1
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROXICOM, INC.,
PROXICOM MERGER SUB, INC.,
IBIS CONSULTING, INC.,
AND
THE STOCKHOLDERS OF IBIS CONSULTING, INC.
DATED AS OF AUGUST 21, 1998
2
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.4. Articles of Incorporation; Bylaws. . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5. Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.6. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.7. Subsequent Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.8. Tax and Accounting Treatment of the Merger. . . . . . . . . . . . . . . . . 3
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . 4
SECTION 2.1. Conversion of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.2. Escrowed Merger Stock; Stockholders' Representative. . . . . . . . . . . . . 4
SECTION 2.3. Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.4. Stock Transfer Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.5. Transferability of Acquiror Common Stock. . . . . . . . . . . . . . . . . . 6
SECTION 2.6. Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.7. Conversion of Company Stock Options. . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS . . . . . . . . 9
SECTION 3.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.2. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.3. Articles of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . 9
SECTION 3.4. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.5. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.6. No Conflict; Required Filings and Consents. . . . . . . . . . . . . . . . . 10
SECTION 3.7. Company Financial Statements; No Liabilities. . . . . . . . . . . . . . . . 11
SECTION 3.8. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.9. Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . 12
SECTION 3.10. Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.11. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.12. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.13. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.14 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.15. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.16 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.17 Pooling of Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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SECTION 3.18. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.19. Taxes and Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.20. Employment Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.21. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.22. Transactions with Related Parties. . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.23. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.24. Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.25. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.26. Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.27. Reorganization Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.28 HSR Act Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.29. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS . . . . . . . . . . . . . . . . 25
SECTION 4.1. Authority and Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.2. Absence of Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.3. Restrictions and Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.4. Title to Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.5. Non-Registration of Securities; Purchase for Investment Only. . . . . . . . 26
SECTION 4.6. Ability of Stockholder to Evaluate Investment and Bear Economic Risk. . . . 27
SECTION 4.7. Waiver of Dissenter's Rights. . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.2. Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . 28
SECTION 5.3. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.4. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.5. No Conflict; Required Filings and Consents. . . . . . . . . . . . . . . . . 29
SECTION 5.6. Acquiror Financial Statements; No Liabilities. . . . . . . . . . . . . . . . 29
SECTION 5.7. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.8. Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . 30
SECTION 5.9. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.10. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.11. Reorganization Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.12. HSR Act Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.13. Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.14. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.15. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.16. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.17. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.18. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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SECTION 5.19. Pooling of Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.20. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.21. Taxes and Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.22. Employment Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.23. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.24. Transactions with Related Parties. . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.25. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.26. Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.27. Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.28. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF MERGER SUB . . . . . . . . . . . . . . . . . . . 41
SECTION 6.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.2. Articles of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . 41
SECTION 6.3. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.4. No Conflict; Required Filings and Consents. . . . . . . . . . . . . . . . . 42
ARTICLE VII COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.1. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.2. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.1. Consents and Approvals; Filings and Notices. . . . . . . . . . . . . . . . . 45
SECTION 8.2. Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.3. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.4. Further Action; Reasonable Best Efforts. . . . . . . . . . . . . . . . . . . 45
SECTION 8.5. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.6. No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.7. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.8. Pooling Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.9. Stockholders' Covenants Not To Compete . . . . . . . . . . . . . . . . . . . 47
SECTION 8.11. Stockholders' Nominee on Acquiror's Board of Directors. . . . . . . . . . . 48
SECTION 8.12. Sale of Certain Merger Stock in Acquiror's IPO. . . . . . . . . . . . . . . 48
SECTION 8.13. Additional Acquiror Stock Options. . . . . . . . . . . . . . . . . . . . . 49
ARTICLE IX CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.1. Conditions to Obligations of Acquiror and Merger Sub. . . . . . . . . . . . 49
SECTION 9.2. Additional Conditions to Obligations of the Company and the Stockholders. . 51
ARTICLE X TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.2. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.3. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.4. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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ARTICLE XI SURVIVAL OF REPRESENTATIONS; ESCROW ARRANGEMENTS; REMEDIES . . . . . . . . . . . . 54
SECTION 11.1. Survival of Representations. . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.2. Indemnification by the Stockholders; Escrow Arrangements. . . . . . . . . . 54
SECTION 11.3. Third Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 11.4. Limitation of Liability of Acquiror and Merger Sub. . . . . . . . . . . . . 57
ARTICLE XII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 12.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 12.2. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 12.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 12.4. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 12.5. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 12.6. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 12.7. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 12.8. Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 12.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 12.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 12.11. Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
The Exhibits and Schedules to this Agreement and Plan of Merger are not
included with this Registration Statement on Form S-1. The Registrant will
provide these Exhibits and Schedules upon the request of the Securities and
Exchange Commission.
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Index of Defined Terms
Section
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accredited investor . . . . . . . . . . . . . . . . . . . . . . . . . 4.6
Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Acquiror Audited Financial Statements . . . . . . . . . . . . . . . . 5.6
Acquiror Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . 5.6
Acquiror Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 5.23(a)
Acquiror Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Acquiror Commonly Controlled Entity . . . . . . . . . . . . . . . . . 5.23(a)
Acquiror Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 5.15(b)
Acquiror ERISA Plan . . . . . . . . . . . . . . . . . . . . . . . . . 5.23(a)
Acquiror Financial Statements . . . . . . . . . . . . . . . . . . . . 5.6
Acquiror Indemnified Persons . . . . . . . . . . . . . . . . . . . . 11.2(a)
Acquiror Material Adverse Effect . . . . . . . . . . . . . . . . . . 12.2(a)
Acquiror Real Property . . . . . . . . . . . . . . . . . . . . . . . 5.16
Acquiror Software . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(b)
Acquiror Unaudited Financial Statements . . . . . . . . . . . . . . . 5.6
affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(c)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Amended and Restated Registration Rights Agreement . . . . . . . . . 9.2(h)
Amendment No. 2 to Stockholders' Agreement . . . . . . . . . . . . . 2.5(b)
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(d)
benefit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(c); 5.23(c)
business day . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(e)
California Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . 3.6(b)
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
CGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Company Audited Financial Statements . . . . . . . . . . . . . . . . 3.7
Company Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . 3.7
Company Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . 3.7
Company Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 3.21(a)
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Company Commonly Controlled Entity . . . . . . . . . . . . . . . . . 3.21(a)
Company Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)
Company Custom Software . . . . . . . . . . . . . . . . . . . . . . . 12.2(f)
Company ERISA Plan . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(a)
Company Financial Statements . . . . . . . . . . . . . . . . . . . . 3.7
Company Material Adverse Effect . . . . . . . . . . . . . . . . . . . 12.2(g)
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Section
-------
Company Real Property . . . . . . . . . . . . . . . . . . . . . . . . 3.13
Company Unaudited Financial Statements . . . . . . . . . . . . . . . 3.7
Competitive Business . . . . . . . . . . . . . . . . . . . . . . . . 8.9(a)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . 8.3
control, controlled by, under common control with . . . . . . . . . . 12.2(h)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
employee benefit plans . . . . . . . . . . . . . . . . . . . . . . . 3.21(a); 5.23(a)
employee pension benefit plan . . . . . . . . . . . . . . . . . . . . 3.21(a); 5.23(a)
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(i)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . 3.15(c)(i)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(a)
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Escrow Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Government Entity . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(j)
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . 3.15(c)(ii)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(k)
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3(a)
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . 11.3(a)
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 12.2(l)
IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.12
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(m)
Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(n)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Merger Filing Documents . . . . . . . . . . . . . . . . . . . . . . . 1.2
Merger Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(d)
New Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
Noncompete Period . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9(a)
Original Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 2.5(b)
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(o)
plan of reorganization . . . . . . . . . . . . . . . . . . . . . . . 1.8
qualified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(b); 5.23(b)
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(p)
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15(c)(iii)
SEC Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(c)
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Section
-------
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(a)
Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
Stockholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . 2.5(b)
Stockholders' Representative . . . . . . . . . . . . . . . . . . . . 2.2(b)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(q)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(r)
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2(s)
Third Party Products . . . . . . . . . . . . . . . . . . . . . . . . 3.14(g)
unfunded current liability . . . . . . . . . . . . . . . . . . . . . 3.21(c); 5.23(c)
- iii -
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
this 21st day of August, 1998, by and among PROXICOM, INC., a Delaware
corporation ("Acquiror"), PROXICOM MERGER SUB, INC., a Delaware corporation and
a wholly-owned subsidiary of Acquiror ("Merger Sub"), IBIS CONSULTING, INC., a
California corporation (the "Company"), and the undersigned stockholders of the
Company (the "Stockholders").
