agrees to assign all rights, title, and interest in all
writings, products, inventions, discoveries, developments, improvements,
ideas, technical notes, programs, specifications, computer or other
apparatus programs and related documentation, and other works of
authorship, tangible and intangible property, whether or not patentable,
copyrightable or subject to other forms of protection, made, created,
developed, discovered, written or conceived by Employee, solely or jointly
with another, in whole or in part, for either the Company and/or the
Company's customer(s), broker(s) and/or client(s) during the Employment
Period, whether during or outside of regular working hours, and to
promptly deliver to the Company all such tangible properties and work
products at the request of the Company. Employee shall not be entitled to
any compensation in addition to the amounts set forth in Section 3 of this
Agreement by reason of said assignment. Employee further agrees to take
all actions reasonably required by the Company to secure the Company's
right, title and interest in such properties and products.
13. Employee shall, upon termination of employment with the Company,
immediately return to the Company all equipment and supplies of the
Company and its subsidiaries (including International Object Technology,
Inc.) and all books, records, lists and other written, typed, printed or
electronically stored materials, whether furnished by the Company or its
subsidiaries (including International Object Technology, Inc.) or prepared
by Employee, which contain any information relating to the Company's or
its subsidiaries' (including International Object Technology, Inc.)
business or any of its customers, brokers and/or clients, and Employee
agrees that Employee shall neither make nor retain copies of such
materials after termination of employment.
14. Employee hereby authorizes the Company to offset and deduct against
salary due to Employee by the Company, any undisputed monies owed by
Employee to the Company
4
EXHIBIT F-1
for correction of payroll errors, the repayment of monetary advances, the
reimbursement of tuition or training costs, and the recoupment of auto
allowances, relocation expenses, expenses, and/or advanced vacation time.
15. The failure of either party to insist upon the performance of any of the
provisions of this agreement, or the waiver of any breach thereof, shall
not be construed as or constitute a waiver of the rights granted herein
with respect to any subsequent forbearance or breach.
16. Both parties hereto do hereby consent to jurisdiction in the State of New
Jersey with regard to all controversies which may arise with respect to
the execution, interpretation of and compliance with the terms and
provisions of this Agreement; and both parties hereto agree that the law
of the State of New Jersey shall apply hereto (without regard to the
principles of conflicts of law) and, in addition, waive any other venue or
forum which they might otherwise be entitled by virtue or domicile or
otherwise.
17. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and any successor to the business of the Company, but
neither the Agreement nor any rights hereunder may be assigned, pledged or
encumbered by Employee without the written consent of the Company. This
Agreement may not be changed, modified or terminated orally. This
Agreement supersedes any prior agreements made between the parties,
whether oral or written, and constitutes the final and entire agreement
and understanding of the parties, all prior representations and agreements
having been merged into this Agreement, and this Agreement shall serve to
terminate, amend, restate and replace all prior employment agreements
entered into between the Company or its subsidiaries (including
International Object Technology, Inc.) and Employee, whether written or
oral. No waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in writing
and duly executed by the party to be charged therewith and no evidence of
any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising
out of or affecting this Agreement, or the rights or obligations of the
parties hereunder, unless such waiver or modification is in writing, duly
executed as aforesaid, and the parties agree that the provisions of this
Section 17 may not be waived except as herein set forth.
18. All agreements and covenants contained herein are severable, and in the
event any of them shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements or covenants
were not contained herein.
19. Employee hereby represents and warrants that the execution of this
Agreement by Employee and the performance of Employee's duties and
obligations hereunder shall not breach or be in conflict with any other
agreement to which Employee is a party or by which Employee is bound, and
that Employee is not now subject to any covenant against competition or
similar covenant which would affect the performance of Employee's duties
hereunder. Employee hereby agrees to indemnify the Company for all claims
arising out or related to Employee's breach of this Section 19.
5
EXHIBIT F-1
20. All disputes, controversies, or differences arising in connection with the
validity, execution, performance, breach, non-renewal or termination of
this Agreement shall be finally settled in an arbitration proceeding under
the Rules of the American Arbitration Association by three arbitrators
with expertise in employment and labor law in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association. Selection of the arbitrators shall be as follows: each party
shall appoint one arbitrator within twenty (20) days after service of a
party's claim, and those two arbitrators shall appoint a third arbitrator
who shall act as chairman, within a twenty (20) day period thereafter. If
a chairman is not appointed within said period, the parties shall apply to
the American Arbitration Association for appointment of the third
arbitrator. The parties agree to be bound by the findings of the
arbitration. Notwithstanding the foregoing, the courts shall have
jurisdiction over injunctive or provisional relief pending arbitration.
The arbitrators shall only be empowered to award direct damages. In no
event shall the arbitrators be permitted to award special, consequential,
indirect, incidental or punitive damages or lost profits. The
non-prevailing party to the arbitration shall pay all the prevailing
party's expenses of the arbitration, including reasonable attorneys' fees
and other costs and expenses incurred in connection with the prosecution
or defense of such arbitration.
21. Any offer, notice, or request or other communication hereunder shall be in
writing and shall be deemed to have been duly delivered when (a) delivered
by hand (with written confirmation of receipt), (b) one business day after
mailed to the addressee, if sent by a nationally recognized overnight
delivery service, to the appropriate addresses set forth below or as
subsequently modified by written notice.