WHEREAS, the Boards of Directors of each of Acquiror, Merger Sub and
the Company have determined that it is in the best interests of their
respective companies and stockholders that Merger Sub merge with and into the
Company, pursuant to and subject to the terms and conditions of this Agreement
and the General Corporation Law of the State of California (the "CGCL") and the
General Corporation Law of the State of Delaware ("DGCL");
WHEREAS, concurrently with the execution of this Agreement and as a
further inducement to Acquiror and the Stockholders to enter into this
Agreement, Acquiror has entered into an employment agreement with each
Stockholder and with each of Xxxxxxx Xxxx and Xxxxxxx Xxxxxxxx, each of which
sets forth the terms and conditions of such Stockholder's and such person's
employment with Acquiror from and after the Effective Time (collectively, the
"Employment Agreements").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the CGCL and the DGCL, at the Effective Time
(as defined in Section 1.2), Merger Sub shall be merged with and into the
Company (the "Merger"). As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (sometimes referred to herein as the
"Surviving Corporation") as a wholly-owned subsidiary of Acquiror. The name of
the Company shall continue as the name of the Surviving Corporation.
10
SECTION 1.2. EFFECTIVE TIME.
At the Closing (as defined in Section 1.6), the parties hereto
shall cause the Merger to be consummated by filing (a) a merger agreement and
required officer's certificates with the Secretary of State of the State of
California, and (b) a certificate of merger with the Secretary of State of the
State of Delaware (collectively, the "Merger Filing Documents"), all in such
form as required by, and executed in accordance with the relevant provisions of
the CGCL and the DGCL and in such form as approved by the Company and Acquiror
prior to such filing (the date and time that the Merger Filing Documents are
deemed effective by the Secretary of State of the State of California and the
Secretary of State of the State of Delaware, or such subsequent date or time
specified therein being the "Effective Time").
SECTION 1.3. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as
provided in this Agreement and the applicable provisions of the CGCL and the
DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of Merger Sub and the Company shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Merger Sub and the Company shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.4. ARTICLES OF INCORPORATION; BYLAWS.
At the Effective Time, the articles of incorporation of Merger
Sub, as in effect immediately prior to the Effective Time and as amended by the
Merger Filing Documents, shall be the articles of incorporation of the
Surviving Corporation, and the bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving Corporation.
SECTION 1.5. DIRECTORS AND OFFICERS.
The director of Merger Sub (or such other or additional
individuals as Acquiror may designate prior to Closing) shall be the initial
director of the Surviving Corporation, who will hold office in accordance with
the articles of incorporation and bylaws of the Surviving Corporation; and the
officers of Merger Sub shall continue as the officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
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SECTION 1.6. CLOSING.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place as promptly as
practicable after satisfaction of the latest to occur or, if permissible,
waiver of the conditions set forth in Article IX hereof (the "Closing Date"),
at the offices of Xxxxx & Xxxxxxx L.L.P., 0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000,
XxXxxx, Xxxxxxxx 00000, unless another date or place is agreed to in writing by
the parties hereto.
SECTION 1.7. SUBSEQUENT ACTIONS.
If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties, privileges, franchises or Assets of either of its
constituent corporations acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be directed and authorized to execute and deliver, in the
name and on behalf of either of such constituent corporations, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and
on behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties, privileges,
franchises or Assets in the Surviving Corporation or otherwise to carry out
this Agreement.
SECTION 1.8. TAX AND ACCOUNTING TREATMENT OF THE MERGER.
It is intended by the parties hereto that the Merger shall (a)
constitute a reorganization of Merger Sub and the Company within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
(b) qualify for accounting treatment as a pooling of interests under Accounting
Principle Board Opinion No. 16. The parties hereby adopt this Agreement as a
"plan of reorganization" of Merger Sub and the Company within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any
action on the part of the parties hereto or the holders of the following
securities:
(a) Outstanding Company Common Stock. Subject to the
provision hereof, each share of common stock, no par value, of the Company
(the "Company Common Stock"), issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive 0.2327868 share of
common stock, par value $0.01 per share, of Acquiror ("Acquiror Common Stock")
(such number, the "Exchange Ratio"), rounded up to the nearest whole number
(the shares of Acquiror Common Stock issuable pursuant to this Section 2.1(a)
are referred to herein as the "Merger Stock"). All such shares of Company
Common Stock shall cease to be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each certificate (a "Certificate")
previously evidencing such shares shall thereafter represent only the right to
receive Acquiror Common Stock. The Stockholders shall cease to have any rights
with respect to such shares of Company Common Stock.
(b) Treasury Stock. All shares of capital stock of the Company
held in the treasury of the Company immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof and no
Acquiror Common Stock or other consideration shall be delivered or deliverable
in exchange therefor.
(c) Merger Sub Stock. Each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(d) No Fractional Shares. No fraction of a share of Acquiror
Common Stock shall be issued in connection with the Merger.
SECTION 2.2. ESCROWED MERGER STOCK; STOCKHOLDERS' REPRESENTATIVE.
(a) When making the issuances of the Merger Stock pursuant to
Section 2.1(a) above, Acquiror shall withhold and retain in escrow from the
Stockholders ten percent (10%) of the aggregate number of shares of Acquiror
Common Stock issuable pursuant to Section 2.1(a), and rounded up to the nearest
whole number (such shares, collectively, the "Escrow Stock"). The Escrow Stock
- 4 -
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will be placed in escrow pursuant to an Escrow Agreement, in the form of
Exhibit A hereto (the "Escrow Agreement"), to be entered into at Closing among
Acquiror, the Surviving Corporation, the Stockholders, the Stockholders'
Representative (as defined below) and Crestar Bank, as escrow agent (the
"Escrow Agent"). The Escrow Stock shall be held in escrow pursuant to the
Escrow Agreement. The Escrow Stock shall be registered in the name of the
Stockholders and the certificates therefor shall contain a legend to the effect
that the Escrow Stock is being held in escrow pursuant to the Escrow Agreement.
The Escrow Stock shall be released to the Stockholders or Acquiror, as the case
may be, only in accordance with the terms of the Escrow Agreement.
(b) Each Stockholder hereby appoints Xxxxxx Xxxx as
attorney-in-fact with full power and authority to act for and on behalf of any
or all of the Stockholders (with full power of substitution in the premises),
in connection with the indemnity provisions of Section 11.2 as they relate to
the Stockholders generally and such other matters as are reasonably necessary
for the consummation of the transactions contemplated hereby including, without
limitation, (i) to review all claims for indemnification asserted by an
Acquiror Indemnified Person, and, to the extent deemed appropriate, dispute,
question the accuracy of, compromise, settle or otherwise resolve any and all
such claims, (ii) to compromise on their behalf with Acquiror any claims
asserted thereunder, (iii) to authorize payments to be made with respect to any
such claims for indemnification, (iv) to execute and deliver on behalf of the
Stockholders any document or agreement contemplated by or necessary or
desirable in connection with this Agreement, the Escrow Agreement and the
transactions contemplated hereby and thereby, and (v) to take such further
actions including coordinating and administering post-closing matters related
to the rights and obligations of the Stockholders as are authorized in this
Agreement (the above named representative, as well as any subsequent
representative of the Stockholders appointed by the Stockholders being referred
to herein as the "Stockholders' Representative"). Acquiror and Merger Sub
shall be entitled to rely on such appointment and treat such Stockholders'
Representative as the duly appointed attorney-in-fact of each Stockholder.
Each of the Stockholders, other than the Stockholders' Representative, hereby
agrees to indemnify and hold the Stockholders' Representative harmless against
all Losses resulting from, imposed upon or incurred by each such Stockholder,
directly or indirectly, as a result of the Stockholders' Representative's
actions as attorney-in-fact as provided in this Section 2.2(b).
SECTION 2.3. EXCHANGE OF CERTIFICATES.
At the Closing, each Stockholder shall deliver to Acquiror for
cancellation, such Stockholder's Certificate(s) representing his or her shares
of Company Common Stock held immediately prior to the Effective Time, duly
- 5 -
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endorsed in blank or with duly executed stock powers attached. In exchange for
the Certificates, promptly following the Effective Time, Acquiror shall deliver
to each Stockholder a stock certificate representing the aggregate number of
whole shares of Merger Stock issuable pursuant to Section 2.1(a) (less shares
of Escrow Stock to be deposited in escrow pursuant to Section 2.2(a)), which
shares of Merger Stock shall be deemed to have been issued at the Effective
Time.
SECTION 2.4. STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company with
respect to all shares of Company Common Stock shall be closed and no further
registration of transfers of such shares of Company Common Stock shall
thereafter be made on the records of the Company.
SECTION 2.5. TRANSFERABILITY OF ACQUIROR COMMON STOCK.
(a) The shares of Acquiror Common Stock to be issued and delivered
to the Stockholders in the Merger in accordance with the provisions of this
Article II will not have been registered under the Securities Act of 1933, as
amended (the "Securities Act") or under the securities laws of any state as of
the Effective Time. Accordingly, such shares of Acquiror Common Stock will not
be transferable except upon compliance with the Securities Act, any state
securities laws, the rules, regulations and other administrative regulations
promulgated under the Securities Act and any state securities laws and shall
bear appropriate legends to this effect as set forth in Section 2.6 below. In
addition, the shares of Escrow Stock shall contain a legend providing notice as
to the Escrow Agreement.
(b) The shares of Acquiror Common Stock to be issued and delivered
to the Stockholders in the Merger in accordance with the provisions of this
Article II will also be subject to that certain Amended and Restated
Stockholders Agreement, dated February 20, 1997, among Acquiror, General
Atlantic Partners 34, L.P., GAP Coinvestment Partners, L.P., Xxxx Xxxxxxxxx,
The Xxxxx X. Xxxxxx Trust and FBR Venture Capital Managers Inc. (collectively,
the "Original Stockholders"), as amended by that certain Amendment No. 1 to
Amended and Restated Stockholders Agreement, dated November 24, 1997, among the
Original Stockholders and General Electric Capital Corporation (collectively,
the "Stockholders' Agreement"). Each Stockholder acknowledges and agrees that
such Stockholder has been given a copy of the Stockholders' Agreement and
afforded ample opportunity to read it, and is thoroughly familiar with its
terms. In addition to the other legends described in this Agreement, each
Stockholder acknowledges and agrees that the certificates evidencing the shares
of Merger Stock (including the Escrow Stock) will contain a legend providing
notice as to the Stockholders' Agreement. At Closing, each Stockholder,
Acquiror and the parties to the Stockholders' Agreement shall execute
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and deliver an Amendment No. 2 to Amended and Restated Stockholders Agreement
in the form of Exhibit B hereto (the "Amendment No. 2 to Stockholders'
Agreement").
(c) Each Stockholder further acknowledges and agrees that such
Stockholder may be deemed to be an "affiliate" of the Company as that term is
used in SEC Accounting Series Release Nos. 130 and 135 (together, the "SEC
Release") and Rule 145 of the rules and regulations of the SEC under the
Securities Act. Accordingly, each Stockholder agrees not to sell, exchange,
transfer, pledge or otherwise dispose of such Stockholder's interests in, or
reduce such Stockholder's risk relative to, any of the (i) shares of Company
Common Stock over which such Stockholder has or shares voting or dispositive
power or (ii) shares of Acquiror Common Stock into which such shares of Company
Common Stock are converted upon consummation of the Merger or upon the exercise
of any Acquiror options, until such time as financial results covering at least
thirty (30) days of post-Merger combined operations of Acquiror and the Company
have been published by Acquiror within the meaning of the SEC Release. Each
Stockholder understands that reducing such Stockholder's risk relative to such
shares of Company Common Stock or Acquiror Common Stock includes, but is not
limited to, using such shares to secure a non-recourse loan, purchasing a put
option to sell such shares or otherwise entering a put agreement with respect
to such shares.
SECTION 2.6. LEGEND.
Each certificate representing Acquiror Common Stock issued to the
Stockholders hereunder shall be stamped or otherwise imprinted with a legend
(the "Legend") in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE HYPOTHECATED
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE
SECURITIES LAWS UPON RECEIPT BY PROXICOM, INC. (THE "COMPANY")
OF A WRITTEN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
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IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED PURSUANT TO A BUSINESS COMBINATION WHICH IS ACCOUNTED FOR
AS A "POOLING OF INTERESTS" AND MAY NOT BE SOLD, NOR MAY THE OWNER
THEREOF REDUCE HIS OR HER RISKS RELATIVE THERETO IN ANY WAY, UNTIL
SUCH TIME AS THE COMPANY HAS PUBLISHED THE FINANCIAL RESULTS COVERING
AT LEAST 30 DAYS OF COMBINED OPERATIONS AFTER THE EFFECTIVE DATE OF
THE MERGER THROUGH WHICH THE BUSINESS COMBINATION WAS EFFECTED.
Such legend will also be placed on any certificate representing
Acquiror securities issued subsequent to the original issuance of the Acquiror
Common Stock pursuant to the Merger as a result of any stock dividend, stock
split, or other recapitalization, or upon the exercise of any Acquiror stock
options, as long as the Acquiror Common Stock issued to the Stockholder
pursuant to the Merger is subject to the restrictions set forth herein or in
the Amendment No. 2 to Stockholders' Agreement.
SECTION 2.7. CONVERSION OF COMPANY STOCK OPTIONS.
As of the Effective Time, each outstanding unexpired and unexercised
option to purchase shares of Company Common Stock described on Schedule 3.4
hereto (each a "Stock Option"), shall automatically be converted into an option
(each a "New Option") to purchase a number of whole shares of Acquiror Common
Stock equal to the number of shares of Company Common Stock that could have
been purchased (assuming full vesting) under such Stock Option multiplied by
the Exchange Ratio, at a price per share of Acquiror Common Stock equal to the
per-share option exercise price specified in such Stock Option divided by the
Exchange Ratio. Nothing in this Section 2.7 shall affect the vesting schedule
in effect for each Stock Option as of the date hereof, and each New Option
shall have the same vesting schedule as in effect for the corresponding Stock
Option as of the date hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders jointly represent and warrant to
Acquiror and Merger Sub as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company has the
requisite power and authority to own, lease and operate its business as it is
now being conducted and to perform the terms of this Agreement and the
transactions contemplated hereby. The Company is duly qualified to conduct its
business as a foreign corporation, and is in good standing, in each
jurisdiction in which the ownership or leasing of its Assets or the nature of
its activities in connection with the conduct of its business makes such
qualification necessary.
SECTION 3.2. SUBSIDIARIES.
The Company has no Subsidiaries and no equity interest or other
investment in, nor has the Company made advances or loans to, any person.
SECTION 3.3. ARTICLES OF INCORPORATION AND BYLAWS.
The Company has heretofore delivered to Acquiror a complete and
correct copy of each of the articles of incorporation and bylaws of the
Company, each as amended to date. Such articles of incorporation and bylaws
are in full force and effect. The Company is not in violation of any of the
provisions of its articles of incorporation or bylaws.
SECTION 3.4. CAPITALIZATION.
The authorized capital stock of the Company consists of one hundred
million (100,000,000) shares of Company Common Stock, of which twenty-one
million four hundred twenty-eight thousand six hundred (21,428,600) shares are
issued and outstanding. All of the outstanding shares of capital stock of the
Company are owned beneficially and of record by the Stockholders as set forth
in Schedule 3.4, free and clear of all Encumbrances, except as set forth in
Schedule 3.4. Except as set forth in Schedule 3.4 there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or
obligating the Company to
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issue or sell any shares of capital stock of, or other equity interests in the
Company, including any securities directly or indirectly convertible into or
exercisable or exchangeable for any capital stock or other equity securities of
the Company. There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any shares of its capital stock or make
any investment (in the form of a loan, capital contribution or otherwise) in
any other person. All of the issued and outstanding shares of Company Common
Stock have been duly authorized and validly issued in accordance with
applicable laws and are fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in Schedule 3.4, no shares of capital
stock of the Company have been reserved for any purpose.
SECTION 3.5. AUTHORITY.
The Company has the necessary corporate power and authority to enter
into this Agreement and the Related Agreements and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Related
Agreements by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement and the Related
Agreements or to consummate the transactions contemplated hereby and thereby.
This Agreement and the Related Agreements have been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery by
Acquiror and Merger Sub, constitute legal, valid and binding obligations of the
Company, enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
SECTION 3.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the Related
Agreements by the Company do not, and the performance by the Company of its
obligations under this Agreement and the Related Agreements will not, (i)
conflict with or violate the articles of incorporation, bylaws or other
organizational document of the Company, (ii) conflict with or violate any Laws
applicable to the Company or to its Assets, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company is a party or by which the Company is bound or to which
any of its Assets is subject, except in the
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case of clauses (ii) and (iii) for such conflicts, violations, breaches and
defaults which would not have a Company Material Adverse Effect.
(b) The Company's execution and delivery of this Agreement and the
Related Agreements does not, and the Company's performance of this Agreement
and the Related Agreements will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any third party
or any court, arbitral tribunal, regulatory body, administrative agency or
commission, whether national or foreign, or Government Entity, except for the
filing and recordation of appropriate merger documents as required by the CGCL
and the DGCL, the filing of required notices and documentation under the
California state securities Laws (the "California Blue Sky Laws"), and except
where the failure to obtain any such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Company
Material Adverse Effect and would not materially adversely affect the Company's
performance of its obligations under this Agreement and the Related Agreements.
SECTION 3.7. COMPANY FINANCIAL STATEMENTS; NO LIABILITIES.
The Company has furnished to Acquiror (a) the audited balance sheets
of the Company as of December 31, 1995, 1996, and 1997, and the related audited
statements of income and cash flows for the fiscal years then ended (such
audited financial statements, including the schedules and notes thereto,
collectively, the "Company Audited Financial Statements"); and (b) the
unaudited balance sheet of the Company as of July 31, 1998, and the unaudited
statements of income and cash flows for the seven-month period then ended (such
unaudited financial statements, collectively, the "Company Unaudited Financial
Statements" and together with the Company Audited Financial Statements, the
"Company Financial Statements"). The Company Financial Statements referred to
in this Section 3.7 present fairly the financial condition of the Company as of
their respective dates and for the respective periods indicated and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as otherwise noted in the notes thereto and that the
Company Unaudited Financial Statements do not contain all required footnotes
and are subject to normal recurring year-end adjustments). Except as reflected
in the balance sheet of the Company (the "Company Balance Sheet") as of July
31, 1998 (the "Company Balance Sheet Date"), the Company has no material
liabilities, contingent or absolute, matured or unmatured.