If to the Company: The A Consulting Team, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx XxxXxx, Chief Executive Officer
If to the Employee: Xxxxxxx Xxxxxxx
00 Xxxxxxx Xxxxx Xxx
Xxxxxx, XX 00000
[Remainder of Page Intentionally Left Blank]
6
EXHIBIT F-1
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
THE A CONSULTING TEAM, INC. XXXXXXX XXXXXXX
By:
-------------------------------- --------------------------------
Name: Xxxxxx XxxXxx
Title: Chief Executive Officer
7
EXHIBIT F-1
EXHIBIT A
OPTIONS VESTING SCHEDULE
Number of Shares Vesting Time
------------------------ ----
11,667 One year anniversary of the date hereof
11,667 Two year anniversary of the date hereof
11,666 Three year anniversary of the date hereof
8
EXHIBIT F-1
EXHIBIT B
None
9
EXHIBIT F-2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of the ____ day of
____________, 2002 (the "Effective Date") is made and entered into by and
between The A Consulting Team, Inc. (the "Company"), a New York corporation,
having its principal place of business at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000 and Xxxx Xxxxxxxx ("Employee"), an individual residing at 00 Xxxx
Xxxxx, Xxxxxxx, Xxx Xxxxxx 00000.
1. The Company hereby employs Employee as Director - Sales and Marketing. The
Employee shall have such responsibilities and duties as are typical and
customary for a Director - Sales and Marketing. Employee shall be based in
the metropolitan New York area, and the Company shall provide Employee
with an office and appropriate computer and communications at both of its
offices in that area. Employee hereby accepts employment in such capacity
upon the terms and conditions hereinafter set forth.
2. The term of this Agreement is for three (3) years, commencing on the
Effective Date reflected above (the "Term"). The entire period this
Agreement remains in effect is hereinafter referred to as the "Employment
Period."
It is expressly understood and agreed that any changes in Employee's
compensation, duties, location or title shall not invalidate this
Agreement. At the option of the parties, such changes may be incorporated
into an "Addendum" to this Agreement. Failure to so incorporate such
changes shall not affect the validity of, or the enforceability of, the
other terms herein.
3. The Company shall pay to Employee the following compensation for all
the services to be rendered by Employee in any capacity:
An initial gross salary at the rate of one hundred and sixty thousand
dollars ($160,000) per year (the "Annual Base Salary"), which reflects a
temporary reduction from one hundred and seventy five thousand dollars
($175,000) per year, payable twice a month, less all applicable and
required federal, state, local and authorized deductions. The Compensation
Committee of the Board of Directors of the Company shall review Employee's
Annual Base Salary in accordance with its existing procedures.
Upon approval by the Board of Directors of the Company, the Company shall
grant to Employee options to purchase 30,000 shares of Company Common
Stock in accordance with the terms of Company's Stock Option and Award
Plan. The options shall vest pursuant to the schedule set forth in Exhibit
A attached hereto. Notwithstanding the foregoing, in the event a
"Change-in-Control" (as defined in the Stock Option Agreement to be
entered into between the Company and the Employee) or a termination of the
Employee's employment by the Company without Cause (as defined herein)
occurs, such grant shall become immediately vested and exercisable.
1
EXHIBIT F-2
The Employee and the Company will jointly develop an annual bonus plan for
such Employee. The Compensation Committee of the Board of Directors of the
Company shall administer such bonus plan and determine the amount of the
Employee's bonus.
Employee shall be entitled to employee benefits, sick days and personal
days in accordance with the Company's then current benefits and PTO policy
for a level seven (7) employee, as it may be amended or modified from time
to time.
4. Employee shall perform such work as may be required of Employee by the
Company in accordance with the instructions, directions and control of the
Company and at such reasonable time and places as the Company may
determine. At all times during the Employment Period, Employee shall
adhere to all the rules and regulations that have been or that may
hereafter be established by the Company for the conduct of its employees
and further, Employee shall adhere to all the provisions of the Company's
handbook(s).
5. Employee hereby consents to a background check by the Company and/or the
Company's broker(s), customer(s) and/or client(s) to the full extent
permitted by law. Such a background check may include, but shall not be
limited to, a judgment and public criminal record check, fingerprinting,
and drug and/or alcohol screening. The Company shall maintain strict
confidentiality with regard to the results of any such background check
and shall not release the results to any other person or entity outside of
the Company other than to (i) agents or independent contractors bound to
confidentiality by written agreement or (ii) the Company's legal counsel
and independent auditors who shall have received prior notice of the
Company's obligations under this Agreement. The obligations of the Company
hereunder shall not apply to information or material which (i) has become
generally available to the public other than as a result of unauthorized
disclosure by the Company or one of its affiliates or (ii) is disclosed
pursuant to an order or requirement of a court, government administrative
agency or other governmental body, a self regulatory body (including the
Securities Exchange Commission, the NASD and Nasdaq) or applicable law.
Provided that the Company complies with the foregoing provisions of this
paragraph, the Employee agrees to hold the Company harmless from any
claims in connection with such checking or testing or the reporting of the
results thereof to the Company.
6. Employee shall devote full and complete attention and energies to the
business of the Company, and shall not during the term of this Agreement
be engaged in any other business activity, whether such business activity
is pursued for gain, profit or other pecuniary advantage and whether said
other business activity is directly or indirectly related to the business
activity of the Company, without the express written consent of the
Company, except as set forth on Exhibit B hereto. However, this shall not
be construed as preventing Employee from utilizing his free time for the
advancement of any business not competitive, either directly or
indirectly, with the Company, or investing Employee's assets in such form
or manner as shall not require any services on Employee's part in the
operation or the affairs of the company or companies in which such
investments are made; provided, however, that any investments made in any
non-public company shall not be made in any company that has allied,
related or competing business activities to the Company.
2
EXHIBIT F-2
7. The Company shall reimburse Employee for expenses incurred by Employee in
the course of his employment provided that such expenses are reimbursable
by the Company under its then current reimbursement policy, and further,
such expenses are authorized by the Company and an accounting is made to
the Company therefore, in accordance with the procedures of the Company
pertaining thereto.
8. The Company shall reimburse Employee for a car and related expenses in the
amount of $640.00 per month.
9. The Employment Period shall be terminated at the time of the death of
Employee or may be terminated by the Company if Employee shall fail to
render the services provided for hereunder for a continuous period of
sixty (60) days because of Employee's physical or mental disability.
Notwithstanding anything to the contrary herein, either party may
terminate the Employment Period, with or without Cause (as defined herein)
and for any reason whatsoever, by giving ten (10) business days prior
notice to the other party. In the event the Company terminates Employee
without Cause, Employee shall be entitled to receive as severance an
amount equal to (i) the Annual Base Salary multiplied by one and one half
(1.5), less (ii) one-twelfth (1/12) the Annual Base Salary (the "Monthly
Salary Amount"), multiplied by the number of months that Employee has been
employed by the Company after the Effective Date. Notwithstanding the
foregoing, upon the fifteen (15) month anniversary of the Effective Date,
Employee shall be entitled to receive as severance an amount equal to the
lesser of (i) the Monthly Salary Amount multiplied by three (3), and (ii)
the Monthly Salary Amount multiplied by the number of full months
remaining in the Term. For purposes of this Section 9, "Cause" shall mean:
(a) Employee's embezzlement, willful breach of fiduciary duty or fraud
with regard to the Company or any of the Company's assets or businesses,
(b) Employee's conviction of, or pleading of nolo contendere with regard
to a felony (other than a traffic violation) or any other crime involving
moral turpitude and involving activity related to the affairs of the
Company, or (c) any other breach by Employee of a material provision of
this Agreement that remains uncured for thirty (30) days after written
notice thereof is given to Employee. In the event the Company terminates
the employment of Employee for Cause, the Company's sole obligation is to
pay Employee for that period actually worked by Employee (plus any
commissions due for that period, if applicable). In the event of a
termination of the Employment Period with Cause, Employee shall not be
entitled to any payment in excess of the amount of his bi-monthly salary
due at the date of termination and any unreimbursed expenses properly
accrued and accounted for pursuant to Section 7 of this Agreement.
10. Employee recognizes and acknowledges that the Company's and its
subsidiaries' (including International Object Technology, Inc.) trade
secrets, customer, broker and client lists, private processes, prospective
customer, broker and client lists, and staff and prospective staff lists
are deemed to be the private and proprietary information of the Company
and are special, unique and significant proprietary assets of the
Company's business. Employee shall not, either during or subsequent to the
Employment Period, in whole or in part, disclose such trade secrets,
customer, broker, or client lists, staff or prospective staff lists,
prospective customer, broker or client lists or private processes to any
person, firm, corporation, association or other entity for any reason or
purpose
3
EXHIBIT F-2
whatsoever. In addition, Employee shall not make use of any of the above
for Employee's own purposes or for the benefit of any person, firm,
corporation, or other entity other than the Company under any
circumstances during the Employment Period or subsequent to employment.
11. Employee agrees that during the Employment Period and for a period of one
(1) year thereafter, Employee shall not directly or indirectly, or in any
capacity, individually or in any corporation, firm, association or other
business entity, compete or attempt to compete with the Company, any
parent, subsidiary, or affiliate of the Company, or any corporation merged
into, or merged or consolidated with the Company (a) by soliciting
business from any customer, broker and/or client of the Company with which
Employee was involved (directly or indirectly) during the Employment
Period, if such solicited business competes with the business of the
Company, or (b) inducing any personnel of the Company to leave the service
of the Company, or by employing or contracting with any such personnel.
The provisions of this Section 11 shall be construed as an Agreement
independent of any other provision contained herein and shall be
enforceable in both law and equity, including by temporary or permanent
restraining orders, notwithstanding the existence of any claim or cause of
action by Employee against the Company, whether predicated on this
Agreement or otherwise.
12. Employee hereby agrees to assign all rights, title, and interest in all
writings, products, inventions, discoveries, developments, improvements,
ideas, technical notes, programs, specifications, computer or other
apparatus programs and related documentation, and other works of
authorship, tangible and intangible property, whether or not patentable,
copyrightable or subject to other forms of protection, made, created,
developed, discovered, written or conceived by Employee, solely or jointly
with another, in whole or in part, for either the Company and/or the
Company's customer(s), broker(s) and/or client(s) during the Employment
Period, whether during or outside of regular working hours, and to
promptly deliver to the Company all such tangible properties and work
products at the request of the Company. Employee shall not be entitled to
any compensation in addition to the amounts set forth in Section 3 of this
Agreement by reason of said assignment. Employee further agrees to take
all actions reasonably required by the Company to secure the Company's
right, title and interest in such properties and products.
13. Employee shall, upon termination of employment with the Company,
immediately return to the Company all equipment and supplies of the
Company and its subsidiaries (including International Object Technology,
Inc.) and all books, records, lists and other written, typed, printed or
electronically stored materials, whether furnished by the Company or its
subsidiaries (including International Object Technology, Inc.) or prepared
by Employee, which contain any information relating to the Company's or
its subsidiaries' (including International Object Technology, Inc.)
business or any of its customers, brokers and/or clients, and Employee
agrees that Employee shall neither make nor retain copies of such
materials after termination of employment.
14. Employee hereby authorizes the Company to offset and deduct against salary
due to Employee by the Company, any undisputed monies owed by Employee to
the Company
4
EXHIBIT F-2
for correction of payroll errors, the repayment of monetary advances, the
reimbursement of tuition or training costs, and the recoupment of auto
allowances, relocation expenses, expenses, and/or advanced vacation time.
15. The failure of either party to insist upon the performance of any of the
provisions of this agreement, or the waiver of any breach thereof, shall
not be construed as or constitute a waiver of the rights granted herein
with respect to any subsequent forbearance or breach.
16. Both parties hereto do hereby consent to jurisdiction in the State of New
Jersey with regard to all controversies which may arise with respect to
the execution, interpretation of and compliance with the terms and
provisions of this Agreement; and both parties hereto agree that the law
of the State of New Jersey shall apply hereto (without regard to the
principles of conflicts of law) and, in addition, waive any other venue or
forum which they might otherwise be entitled by virtue or domicile or
otherwise.
17. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and any successor to the business of the Company, but
neither the Agreement nor any rights hereunder may be assigned, pledged or
encumbered by Employee without the written consent of the Company. This
Agreement may not be changed, modified or terminated orally. This
Agreement supersedes any prior agreements made between the parties,
whether oral or written, and constitutes the final and entire agreement
and understanding of the parties, all prior representations and agreements
having been merged into this Agreement, and this Agreement shall serve to
terminate, amend, restate and replace all prior employment agreements
entered into between the Company or its subsidiaries (including
International Object Technology, Inc.) and Employee, whether written or
oral. No waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in writing
and duly executed by the party to be charged therewith and no evidence of
any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising
out of or affecting this Agreement, or the rights or obligations of the
parties hereunder, unless such waiver or modification is in writing, duly
executed as aforesaid, and the parties agree that the provisions of this
Section 17 may not be waived except as herein set forth.
18. All agreements and covenants contained herein are severable, and in the
event any of them shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements or covenants
were not contained herein.
19. Employee hereby represents and warrants that the execution of this
Agreement by Employee and the performance of Employee's duties and
obligations hereunder shall not breach or be in conflict with any other
agreement to which Employee is a party or by which Employee is bound, and
that Employee is not now subject to any covenant against competition or
similar covenant which would affect the performance of Employee's duties
hereunder. Employee hereby agrees to indemnify the Company for all claims
arising out or related to Employee's breach of this Section 19.
5
EXHIBIT F-2
20. All disputes, controversies, or differences arising in connection with the
validity, execution, performance, breach, non-renewal or termination of
this Agreement shall be finally settled in an arbitration proceeding under
the Rules of the American Arbitration Association by three arbitrators
with expertise in employment and labor law in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association. Selection of the arbitrators shall be as follows: each party
shall appoint one arbitrator within twenty (20) days after service of a
party's claim, and those two arbitrators shall appoint a third arbitrator
who shall act as chairman, within a twenty (20) day period thereafter. If
a chairman is not appointed within said period, the parties shall apply to
the American Arbitration Association for appointment of the third
arbitrator. The parties agree to be bound by the findings of the
arbitration. Notwithstanding the foregoing, the courts shall have
jurisdiction over injunctive or provisional relief pending arbitration.
The arbitrators shall only be empowered to award direct damages. In no
event shall the arbitrators be permitted to award special, consequential,
indirect, incidental or punitive damages or lost profits. The
non-prevailing party to the arbitration shall pay all the prevailing
party's expenses of the arbitration, including reasonable attorneys' fees
and other costs and expenses incurred in connection with the prosecution
or defense of such arbitration.
21. Any offer, notice, or request or other communication hereunder shall be in
writing and shall be deemed to have been duly delivered when (a) delivered
by hand (with written confirmation of receipt), (b) one business day after
mailed to the addressee, if sent by a nationally recognized overnight
delivery service, to the appropriate addresses set forth below or as
subsequently modified by written notice.
If to the Company: The A Consulting Team, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx XxxXxx, Chief Executive Officer
If to the Employee: Xxxx Xxxxxxxx
00 Xxxx Xxxxx
Xxxxxxx, Xxx Xxxxxx 00000
[Remainder of Page Intentionally Left Blank]
6
EXHIBIT F-2
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
THE A CONSULTING TEAM, INC. XXXX XXXXXXXX
By:
------------------------------ ------------------------------
Name: Xxxxxx XxxXxx
Title: Chief Executive Officer
7
EXHIBIT F-2
EXHIBIT A
OPTIONS VESTING SCHEDULE
Number of Shares Vesting Time
------------------------ ----
10,000 One year anniversary of the date hereof
10,000 Two year anniversary of the date hereof
10,000 Three year anniversary of the date hereof
8
EXHIBIT F-2
EXHIBIT B
None
9
EXHIBIT F-3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of the ____ day of
____________, 2002 (the "Effective Date") is made and entered into by and
between The A Consulting Team, Inc. (the "Company"), a New York corporation,
having its principal place of business at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000 and Xxxxx Xxxxxxxxxxx ("Employee"), an individual residing at 00 Xxxx
Xxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxxxx 00000.
l. The Company hereby employs Employee as Director - Technology Solutions.
The Employee shall have such responsibilities and duties as are typical
and customary for a Director - Technology Solutions. Employee shall be
based in the metropolitan New York area, and the Company shall provide
Employee with an office and appropriate computer and communications at
both of its offices in that area. Employee hereby accepts employment in
such capacity upon the terms and conditions hereinafter set forth.
2. The term of this Agreement is for three (3) years, commencing on the
Effective Date reflected above (the "Term"). The entire period this
Agreement remains in effect is hereinafter referred to as the "Employment
Period."
It is expressly understood and agreed that any changes in Employee's
compensation, duties, location or title shall not invalidate this
Agreement. At the option of the parties, such changes may be incorporated
into an "Addendum" to this Agreement. Failure to so incorporate such
changes shall not affect the validity of, or the enforceability of, the
other terms herein.
3. The Company shall pay to Employee the following compensation for all
the services to be rendered by Employee in any capacity:
An initial gross salary at the rate of one hundred and sixty thousand
dollars ($160,000) per year (the "Annual Base Salary"), which reflects a
temporary reduction from one hundred and seventy five thousand dollars
($175,000) per year, payable twice a month, less all applicable and
required federal, state, local and authorized deductions. The Compensation
Committee of the Board of Directors of the Company shall review Employee's
Annual Base Salary in accordance with its existing procedures.