SECTION 3.8. ACCOUNTS RECEIVABLE.
The accounts receivable of the Company shown on the Company Balance
Sheet, or acquired by the Company after the Company Balance Sheet Date, have
been collected or are collectible in amounts not less than the amounts thereof
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carried on the books of the Company, except to the extent of the allowance for
doubtful accounts shown on the Company Balance Sheet.
SECTION 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the Company Balance Sheet Date, there has been no change or
event that has caused or would cause a Company Material Adverse Effect. Since
the Company Balance Sheet Date, the Company has conducted its business in the
ordinary course, and the Company has not (a) paid any dividend or distribution
in respect of, or redeemed or repurchased any of, its capital stock; (b) issued
any capital stock, bonds or other corporate securities or debt instruments,
granted any options, warrants or other rights calling for the issuance thereof,
or borrowed any funds; (c) incurred any material loss of, or significant injury
to, any of their respective Assets as the result of any fire, explosion, flood,
windstorm, earthquake, labor trouble, riot, accident, act of God or public
enemy or armed forces, or other casualty; (d) incurred, or become subject to,
any obligation or liability (absolute or contingent, matured or unmatured,
known or unknown), except current liabilities incurred in the ordinary course
of business; (e) mortgaged, pledged or subjected to any Encumbrance any of its
Assets; (f) sold, exchanged, transferred or otherwise disposed of any of its
Assets other than in the ordinary course of business, or canceled any debts or
claims; (g) written down the value of any of its Assets or written off as
uncollectible any accounts receivable, except write downs and write-offs in the
ordinary course of business, none of which, individually or in the aggregate,
are material; (h) entered into any transactions other than in the ordinary
course of business and consistent with its past practice; (i) made any change
in any method of accounting or accounting practice; or (j) made any agreement
or is otherwise legally obligated to do any of the foregoing.
SECTION 3.10. ASSETS.
The Company is the sole and exclusive legal and equitable owner of and
has good and marketable title to its Assets (except for Intellectual Property
with respect to which the Company's representations and warranties are set
forth in Section 3.14), free and clear of all Encumbrances. No person or
Government Entity has an option to purchase, right of first refusal or other
similar right with respect to all or any part of the Company's Assets. All of
the personal property of the Company actively used in the conduct of its
business is in good working order and repair, ordinary wear and tear excepted,
and is suitable and adequate for the uses for which it is intended or is being
used.
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SECTION 3.11. LEASES.
Schedule 3.11 lists and describes all leases and other agreements
under which the Company is lessee or lessor of any Asset, or holds, manages or
operates any Asset owned by any third party, or under which any Asset owned by
the Company is held, operated or managed by a third party, and which involve
payments of more than Five Thousand Dollars ($5,000) individually (or Twenty
Thousand Dollars ($20,000) in the aggregate for all such leases and other
agreements) over its remaining term (including, without limitation, periods
covered by any option to renew by either party). Each such lease and other
agreement is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, the Company and, to
the knowledge of the Company, the other party or respective parties thereto and
grants the leasehold estate it purports to grant free and clear of all
Encumbrances. With respect to each such lease and other agreement, (a) all
necessary governmental approvals with respect thereto required to be obtained
by the Company have been obtained, (b) all necessary filings or registrations
therefor required to be made by the Company have been made, and (c) there have
been no threatened cancellations thereof and no outstanding disputes
thereunder. The Company has performed in all material respects all obligations
thereunder required to be performed by the Company to date. The Company is not
and, to the Company's knowledge, no other party is in default in any material
respect under any of the foregoing, and there has not occurred any event which
(whether with or without notice, lapse of time or the happening or occurrence
of any other event) would constitute such a default.
SECTION 3.12. CONTRACTS.
(a) Except as set forth in Schedule 3.12, there are no agreements,
contracts and commitments (whether written or oral) to which the Company is a
party or by which the Company or any of its Assets are bound which involve
payments of more than Five Thousand Dollars ($5,000) individually (or Twenty
Thousand Dollars ($20,000) in the aggregate with all other such agreements,
contracts and commitments) (collectively, the "Company Contracts"), including,
without limitation, the following types of contracts and agreements: (i)
employment, severance, termination, consulting and retirement agreements; (ii)
license agreements or distributor, dealer, manufacturer's representative, sales
agency and advertising agreements; (iii) agreements with any labor organization
or other collective bargaining unit; (iv) agreements for the future purchase of
materials, supplies, services, merchandise or equipment; (v) agreements for the
purchase, sale or lease of any real estate or other Assets (excluding the
license agreements described in clause (ii) above); (vi) profit-sharing, bonus,
incentive compensation, deferred compensation, stock option, severance pay,
stock purchase, employee benefit, insurance, hospitalization, pension,
retirement or other similar plans or agreements; (vii) agreements for the sale
of Assets other than in the
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ordinary course of business or the grant of any preferential rights to purchase
Assets; (viii) agreements which contain provisions requiring the Company to
indemnify any person; (ix) joint venture agreements or other agreements
involving the sharing of profits; (x) outstanding loans to any persons or
entities or receivables due from any stockholders or any affiliates of the
Company; (xi) agreements (including, without limitation, agreements not to
compete and exclusivity agreements) that reasonably could be interpreted to
impose any restriction on any business operations of the Company; (xii)
agreements, notes and other instruments evidencing indebtedness for borrowed
money and grants of Encumbrances on any of the Assets of the Company; (xiii)
customer and client contracts; and (xiv) other agreement which by its terms
does not terminate or is not terminable by the Company within thirty (30) days
or upon thirty (30) days' (or less) notice. Schedule 3.12 includes a brief
description of all oral Company Contracts of the types described in clauses (i)
through (xiv) above.
(b) All the Company Contracts are valid and in full force and
effect and constitute legal, valid and binding obligations of, and are legally
enforceable against, the Company and, to the knowledge of the Company, the
other party or respective parties thereto. With respect to each such Company
Contract, (i) all necessary governmental approvals with respect thereto
required to be obtained by the Company have been obtained, (ii) all necessary
filings or registrations therefor required to be made by the Company have been
made, and (iii) there have been no threatened cancellations thereof and no
outstanding disputes thereunder. The Company has performed in all material
respects all obligations thereunder required to be performed by the Company to
date. The Company is not and, to the Company's knowledge, no other party is in
default in any material respect under any of the Company Contracts, and there
has not occurred any event which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute such a
default. True and complete copies of all Company Contracts have been delivered
to Acquiror.
SECTION 3.13. REAL PROPERTY.
Schedule 3.13 contains a list and brief description of all leasehold
interests in real estate, easements, rights to access, rights-of-way and other
real property interests which are owned, leased, used or held for use by the
Company (collectively, the "Company Real Property"). The Company does not hold
any fee simple interest in any real estate. The Company Real Property
described in Schedule 3.13 constitutes all real property interests necessary to
conduct the business and operations of the Company as now conducted and is
suitable and adequate for the uses for which it is currently devoted.
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SECTION 3.14 INTELLECTUAL PROPERTY.
(a) Schedule 3.14(I)(A) and (B) set forth: (i) all registered and
unregistered trademarks, service marks, trade names, maskworks, registered and,
to the best of Company's knowledge, all unregistered copyrights, including the
jurisdictions in which each such Intellectual Property right has been
registered or in which any application for such registration has been filed,
and (ii) subject to any exceptions set forth in Schedule 3.14(II)(A), all
current written and, to the best of the Company's knowledge, oral license,
sublicense, franchise and other agreements under which the Company licenses the
Company Intellectual Property to third parties or pursuant to which the Company
is authorized to use a third party's Intellectual Property. Schedule
3.14(I)(A) and (B) set forth whether the Company is the sole owner or joint
owner or licensee of each item of Intellectual Property identified therein, and
any license fees, royalties or similar compensation which, are payable or are
due in the future from the Company.
(b) Except as set forth in Schedule 3.14(II)(B), the Company either
owns or has adequate rights to use all of the Intellectual Property that is
necessary to and currently used for its business as now conducted, and the
Company Software (as defined in Schedule 3.14(I)(A)(4)) is free and clear of
Encumbrances and, to the best of Company's knowledge, all other Company
Intellectual Property is free and clear of Encumbrances. Except as set forth
in Schedule 3.14(II)(B), the Company has previously furnished to Acquiror
evidence of either ownership by the Company of or license rights to use its
Intellectual Property. Except as provided in Schedule 3.14(II)(B), the Company
Software (as defined in Schedule 3.14(I)(A)(4)) and Company Custom Software
either do not contain any third party Intellectual Property or, to the extent
they contain third party Intellectual Property, the Company has adequate rights
to include such third party Intellectual Property in the Company Software or
Company Custom Software, as appropriate.
(c) There are no pending or, to the best of the Company's
knowledge, threatened claims against the Company alleging that the conduct of
its business infringes any Intellectual Property rights of others. The
Intellectual Property of the Company is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge. Except as set forth in
Schedule 3.14(II)(C) and to the best of the Company's knowledge, the Company
has not engaged in unfair competition against any third party and the business
of the Company as now conducted does not infringe any third party Intellectual
Property rights.
(d) To the best of the Company's knowledge, no third party is
infringing upon any of the Company's Intellectual Property, and the Company has
not notified any third party that it believes such third party is interfering
with, infringing or misappropriating any of the Company's Intellectual Property
or engaging in any act of unfair competition. Except as set forth in
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Schedule 3.14(II)(D), the Company represents and warrants that it has the right
to bring an action for the infringement of all of its Intellectual Property.
(e) Except as set forth in Schedule 3.14(II)(E), each present or
former employee, consultant, officer, director or stockholder of the Company
has executed a confidentiality and nondisclosure agreement, and an Intellectual
Property assignment agreement, substantially in the forms which have been
furnished to Acquiror. All employees who contributed to the Company's
Intellectual Property did so within the scope of their employment for the
Company. The Company Software was developed by persons who are or were
employees of the Company at the time of such development.
(f) Except as set forth in Schedule 3.14(II)(E) and (F), any third
party to which the Company has disclosed or allowed access to the proprietary
and confidential Intellectual Property of the Company has executed a
confidentiality and nondisclosure agreement with respect to such Intellectual
Property.
(g) To the best of the Company's knowledge, any hardware, software
or firmware licensed or purchased by the Company from third parties, accurately
processes date/time data (including but not limited to, calculating, comparing,
and sequencing) from, into and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and leap year calculations. The Company
represents and warrants that the Company Software (as defined in Schedule
3.14(I)(A)(4)) and Company Custom Software accurately process date/time data
(including but not limited to, calculating, comparing and sequencing) from,
into and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and leap year calculations when either (A) used as standalone
applications, or (B) integrated into or otherwise used in conjunction with the
third party hardware, software, firmware and data ("Third Party Products") with
which such Company Software or Company Custom Software, as the case may be, was
designed or intended to operate at the time such Company Software or such
Company Custom Software, as the case may be, was (i) developed for internal use
or (ii) provided to the Company customers or tested by the Company for such
customers, whichever is later. Notwithstanding the foregoing, the Company
shall not be considered to be in breach of the representation and warranty in
the immediately preceding sentence if the failure of such Company Software or
Company Customer Software, as the case may be, to comply with such
representation and warranty is attributable solely to (i) a failure by any
Third Party Product to accurately process date/time data (including but not
limited to, calculating, comparing and sequencing) from, into and between the
twentieth and twenty-first centuries, and the years 1999 and 2000 and leap year
calculations; or (ii) any modification of the Company Software or Company
Custom Software, as the case may be, by a Company customer following the
provision of such Company Software or Company Custom Software, as the case may
be, to such customer or the testing of the Company Software or Company
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Custom Software, as the case may be, by the Company for such customer,
whichever is later. The Company does not license or sell any hardware or
firmware to third parties.
SECTION 3.15. ENVIRONMENTAL MATTERS.
(a) The Company has complied and is in compliance in all material
respects with all Environmental Laws (as defined below). The Company does not
have any liability under any Environmental Law, nor is the Company responsible
for any liability of any other person under any Environmental Law. There are
no pending or, to the knowledge of the Company, threatened actions, suits,
claims, legal proceedings or other proceedings based on, and the Company has
not directly or indirectly received any notice of any complaint, order,
directive, citation, notice of responsibility, notice of potential
responsibility, or information request from any Government Entity or any other
person arising out of or attributable to: (i) the current or past presence,
Release or threatened Release of Hazardous Materials at or from any part of the
Company Real Property; (ii) the off-site disposal or treatment of Hazardous
Materials originating on or from the Company Real Property or the businesses or
Assets of the Company; or (iv) any violation of Environmental Laws at any part
of the Company Real Property or otherwise arising from the Company's activities
involving Hazardous Materials.
(b) There are no environmental permits of the Company that are
nontransferable or require consent, notification or other action to remain in
full force and effect following the consummation of the Merger, and no other
consent, notification, approval or other action is required by the Company
under any Environmental Law in order to consummate the Merger.
(c) As used herein, these terms shall have the following meanings:
(i) "Environmental Laws" means all Laws (including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act), including any plans, other criteria, or guidelines promulgated
pursuant to such Laws, now or hereafter in effect relating to the generation,
production, installation, use, storage, treatment, transportation, release,
threatened release, or disposal of Hazardous Materials, noise control, or the
protection of human health or safety, natural resources, or the environment.
(ii) "Hazardous Materials" means wastes, substances,
radiation, or materials (whether solids, liquids or gases) (i) which are
hazardous, toxic, infectious, explosive, radioactive, carcinogenic, or
mutagenic; (ii) which are or become defined as a "pollutants", "contaminants",
"hazardous materials", "hazardous wastes", "hazardous substances", "toxic
substances", "radioactive
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materials", "solid wastes" or other similar designations in, or otherwise
subject to regulation under, any Environmental Laws; (iii) the presence of
which on the Company Real Property or the Acquiror Real Property, as the case
may be, cause or threaten to cause a nuisance pursuant to applicable statutory
or common law upon such Company Real Property or Acquiror Real Property, as the
case may be, or to adjacent properties; (iv) without limitation, which contain
polychlorinated biphenyl (PCBs), asbestos and asbestos-containing materials,
lead-based paints, urea-formaldehyde foam insulation, and petroleum or
petroleum products (including, without limitation, crude oil or any fraction
thereof) or (v) which pose a hazard to human health, safety, natural resources,
industrial hygiene, or the environment, or an impediment to working conditions.
(iii) "Release" means any emission, spill, seepage, leak,
escape, leaching, discharge, injection, pumping, pouring, emptying, dumping,
disposal, or release of Hazardous Materials from any source (including, without
limitation, the Company Real Property or Acquiror Real Property, as the case
may be, and property adjacent thereto) into or upon the environment, including
the air, soil, improvements, surface water, groundwater, the sewer, septic
system, storm drain, publicly owned treatment works, or waste treatment,
storage, or disposal systems at, on, from, above, or under the Company Real
Property or Acquiror Real Property, as the case may be, or any other property
at which Hazardous Materials originating on or from the Company Real Property
or Acquiror Real Property, as the case may be, or the businesses or Assets of
the Company or Acquiror, as the case may be, have been stored, treated or
disposed.
SECTION 3.16 ABSENCE OF LITIGATION.
There are (a) no claims, actions, suits, investigations, or
proceedings pending or, to the Company's knowledge, threatened against the
Company or any of its Assets before any court, administrative, governmental,
arbitral, mediation or regulatory authority or body, domestic or foreign, and
(b) no judgments, decrees, injunctions or orders of any Government Entity or
arbitrator outstanding against the Company or any of its Assets.
SECTION 3.17 POOLING OF INTERESTS.
To the best knowledge of the Company and the Stockholders, neither the
Company nor any of its directors, officers or stockholders has taken any action
which would interfere with Acquiror's ability to account for the Merger as a
pooling of interests. The Stockholders are all of the "affiliates" of the
Company (as such term is used in SEC Accounting Series Release Number 130 and
Release Number 135 and Rule 145 under the Securities Act).
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SECTION 3.18. BOOKS AND RECORDS.
The books of account, stock records, minute books and other records of
the Company are true and complete in all material respects, and the matters
contained therein are appropriately and accurately reflected in the financial
statements to the extent required to be reflected therein.
SECTION 3.19. TAXES AND ASSESSMENTS.
(a) The Company has (or, in the case of returns becoming due after
the date hereof and on or before the Effective Time, will have prior to the
Effective Time) duly filed all Tax returns required to be filed by Company on
or before the Effective Time with respect to all applicable Taxes (as defined
below). No penalties or other charges are or will become due with respect to
any of the Company's Tax returns as the result of the late filing thereof.
All of the Company Tax returns are (or, in the case of returns becoming due
after the date hereof and on or before the Effective Time, will be) true and
complete in all material respects. The Company: (i) has paid all Taxes due or
claimed to be due by any taxing authority in connection with any of the Company
Tax returns (without regard to whether or not such Taxes are shown as due on
such Company Tax returns); or (ii) has established (or, in the case of amounts
becoming due after the date hereof, prior to the Effective Time will have paid
or established) in its financial statements provided to Acquiror adequate
reserves (in conformity with generally accepted accounting principles
consistently applied) for the payment of such Taxes. The amounts set up as
reserves for Taxes on the financial statements of the Company furnished to
Acquiror are, to the Company's knowledge, sufficient for the payment of all
unpaid Taxes, whether or not such Taxes are disputed or are yet due and
payable, for or with respect to the period, and for which the Company may be
liable or as a transferee of the assets of, or successor to, any corporation,
person, association, partnership, joint venture or other entity.
(b) The Company, either in its own right or as a transferee, has
not or on the Effective Time will not have any liability for Taxes payable for
or with respect to any periods prior to and including the Effective Time in
excess of the amounts actually paid prior to the Effective Time or reserved for
in financial statements furnished to Acquiror.