Upon approval by the Board of Directors of the Company, the Company shall
grant to Employee options to purchase 31,000 shares of Company Common
Stock in accordance with the terms of Company's Stock Option and Award
Plan. The options shall vest pursuant to the schedule set forth in Exhibit
A attached hereto. Notwithstanding the foregoing, in the event a
"Change-in-Control" (as defined in the Stock Option Agreement to be
entered into between the Company and the Employee) or a termination of the
Employee's employment by the Company without Cause (as defined herein)
occurs, such grant shall become immediately vested and exercisable.
1
EXHIBIT F-3
The Employee and the Company will jointly develop an annual bonus plan for
such Employee. The Compensation Committee of the Board of Directors of the
Company shall administer such bonus plan and determine the amount of the
Employee's bonus.
Employee shall be entitled to employee benefits, sick days and personal
days in accordance with the Company's then current benefits and PTO policy
for a level seven (7) employee, as it may be amended or modified from time
to time.
4. Employee shall perform such work as may be required of Employee by the
Company in accordance with the instructions, directions and control of the
Company and at such reasonable time and places as the Company may
determine. At all times during the Employment Period, Employee shall
adhere to all the rules and regulations that have been or that may
hereafter be established by the Company for the conduct of its employees
and further, Employee shall adhere to all the provisions of the Company's
handbook(s).
5. Employee hereby consents to a background check by the Company and/or the
Company's broker(s), customer(s) and/or client(s) to the full extent
permitted by law. Such a background check may include, but shall not be
limited to, a judgment and public criminal record check, fingerprinting,
and drug and/or alcohol screening. The Company shall maintain strict
confidentiality with regard to the results of any such background check
and shall not release the results to any other person or entity outside of
the Company other than to (i) agents or independent contractors bound to
confidentiality by written agreement or (ii) the Company's legal counsel
and independent auditors who shall have received prior notice of the
Company's obligations under this Agreement. The obligations of the Company
hereunder shall not apply to information or material which (i) has become
generally available to the public other than as a result of unauthorized
disclosure by the Company or one of its affiliates or (ii) is disclosed
pursuant to an order or requirement of a court, government administrative
agency or other governmental body, a self regulatory body (including the
Securities Exchange Commission, the NASD and Nasdaq) or applicable law.
Provided that the Company complies with the foregoing provisions of this
paragraph, the Employee agrees to hold the Company harmless from any
claims in connection with such checking or testing or the reporting of the
results thereof to the Company.
6. Employee shall devote full and complete attention and energies to the
business of the Company, and shall not during the term of this Agreement
be engaged in any other business activity, whether such business activity
is pursued for gain, profit or other pecuniary advantage and whether said
other business activity is directly or indirectly related to the business
activity of the Company, without the express written consent of the
Company, except as set forth on Exhibit B hereto. However, this shall not
be construed as preventing Employee from utilizing his free time for the
advancement of any business not competitive, either directly or
indirectly, with the Company, or investing Employee's assets in such form
or manner as shall not require any services on Employee's part in the
operation or the affairs of the company or companies in which such
investments are made; provided, however, that any investments made in any
non-public company shall not be made in any company that has allied,
related or competing business activities to the Company.
2
EXHIBIT F-3
7. The Company shall reimburse Employee for expenses incurred by Employee in
the course of his employment provided that such expenses are reimbursable
by the Company under its then current reimbursement policy, and further,
such expenses are authorized by the Company and an accounting is made to
the Company therefore, in accordance with the procedures of the Company
pertaining thereto.
8. The Company shall continue to pay the lease and insurance on the car
currently leased by International Object Technology, Inc. for the Employee
until the current lease expires. Thereafter, the Company shall reimburse
Employee for a car and related expenses in the amount of $640.00 per
month.
9. The Employment Period shall be terminated at the time of the death of
Employee or may be terminated by the Company if Employee shall fail to
render the services provided for hereunder for a continuous period of
sixty (60) days because of Employee's physical or mental disability.
Notwithstanding anything to the contrary herein, either party may
terminate the Employment Period, with or without Cause (as defined herein)
and for any reason whatsoever, by giving ten (10) business days prior
notice to the other party. In the event the Company terminates Employee
without Cause, Employee shall be entitled to receive as severance an
amount equal to (i) the Annual Base Salary multiplied by one and one half
(1.5), less (ii) one-twelfth (1/12) the Annual Base Salary (the "Monthly
Salary Amount"), multiplied by the number of months that Employee has been
employed by the Company after the Effective Date. Notwithstanding the
foregoing, upon the fifteen (15) month anniversary of the Effective Date,
Employee shall be entitled to receive as severance an amount equal to the
lesser of (i) the Monthly Salary Amount multiplied by three (3), and (ii)
the Monthly Salary Amount multiplied by the number of full months
remaining in the Term. For purposes of this Section 9, "Cause" shall mean:
(a) Employee's embezzlement, willful breach of fiduciary duty or fraud
with regard to the Company or any of the Company's assets or businesses,
(b) Employee's conviction of, or pleading of nolo contendere with regard
to a felony (other than a traffic violation) or any other crime involving
moral turpitude and involving activity related to the affairs of the
Company, or (c) any other breach by Employee of a material provision of
this Agreement that remains uncured for thirty (30) days after written
notice thereof is given to Employee. In the event the Company terminates
the employment of Employee for Cause, the Company's sole obligation is to
pay Employee for that period actually worked by Employee (plus any
commissions due for that period, if applicable). In the event of a
termination of the Employment Period with Cause, Employee shall not be
entitled to any payment in excess of the amount of his bi-monthly salary
due at the date of termination and any unreimbursed expenses properly
accrued and accounted for pursuant to Section 7 of this Agreement.