(c) There is no action, suit, proceeding, audit, investigation or
claim pending or, to the knowledge of the Company, threatened in respect of any
Taxes for which the Company is or may become liable, nor has any deficiency or
claim for any such Taxes been proposed, asserted or, to the knowledge of the
Company, threatened. The Company has not consented to any waivers or
extensions of any statute of limitations with respect to any taxable year of
the Company. There is no agreement, waiver or consent providing for an
extension of time with respect to the
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assessment or collection of any Taxes against the Company, and no power of
attorney granted by the Company with respect to any tax matters is currently in
force.
(d) The Company has furnished to Acquiror true and complete copies
of all Company Tax returns and all written communications by or to the Company
relating to any such Company Tax returns or to any deficiency or claim proposed
and/or asserted, irrespective of the outcome of such matter, but only to the
extent such items relate to tax years (i) which are subject to an audit,
investigation, examination or other proceeding, or (ii) with respect to which
the statute of limitations has not expired.
(e) Schedule 3.19 sets forth (i) all federal tax elections that
currently are in effect with respect to Company, and (ii) all elections for
purposes of foreign, state or local Taxes and all consents or agreements for
purposes of federal, foreign, state or local Taxes in each case that reasonably
could be expected to affect or be binding upon Company or its assets or
operations after the Effective Time. Schedule 3.19 sets forth all changes in
accounting methods for Tax purposes at any time made, agreed to, requested or
required with respect to the Company.
(f) The Company (i) is not and never has been a partner in a
partnership or an owner of an interest in an entity treated as a partnership
for federal income tax purposes; (ii) has not executed or filed with the
Internal Revenue Service any consent to have the provisions of Section 341(f)
of the Code apply to it; (iii) is not subject to Section 999 of the Code; (iv)
is not a passive foreign investment company as defined in Section 1296(a) of
the Code; and (v) is not a party to an agreement relating to the sharing,
allocation or payment of, or indemnity for, Taxes.
SECTION 3.20. EMPLOYMENT MATTERS.
(a) Schedule 3.20 contains a true and complete list of names,
positions and annual rates of compensation (including bonuses and other special
compensation arrangements) of all current directors, officers and employees of
the Company. With respect to any persons employed by the Company, the Company
is in compliance with all Laws respecting employment conditions and practices,
have withheld all amounts required by any applicable Laws to be withheld from
wages or any Taxes or penalties for failure to comply with any of the
foregoing.
(b) There are no collective bargaining agreements applicable to any
Company employees and the Company does not have a duty to bargain with any
labor organization with respect to any such persons. There is not pending any
demand for recognition or any other request or demand from a labor organization
for representative status with respect to any persons employed by the Company.
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(c) With respect to any persons employed by the Company, (i) the
Company has not engaged in any unfair labor practice within the meaning of the
National Labor Relations Act and has not violated any legal requirement
prohibiting discrimination on the basis of race, color, national origin, sex,
religion, age, marital status, or handicap in its employment conditions or
practices; and (ii) there are no pending or, to the knowledge of the Company,
threatened unfair labor practice charges or discrimination complaints relating
to race, color, national origin, sex, religion, age, marital status, or
handicap against the Company before any Government Entity nor, to the knowledge
of the Company, does any basis therefor exist.
SECTION 3.21. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.21 sets forth a list of all of the pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, sabbatical, vacation, bonus, loans, medical, dental,
vision care, disability, life insurance or other employee programs,
arrangements or agreements and all other material employee benefit plans or
fringe benefit plans, including, without limitation, all "employee benefit
plans" as that term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by the
Company or for which the Company could incur a liability or any entity required
to be aggregated with the Company (each, a "Company Commonly Controlled
Entity") pursuant to Section 414 of the Code for the benefit of present and
former employees or directors of the Company or their beneficiaries, or
providing benefits to such persons in respect of services provided to any such
entity (collectively, the "Company Benefit Plans"). Any of the Company Benefit
Plans which is an "employee pension benefit plan", as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "Company ERISA Plan".
(b) Each of the Company Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) or 501 of the Code has been determined by
the Internal Revenue Service to be so qualified and to the Company's knowledge,
no circumstances exist that could reasonably be expected by the Company to
result in the revocation of any such determination. Each of the Company
Benefit Plans is in compliance with their terms and the applicable terms of
ERISA and the Code and any other applicable laws, rules and regulations the
breach or violation of which could result in a material liability to the
Company or any Company Commonly Controlled Entity.
(c) No Company ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability", as that term is defined in
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Section 302(d)(8)(A) of ERISA, and the present fair market value of the assets
of any such plan equals or exceeds the plan's "benefit liabilities", as that
term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if the plan terminated in accordance with
all applicable legal requirements. All contributions, premiums and other
payments with respect to each Company ERISA Plan which have become due and
payable have been paid.
(d) No Company Benefit Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan"). Neither
the Company nor any Commonly Controlled Entity has completely or partially
withdrawn from any Multiemployer Plan. No termination liability to the Pension
Benefit Guaranty Corporation or withdrawal liability to any Multiemployer Plan
that is material in the aggregate has been or is reasonably expected to be
incurred with respect to any Multiemployer Plan by the Company or any Company
Commonly Controlled Entity.
(e) The Company has made available to Acquiror complete copies, as
of the date hereof, of all of the Company Benefit Plans that have been reduced
to writing, together with all documents establishing or constituting any
related trust, annuity contract, insurance contract or other funding
instrument. The Company has made available to Acquiror complete copies of
current plan summaries, employee booklets, personnel manuals and other material
documents or written materials concerning the Company Benefit Plans that are in
the possession of the Company as of the date hereof.
(f) No claim, lawsuit, arbitration or other action has been
threatened or instituted against any Company Benefit Plan.
(g) Except as contemplated by the terms of this Agreement, the
consummation of the transactions contemplated by this Agreement will not give
rise to any liability, including, without limitation, liability for severance
pay or termination pay, or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any employee, director
or stockholder of the Company (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions. No amounts payable under
any Company Benefit Plan will fail to be deductible for federal income tax
purposes by virtue of Section 280G or 162(m) of the Code.
(h) The Company does not maintain, contribute to, or in any way
provide for any benefits of any kind (other than under Section 4980B of the
Code, the Federal Social Security Act, or a plan qualified under Section 401(a)
of the Code) to any current or future retiree or terminee.
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(i) Neither the Company nor any Company Commonly Controlled Entity
has (or could incur) any liability under Title IV of ERISA.
SECTION 3.22. TRANSACTIONS WITH RELATED PARTIES.
Except for expense advances to employees in the ordinary course of
business, no present or former officer, director, stockholder or person known
by the Company to be an affiliate of the Company, nor any person known by the
Company to be an affiliate of any such person, is currently a party to any
transaction or agreement with the Company, including any agreement providing
for any loans or advances in an amount in excess of One Thousand Dollars
($1,000) individually (or Five Thousand Dollars ($5,000) in the aggregate for
all such agreements), the employment of, furnishing of services by, rental of
their respective Assets from or to, or otherwise requiring payments to, any
such officer, director, stockholder or affiliate.
SECTION 3.23. INSURANCE.
Schedule 3.23 contains a list of all insurance policies of title,
property, fire, casualty, liability, life, worker's compensation, libel and
slander, and other forms of insurance of any kind relating to the Assets or the
business and operations of the Company, true and correct copies of which have
been made available to Acquiror. All premiums with respect to such policies
covering all periods up to and including the date hereof have been paid, and no
notice of cancellation or termination has been received with respect to any
such policy. All such policies (a) are in full force and effect; (b) are
sufficient for compliance by the Company with all requirements of applicable
Law and of all licenses, franchises and other agreements to which the Company
is a party; (c) are valid, outstanding, and enforceable policies; and (d)
provide adequate insurance coverage for the respective Assets and the business
and operations of the Company. There are no pending claims under any insurance
policies and to the Company's knowledge there are no facts which would lead the
Company to believe that the Company will likely receive a claim under any
insurance policies.
SECTION 3.24. PERMITS.
The Company holds all licenses and permits from Government Entities
which are necessary for the conduct of its business, except where the failure
to hold any such license or permit would not have a Company Material Adverse
Effect.
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SECTION 3.25. BROKERS.
Except as set forth on Schedule 3.25 hereto, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
SECTION 3.26. MINUTE BOOKS.
The minute books of the Company made available to Acquiror contain a
complete and accurate summary of all meetings of directors and shareholders or
actions by written consent since the time of incorporation of the Company
through the date of this Agreement, and reflect all transactions referred to in
such minutes accurately in all material respects.
SECTION 3.27. REORGANIZATION TREATMENT.
Neither the Company nor any Stockholder has taken, agreed to take, is
obligated to take or intends to take any action that would cause the Merger to
fail to qualify as a reorganization within the meaning of Section 368 of the
Code.
SECTION 3.28 HSR ACT COMPLIANCE.
The "Person" (as that term is defined in the HSR Act and implementing
regulations) in which the Company is included does not have total assets of One
Hundred Million Dollars ($100,000,000) or more as stated on the last regularly
prepared consolidated balance sheet of that "Person", and does not have annual
net sales of One Hundred Million Dollars ($100,000,000) or more as stated on
the last regularly prepared consolidated annual statement of income and
expenses of that "Person".
SECTION 3.29. DISCLOSURE.
No representations or warranties by the Company in this Agreement and
no statement or information contained in the Schedules hereto or any
certificate furnished or to be furnished by the Company to Acquiror pursuant to
the provisions of this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary,
in light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
In addition to the representations and warranties made by the
Stockholders in Article III hereof, each Stockholder hereby severally
represents and warrants, as to himself or herself, to Acquiror and Merger Sub
as follows:
SECTION 4.1. AUTHORITY AND CAPACITY.
Such Stockholder has full legal right, capacity, power and authority
necessary to execute and deliver this Agreement and all other Related
Agreements, to perform the obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. This Agreement
and the Related Agreements have been duly executed and delivered by such
Stockholder and, assuming due authorization, execution and delivery by
Acquiror, Merger Sub and the other parties hereto and thereto, constitute
legal, valid and binding obligations of such Stockholder, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditor's rights
generally and by the applications of general principles of equity.
SECTION 4.2. ABSENCE OF VIOLATION.
The execution, delivery and performance by such Stockholder of this
Agreement and all other Related Agreements, the fulfillment of and the
compliance with the respective terms and provisions hereof and thereof, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (a) conflict with, or violate any provision of, any Laws applicable to
the Stockholder; or (b) conflict with, or result in any material breach of, or
constitute a default under, any agreement to which such Stockholder is a party
or by which such Stockholder or such Stockholder's property is bound or
affected.
SECTION 4.3. RESTRICTIONS AND CONSENTS.
Such Stockholder's execution and delivery of this Agreement and the
Related Agreements does not, and such Stockholder's performance of this
Agreement and the Related Agreements will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any third party
or any court, arbitral tribunal, regulatory body, administrative agency or
commission or Government Entity, except for the filing and recordation of
appropriate merger documents as required by the CGCL.
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SECTION 4.4. TITLE TO CAPITAL STOCK.
The shares of Company Common Stock reflected on Schedule 3.4 as being
owned by such Stockholder are the only shares of voting stock owned
beneficially or of record by such Stockholder, and except as set forth in
Schedule 3.4, such Stockholder does not own any other options, warrants or
rights to acquire shares of any class of capital stock of the Company. Such
Stockholder has the sole power respecting voting and transfer of such
Stockholder's shares, except, in the case of a married Stockholder, for the
interests of such Stockholder's spouse. The shares of Company Common Stock of
such Stockholder are now, and at all times prior to the Effective Time will be,
owned as indicated on Schedule 3.4 by such Stockholder, free and clear of all
Encumbrances, except as set forth on Schedule 3.4. In the case of each
Stockholder who is married, such Stockholder's spouse has executed and
delivered this Agreement and agrees to be bound by all of the provisions of
this Agreement and the Related Agreements to the same extent as if such spouse
were a Stockholder hereunder and thereunder.
SECTION 4.5. NON-REGISTRATION OF SECURITIES; PURCHASE FOR INVESTMENT
ONLY.
(a) Except as otherwise provided in and by this Agreement, the
Merger Stock issued to such Stockholder will be acquired for investment for
such Stockholder's own account, not as a nominee or agent, and not with a view
to the sale or distribution of any part thereof, and such Stockholder has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Such Stockholder represents that the legal and
beneficial interest of the Merger Stock issued to such Stockholder (including
the Escrow Stock) will be held for such Stockholder's account only, and neither
in whole or in part for any other person. Except as otherwise provided in and
by this Agreement, such Stockholder further represents that such Stockholder
has no present contract, undertaking, agreement or arrangement with any person
to sell, transfer, or grant participation to such person or to any third
person, with respect to any of the Merger Stock.
(b) Such Stockholder understands and acknowledges that the offering
of the Merger Stock pursuant to the Merger Agreement is being conducted on the
basis of an exemption from registration under the Securities Act and that
Acquiror's reliance upon such exemption is predicated upon such Stockholder's
representations.
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SECTION 4.6. ABILITY OF STOCKHOLDER TO EVALUATE INVESTMENT AND BEAR
ECONOMIC RISK.
Such Stockholder further represents that he or she: (a) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of such Stockholder's prospective investment in
the Merger Stock and such Stockholder's liabilities and obligations under this
Agreement; (b) has received all of the information he has requested from
Acquiror for deciding whether to accept the Merger Stock; (c) has the ability
to bear the economic risks of such Stockholder's prospective investment; (d) is
able, without materially impairing his financial condition, to hold the Merger
Stock for an indefinite period of time and to suffer complete loss on his
investment; (e) has been given sufficient time and opportunity to seek the
advice of counsel regarding such Stockholder's liabilities and obligations
hereunder; and (f) is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act.
SECTION 4.7. WAIVER OF DISSENTER'S RIGHTS.
Such Stockholder, by executing this Agreement, approves the Merger and
all other transactions contemplated by this Agreement, and hereby waives any
dissenter's rights to receive payment of the appraised value of such shares of
the Company Common Stock pursuant to Sections 1300 through 1312 of the CGCL.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company and the Stockholders
as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION.
Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Acquiror has the requisite
power and authority to own, lease and operate its Assets and properties and to
carry on its business as it is now being conducted and to perform the terms of
this Agreement and the transaction contemplated hereby. Acquiror is duly
qualified to conduct its business, and is in good standing, in each
jurisdiction where the ownership or leasing of its properties or the nature of
its activities in connection with the conduct of its business makes such
qualification necessary.
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SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Acquiror has heretofore delivered to the Company a complete and
correct copy of the certificate of incorporation and the bylaws of Acquiror,
each as amended to date. Such certificate of incorporation and bylaws are in
full force and effect. Acquiror is not in violation of any of the provisions
of its certificate of incorporation or bylaws.
SECTION 5.3. CAPITALIZATION.
The authorized capital stock of Acquiror consists of: (i) twenty
million (20,000,000) shares of Acquiror Common Stock, of which thirteen million
ninety thousand seven hundred twenty-seven (13,090,727) shares are issued and
outstanding (as of June 30, 1998, determined using the weighted average
treasury stock method); and (ii) five million (5,000,000) shares of preferred
stock, par value $.01 per share, of which two million one thousand four hundred
eighty-three (2,001,483) shares are issued and outstanding (as of June 30,
1998, determined using the weighted average treasury stock method). Acquiror
has made available to the Company true and complete information with respect to
all outstanding options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock
of Acquiror or obligating Acquiror to issue or sell any shares of capital stock
of, or other equity interests in Acquiror, including any securities directly or
indirectly convertible into or exercisable or exchangeable for any capital
stock or other equity securities of Acquiror. There are no outstanding
obligations of Acquiror to repurchase, redeem or otherwise acquire any shares
of its capital stock or make any investment (in the form of a loan, capital
contribution or otherwise) in any other person. All of the issued and
outstanding shares of Acquiror Common Stock have been, and the Merger Stock
will be, duly authorized and validly issued in accordance with applicable laws
and are and will be fully paid and nonassessable and not subject to preemptive
rights. Acquiror has provided to the Company a true and accurate description
of the capitalization of Acquiror before and immediately after the Merger,
including a description of the shares of capital stock of Acquiror that have
been reserved for any purpose.
SECTION 5.4. AUTHORITY.
Acquiror has the necessary corporate power and authority to enter into
this Agreement and the Related Agreements, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Related
Agreements by Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Acquiror are
necessary to authorize
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this Agreement and the Related Agreements or to consummate the transactions
contemplated hereby and thereby. This Agreement and the Related Agreements
have been duly executed and delivered by Acquiror and, assuming the due
authorization, execution and delivery by the Company, constitute legal, valid
and binding obligations of Acquiror, enforceable in accordance with their
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the Related
Agreements by Acquiror do not, and the performance by Acquiror of its
obligations under this Agreement and the Related Agreements will not, (i)
conflict with or violate the certificate of incorporation, bylaws or other
organizational document of Acquiror, (ii) conflict with or violate any Laws
applicable to Acquiror or its Assets, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Acquiror is a party or by which Acquiror is bound, or by which any of
its Assets is subject, except in the case of clauses (ii) and (iii) for such
conflicts, violations, breaches and defaults which would not have an Acquiror
Material Adverse Effect.
(b) The execution and delivery of this Agreement and the Related
Agreements by Acquiror does not, and the performance of this Agreement by
Acquiror will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any third party or any court, arbitral
tribunal, regulatory body, administrative agency or commission, whether
national or foreign, or Government Entity, except for the filing and
recordation of appropriate merger documents as required by the CGCL and the
DGCL, the filing of required notices and documentation under the California
Blue Sky Laws, and except where the failure to obtain any such consent,
approval, authorization or permit, or to make such filing or notification,
would not have an Acquiror Material Adverse Effect and would not materially
adversely affect Acquiror's performance of its obligations under this Agreement
and the Related Agreements.