10. Employee recognizes and acknowledges that the Company's and its
subsidiaries' (including International Object Technology, Inc.) trade
secrets, customer, broker and client lists, private processes, prospective
customer, broker and client lists, and staff and prospective staff lists
are deemed to be the private and proprietary information of the Company
and are special, unique and significant proprietary assets of the
Company's business. Employee shall not, either during or subsequent to the
Employment Period, in whole or in part, disclose such trade secrets,
customer, broker, or client lists, staff or
3
EXHIBIT F-3
prospective staff lists, prospective customer, broker or client lists or
private processes to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever. In addition, Employee shall
not make use of any of the above for Employee's own purposes or for the
benefit of any person, firm, corporation, or other entity other than the
Company under any circumstances during the Employment Period or subsequent
to employment.
11. Employee agrees that during the Employment Period and for a period of one
(1) year thereafter, Employee shall not directly or indirectly, or in any
capacity, individually or in any corporation, firm, association or other
business entity, compete or attempt to compete with the Company, any
parent, subsidiary, or affiliate of the Company, or any corporation merged
into, or merged or consolidated with the Company (a) by soliciting
business from any customer, broker and/or client of the Company with which
Employee was involved (directly or indirectly) during the Employment
Period, if such solicited business competes with the business of the
Company, or (b) inducing any personnel of the Company to leave the service
of the Company, or by employing or contracting with any such personnel.
The provisions of this Section 11 shall be construed as an Agreement
independent of any other provision contained herein and shall be
enforceable in both law and equity, including by temporary or permanent
restraining orders, notwithstanding the existence of any claim or cause of
action by Employee against the Company, whether predicated on this
Agreement or otherwise.
12. Employee hereby agrees to assign all rights, title, and interest in all
writings, products, inventions, discoveries, developments, improvements,
ideas, technical notes, programs, specifications, computer or other
apparatus programs and related documentation, and other works of
authorship, tangible and intangible property, whether or not patentable,
copyrightable or subject to other forms of protection, made, created,
developed, discovered, written or conceived by Employee, solely or jointly
with another, in whole or in part, for either the Company and/or the
Company's customer(s), broker(s) and/or client(s) during the Employment
Period, whether during or outside of regular working hours, and to
promptly deliver to the Company all such tangible properties and work
products at the request of the Company. Employee shall not be entitled to
any compensation in addition to the amounts set forth in Section 3 of this
Agreement by reason of said assignment. Employee further agrees to take
all actions reasonably required by the Company to secure the Company's
right, title and interest in such properties and products.
13. Employee shall, upon termination of employment with the Company,
immediately return to the Company all equipment and supplies of the
Company and its subsidiaries (including International Object Technology,
Inc.) and all books, records, lists and other written, typed, printed or
electronically stored materials, whether furnished by the Company or its
subsidiaries (including International Object Technology, Inc.) or prepared
by Employee, which contain any information relating to the Company's or
its subsidiaries' (including International Object Technology, Inc.)
business or any of its customers, brokers and/or clients, and Employee
agrees that Employee shall neither make nor retain copies of such
materials after termination of employment.
4
EXHIBIT F-3
14. Employee hereby authorizes the Company to offset and deduct against salary
due to Employee by the Company, any undisputed monies owed by Employee to
the Company for correction of payroll errors, the repayment of monetary
advances, the reimbursement of tuition or training costs, and the
recoupment of auto allowances, relocation expenses, expenses, and/or
advanced vacation time.
15. The failure of either party to insist upon the performance of any of the
provisions of this agreement, or the waiver of any breach thereof, shall
not be construed as or constitute a waiver of the rights granted herein
with respect to any subsequent forbearance or breach.
16. Both parties hereto do hereby consent to jurisdiction in the State of New
Jersey with regard to all controversies which may arise with respect to
the execution, interpretation of and compliance with the terms and
provisions of this Agreement; and both parties hereto agree that the law
of the State of New Jersey shall apply hereto (without regard to the
principles of conflicts of law) and, in addition, waive any other venue or
forum which they might otherwise be entitled by virtue or domicile or
otherwise.
17. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and any successor to the business of the Company, but
neither the Agreement nor any rights hereunder may be assigned, pledged or
encumbered by Employee without the written consent of the Company. This
Agreement may not be changed, modified or terminated orally. This
Agreement supersedes any prior agreements made between the parties,
whether oral or written, and constitutes the final and entire agreement
and understanding of the parties, all prior representations and agreements
having been merged into this Agreement, and this Agreement shall serve to
terminate, amend, restate and replace all prior employment agreements
entered into between the Company or its subsidiaries (including
International Object Technology, Inc.) and Employee, whether written or
oral. No waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in writing
and duly executed by the party to be charged therewith and no evidence of
any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising
out of or affecting this Agreement, or the rights or obligations of the
parties hereunder, unless such waiver or modification is in writing, duly
executed as aforesaid, and the parties agree that the provisions of this
Section 17 may not be waived except as herein set forth.
18. All agreements and covenants contained herein are severable, and in the
event any of them shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements or covenants
were not contained herein.
19. Employee hereby represents and warrants that the execution of this
Agreement by Employee and the performance of Employee's duties and
obligations hereunder shall not breach or be in conflict with any other
agreement to which Employee is a party or by which Employee is bound, and
that Employee is not now subject to any covenant against competition or
similar covenant which would affect the performance of Employee's duties
hereunder. Employee hereby agrees to indemnify the Company for all claims
arising out or related to Employee's breach of this Section 19.
5
EXHIBIT F-3
20. All disputes, controversies, or differences arising in connection with the
validity, execution, performance, breach, non-renewal or termination of
this Agreement shall be finally settled in an arbitration proceeding under
the Rules of the American Arbitration Association by three arbitrators
with expertise in employment and labor law in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association. Selection of the arbitrators shall be as follows: each party
shall appoint one arbitrator within twenty (20) days after service of a
party's claim, and those two arbitrators shall appoint a third arbitrator
who shall act as chairman, within a twenty (20) day period thereafter. If
a chairman is not appointed within said period, the parties shall apply to
the American Arbitration Association for appointment of the third
arbitrator. The parties agree to be bound by the findings of the
arbitration. Notwithstanding the foregoing, the courts shall have
jurisdiction over injunctive or provisional relief pending arbitration.
The arbitrators shall only be empowered to award direct damages. In no
event shall the arbitrators be permitted to award special, consequential,
indirect, incidental or punitive damages or lost profits. The
non-prevailing party to the arbitration shall pay all the prevailing
party's expenses of the arbitration, including reasonable attorneys' fees
and other costs and expenses incurred in connection with the prosecution
or defense of such arbitration.
21. Any offer, notice, or request or other communication hereunder shall be in
writing and shall be deemed to have been duly delivered when (a) delivered
by hand (with written confirmation of receipt), (b) one business day after
mailed to the addressee, if sent by a nationally recognized overnight
delivery service, to the appropriate addresses set forth below or as
subsequently modified by written notice.
If to the Company: The A Consulting Team, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx XxxXxx, Chief Executive Officer
If to the Employee: Xxxxx Xxxxxxxxxxx
00 Xxxx Xxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000.
[Remainder of Page Intentionally Left Blank]
6
EXHIBIT F-3
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
THE A CONSULTING TEAM, INC. XXXXX XXXXXXXXXXX
By:
------------------------------ ------------------------------
Name: Xxxxxx XxxXxx
Title: Chief Executive Officer
7
EXHIBIT F-3
EXHIBIT A
OPTIONS VESTING SCHEDULE
Number of Shares Vesting Time
------------------------ ----
10,334 One year anniversary of the date hereof
10,333 Two year anniversary of the date hereof
10,333 Three year anniversary of the date hereof
8
EXHIBIT F-3
EXHIBIT B
Writing books related to Analysis, Design and use of Rational Corporation tools
(Rational Rose and RequisitePro)
9
EXHIBIT G
EMPLOYMENT AGREEMENT
This Agreement dated as of the ______ day of ________, 2002 ("Effective Date"),
made by and between International Object Technology, Inc. ("Employer") with a
principal place of business at 00 Xxxxxx Xxxxxx, Xxxxx #000, Xxxxx, XX 00000,
and _____________ ("Employee") an individual residing at ______________________.
Employer desires to employ Employee and Employee desires to be employed by
Employer in connection with certain aspects of Employer's business under certain
terms and conditions.
In connection with such employment, Employee may be given access to, generate,
or otherwise come into contact with certain proprietary, confidential
information of Employer or clients of Employer.
Since Employer is a publicly traded company, and for other reasons, in the
interests of preserving the assets of Employer, Employer desires and Employee
agrees to prevent the dissemination or misuse of such information.
In consideration of Employee's continued employment, and in consideration of the
mutual promises set forth in this Agreement, the parties hereto mutually agree
as follows:
1. TERMS OF EMPLOYMENT
This Agreement is an "at-will" employment agreement. Accordingly, either
Employer or Employee can terminate the relationship at will, with or without
cause, at any time, so long as there is no violation of applicable federal,
state or local law. Employer hereby employs or continues to employ Employee and
Employee hereby accepts employment, upon the terms and conditions contained
herein and at a compensation and under such additional terms and conditions as
may be set forth in Attachment A, which is expressly made a part hereof.
Employee also expressly agrees to be bound by Employer's standards of
performance as required from time to time. This Agreement shall commence on the
start date indicated in Attachment A and shall remain in effect for an
indefinite time until terminated by either party by giving the other party
notice of termination at least ten (10) working days in advance. At Employer's
sole option, instead of such notice, Employer may pay Employee the Employee's
then current base salary equivalent for ten (10) days. However, if termination
by Employer is for cause, Employer shall have the right to terminate this
Agreement immediately without prior notice, and Employee will be paid only up to
the last day worked. While employed by Employer, Employee shall devote
Employee's full working time to Employer's affairs and shall faithfully and
diligently serve Employer's interests.
2. REIMBURSEMENT OF EXPENSES
Employer shall reimburse Employee for "out of pocket" expenses in accordance
with Employer policies and procedures in effect from time to time. All "out of
pocket" expenses must be pre-approved by Employer, and must be evidenced by
receipts or similar documentation.
3. CONFIDENTIALITY
Employee recognizes, acknowledges and agrees that the computer systems,
including specifications, programs and documentation, the methods and data which
Employer owns, plans or develops, whether for its own use or for use by its
clients, developments, designs, inventions and improvements, trade secrets and
works of authorship are confidential and the property of Employer. Employee also
recognizes that Employer's customer lists, consultant lists, supplier lists,
proposals, job openings, projects and procedures, and other information and
property are confidential and are the property of Employer. Employee further
recognizes, acknowledges and agrees that in order to enable Employer and
Employee to perform services for its clients, those clients may furnish to
Employer or Employee confidential information concerning client business
affairs, property, methods of operation or other data; that the goodwill
afforded to Employer depends upon, among other things, Employer and all of its
employees keeping such services and information confidential. All of the
aforementioned materials and information including that relating to Employer's
systems and information and Employer's clients and their systems and
information, will be referred to below as "Proprietary Information".
EXHIBIT G
4. NON-DISCLOSURE
Employee agrees that, except as directed by Employer, in the ordinary course of
Employer's business, Employee will not at any time, whether during or after
Employee's employment with Employer, disclose to any person or for any use,
directly or indirectly, for Employee's own benefit or the benefit of others, any
Proprietary Information, or permit any person to examine or make copies of any
documents which may contain or is derived from Proprietary Information, whether
prepared by Employee or otherwise coming into Employee's possession or control.
If it appears that Employee has disclosed (or threatened or threatens to
disclose) Proprietary Information in violation of this Agreement, Employer shall
be entitled to an injunction to restrain Employee from disclosing, in whole or
in part, such Proprietary Information, or from providing any services to any
party to whom such Proprietary Information has been or may be disclosed.
Employer shall not be prohibited by this provision from pursuing any and all
remedies, including but not limited to a claim for losses and damages.
5. POSSESSION
Employee agrees that upon request by Employer, and in any event upon termination
of Employee's employment, Employee shall turn over to Employer all documents,
papers, equipment or other material in Employee's possession or under Employee's
control which may contain or be derived from Proprietary Information, together
with all documents, notes or Employee's work products which are connected with
or derived from Employee's services to Employer and all copies of software
obtained from Employer shall be either returned to Employer or, as appropriate,
permanently deleted. Upon termination of Employee's employment with Employer,
Employee agrees to pay in full any amount owed to Employer, including but not
limited to moneys loaned by Employer to Employee. In addition, all computer
hardware and software, electronic devices or other property and equipment loaned
to Employee by Employer or by a client must be returned immediately.
6. OWNERSHIP
Employee hereby agrees to assign to Employer or client, as required, Employee's
entire right, title and interest in any developments, designs, patents,
inventions and improvements, trade secrets, trademarks, copyrightable matter or
proprietary information which Employee has made or conceived, or may make or
conceive, either solely or jointly with others, while providing services to
Employer or client, or with the use of the time, material or facilities of
Employer or client or relating to any actual or anticipated business, research,
development, product, service or activity of Employer or client known to
Employee while employed at Employer, or suggested by or resulting from any task
assigned to Employee or work performed by Employee for or on behalf of Employer
or client, whether or not such work was performed prior to the effective date of
this Agreement.
7. NON-COMPETITION
Until the expiration of one (1) year after the date on which Employee's
employment with Employer terminates for any reason, Employee shall not engage,
directly or indirectly, or through any corporation or association, in any
business, enterprise or employment which directly solicits business, performs
services or delivers goods that are competitive to those of Employer to any
client to whom Employee has provided consulting or other services through
Employer. Employer and Employee agree that this covenant is fair and reasonable,
because the confidential and sensitive nature and value of the Proprietary
Information and because the use of, or even the likelihood or the appearance of
the use of, the Proprietary Information in certain circumstances may cause
irreparable damage to Employer, or to clients of Employer. However, in the event
a court should decline to enforce the foregoing provision, Employee and Employer
agree that this provision should be modified to restrict Employee's competition
with Employer to the maximum extent enforceable.
Employee further acknowledges and agrees that, for a period of one (1) year
following termination of employment with EMPLOYER (the "Restrictive Period"),
Employee will not solicit for employment or cause others to solicit for
employment, any person who is employed by Employer or its clients before or
during the term of the Restrictive Period.
EXHIBIT G
8. INJUNCTIVE RELIEF
Employee acknowledges that disclosure of any Proprietary Information by Employee
or breach by Employee of the covenant not to compete herein will give rise to
irreparable injury to Employer or to clients of Employer. Employee also agrees
that this injury to Employer, or client(s) of Employer, would be inadequately
compensated in money damages alone. Accordingly, Employer or, where appropriate
the client of Employer, may seek and obtain injunctive relief against the
breach, or threatened breach, of the disclosure of any Proprietary Information
by Employee, or breach by Employee of any of the covenants not to compete, in
addition to any other legal remedies which may be available. Employee further
acknowledges and agrees that the enforcement of a remedy hereunder by way of
injunction would not prevent Employee from earning a reasonable livelihood since
Employee's experience and capabilities would be such that Employee will be able
to obtain employment in business activities not restricted by this Agreement.
9. GENERAL
Employee represents and warrants that Employee's entering into, execution and
performance of this Agreement shall not violate any agreement or contract which
Employee may have entered into or any obligation which Employee may be under,
and Employee expressly agrees to be liable for and hold Employer harmless with
regard to any breach of the foregoing warranty.
Employee hereby authorizes Employer, at any time, to offset and deduct against
any and all monies due to Employee by Employer, whether for salary or other
remuneration to the full extent allowed by law, any and all monies owed by
Employee to Employer for any reason whatsoever, including, but not limited to
the correction of payroll errors, the repayment of monetary advances, the
reimbursement of tuition or training costs, and the recoupment of auto
allowances, relocation expenses, expenses, and/or advanced vacation time.
This Agreement, in conjunction with Attachment A, contains the entire
understanding between Employer and Employee relating to the subject matter of
employment generally. In the event that any part of this Employment Agreement
and any part of Attachment A hereto shall be in conflict, then the conflicting
term(s) of the Attachment A shall prevail.
This Agreement shall by governed by and construed in accordance with the laws of
the State of New Jersey and may be modified only by a writing signed by both
parties. Both parties hereby consent to and waive any objection to the exclusive
jurisdiction of the state and federal courts sitting in New Jersey in any action
on a claim arising out of, under or in connection with this Agreement. Employer
may assign or otherwise transfer its rights under this Agreement upon the
merger, reorganization or sale of all or substantially all of its assets or
stock, or any of its business operations to a third party and this Agreement
shall be binding upon and inure to the benefit of, and be enforceable by such
successor and/or assignee without any obligation on the part of Employer or its
successor or assignee to effectuate same by written notice or otherwise to
Employee. Neither this Agreement nor any rights hereunder may be assigned,
pledged or encumbered by Employee without the written consent of Employer.
If any provision of this Agreement shall be held invalid or unenforceable for
any reason, the remaining provisions shall continue in full force and effect.
The provisions of paragraphs 4 through 10 of this Agreement shall survive any
termination of employment.
ACCEPTED AND AGREED:
International Object Technology, Inc. Employee
By: Signature:
------------------------------ ----------------------------
Title: Print:
--------------------------- --------------------------------
The A Consulting Team, Inc. shall furnish to the Commission upon request any
schedule or exhibit ommitted from this filing.