SECTION 5.6. ACQUIROR FINANCIAL STATEMENTS; NO LIABILITIES.
Acquiror has furnished to the Company (a) the audited balance sheets
of Acquiror as of December 31, 1996, and 1997, and the related audited
statements of income and cash flows for the fiscal years then ended (such
audited financial statements, including the schedules and notes thereto,
collectively, the "Acquiror Audited Financial Statements"); and (b) the
unaudited balance sheet of Acquiror as
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xx Xxxx 00, 0000 (xxx "Acquiror Balance Sheet Date"), and the unaudited
statements of income and cash flows for the six-month period then ended (such
unaudited financial statements, collectively, the "Acquiror Unaudited Financial
Statements" and together with the Acquiror Audited Financial Statements, the
"Acquiror Financial Statements"). The Acquiror Financial Statements referred
to in this Section 5.6 present fairly the financial condition of Acquiror as of
their respective dates and for the respective periods indicated and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as otherwise noted in the notes thereto and that the
Acquiror Unaudited Financial Statements do not contain all required footnotes
and are subject to normal recurring year-end adjustments). Except as reflected
in the Acquiror Unaudited Financial Statements as of the Acquiror Balance Sheet
Date, Acquiror has no material liabilities, contingent or absolute, matured or
unmatured.
SECTION 5.7. ACCOUNTS RECEIVABLE.
The accounts receivable of Acquiror shown on the Acquiror Balance
Sheet, or acquired by Acquiror after the Acquiror Balance Sheet Date, have been
collected or are collectible in amounts not less than the amounts thereof
carried on the books of Acquiror, except to the extent of the allowance for
doubtful accounts shown on the Acquiror Balance Sheet.
SECTION 5.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the Acquiror Balance Sheet Date, there has been no change or
event that has caused or would cause a Acquiror Material Adverse Effect and
Acquiror has conducted its business in the ordinary course, and Acquiror has
not (a) paid any dividend or distribution in respect of, or redeemed or
repurchased any of, its capital stock; (b) issued any capital stock, bonds or
other corporate securities or debt instruments, granted any options, warrants
or other rights calling for the issuance thereof, except for issuances of
options and shares of stock upon exercise of options in the ordinary course of
business, or borrowed any funds (except for borrowings under Acquiror's credit
facility in the ordinary course of business); (c) incurred any material loss
of, or significant injury to, any of the Assets as the result of any fire,
explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of
God or public enemy or armed forces, or other casualty; (d) incurred, or become
subject to, any obligation or liability (absolute or contingent, matured or
unmatured, known or unknown), except current liabilities incurred in the
ordinary course of business; (e) mortgaged, pledged or subjected to any
Encumbrance any of the Assets; (f) sold, exchanged, transferred or otherwise
disposed of any of its Assets except in the ordinary course of business, or
canceled any debts or claims; (g) written down the value of any Assets or
written off as uncollectible any accounts receivable, except write downs and
write-offs in the ordinary course of business,
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none of which, individually or in the aggregate, are material; (h) entered into
any transactions other than in the ordinary course of business and consistent
with past practice; (i) made any change in any method of accounting or
accounting practice; or (j) made any agreement or is otherwise legally
obligated to do any of the foregoing.
SECTION 5.9. ABSENCE OF LITIGATION.
Except for the arbitration/mediation proceeding pending with
Legislate, there are (a) no claims, actions, suits, investigations, or
proceedings pending or, to Acquiror's knowledge, threatened against Acquiror or
any of its Assets before any court, administrative, governmental, arbitral,
mediation or regulatory authority or body, domestic or foreign, and (b) no
judgments, decrees, injunctions or orders of any Government Entity or
arbitrator outstanding against Acquiror or any of its Assets.
SECTION 5.10. BROKERS.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
SECTION 5.11. REORGANIZATION TREATMENT.
Neither Acquiror nor the Merger Sub has taken, agreed to take, or
intends to take any action that would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368 of the Code.
SECTION 5.12. HSR ACT COMPLIANCE.
The "Person" (as that term is defined in the HSR Act and implementing
regulations) in which Acquiror is included does not have total assets of One
Hundred Million Dollars ($100,000,000) or more as stated on the last regularly
prepared consolidated balance sheet of that "Person", and does not have annual
net sales of One Hundred Million Dollars ($100,000,000) or more as stated on
the last regularly prepared consolidated annual statement of income and
expenses of that "Person".
SECTION 5.13. ASSETS.
Acquiror is the sole and exclusive legal and equitable owner of and
has good and marketable title to its Assets (except for Intellectual Property
with respect to which Acquiror's representations and warranties are set forth
in Section 5.17), free and clear of all Encumbrances, except for Encumbrances
arising under or
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pursuant to Acquiror's credit facility and Encumbrances incurred in the
ordinary course of Acquiror's business. No person or Government Entity has an
option to purchase, right of first refusal or other similar right with respect
to all or any part of Acquiror's Assets. All of the personal property of
Acquiror actively used in the conduct of its business is in good working order
and repair, ordinary wear and tear excepted, and is suitable and adequate for
the uses for which it is intended or is being used.
SECTION 5.14. LEASES.
Acquiror has provided to the Company access to all leases and other
agreements under which Acquiror is lessee or lessor of any Asset, or holds,
manages or operates any Asset owned by any third party, or under which any
Asset owned by Acquiror is held, operated or managed by a third party, and
which involve payments of more than Five Thousand Dollars ($5,000) individually
(or Twenty Thousand Dollars ($20,000) in the aggregate for all such leases and
other agreements) over its remaining term (including, without limitation,
periods covered by any option to renew by either party). Each such lease and
other agreement is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, Acquiror and, to the
knowledge of Acquiror, the other party or respective parties thereto and grants
the leasehold estate it purports to grant free and clear of all Encumbrances.
With respect to each such lease and other agreement, (a) all necessary
governmental approvals with respect thereto required to be obtained by Acquiror
have been obtained, (b) all necessary filings or registrations therefor
required to be made by Acquiror have been made, and (c) there have been no
threatened cancellations thereof and no outstanding disputes thereunder.
Acquiror has performed in all material respects all obligations thereunder
required to be performed by Acquiror to date. Acquiror is not and, to
Acquiror's knowledge, no other party is in default in any material respect
under any of the foregoing, and there has not occurred any event which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute such a default.
SECTION 5.15. CONTRACTS.
(a) All the Acquiror Contracts (as defined below) are valid and in
full force and effect and constitute legal, valid and binding obligations of,
and are legally enforceable against, Acquiror and, to the knowledge of
Acquiror, the other party or respective parties thereto, except where the
failure of any such Acquiror Contract or Acquiror Contracts to be valid, in
full force and effect, or to constitute a legal, valid, binding and enforceable
obligation against Acquiror or the other parties thereto would not,
individually or in the aggregate, have an Acquiror Material Adverse Effect.
With respect to each such Acquiror Contract, (i) all necessary
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governmental approvals with respect thereto required to be obtained by Acquiror
have been obtained and (ii) all necessary filings or registrations therefor
required to be made by Acquiror have been made, except in the case of the
foregoing clauses (i) and (ii) where the failure to obtain any such approvals
or make such filings and registrations would not, individually or in the
aggregate, have an Acquiror Material Adverse Effect. With respect to each such
Acquiror Contract, (i) Acquiror has performed all obligations thereunder
required to be performed by Acquiror to date and (ii) Acquiror is not and, to
Acquiror's knowledge, no other party is in default under any of the Acquiror
Contracts, and there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a default, except in the case of the foregoing clauses (i) and
(ii) for such nonperformance, events and defaults which would not, individually
or in the aggregate, have an Acquiror Material Adverse Effect.
(b) As used herein, an "Acquiror Contract" shall mean any
agreement, contract or commitment (whether written or oral) to which Acquiror
is a party or by which Acquiror or any of its Assets is bound which involves
payments of more than Five Thousand Dollars ($5,000) individually or Twenty
Thousand Dollars ($20,000) in the aggregate with all other similar types of
such agreements, contracts or commitments.
SECTION 5.16. REAL PROPERTY.
Acquiror has provided to the Company access to all documentation
evidencing all leasehold interests in real estate, easements, rights to access,
rights-of-way and other real property interests which are owned, leased, used
or held for use by Acquiror (collectively, the "Acquiror Real Property").
Acquiror does not hold any fee simple interest in any real estate. The
Acquiror Real Property constitutes all real property interests necessary to
conduct the business and operations of Acquiror as now conducted and is
suitable and adequate for the uses for which it is currently devoted.
SECTION 5.17. INTELLECTUAL PROPERTY.
(a) Acquiror either owns or has adequate rights to use all of the
Intellectual Property that is necessary to and currently used for its business
as now conducted. The software which Acquiror licenses to third parties is
free and clear of Encumbrances, and to the best of Acquiror's knowledge, all
other Acquiror Intellectual Property is free and clear of Encumbrances. All
Acquiror Software either does not contain any third party Intellectual Property
or, to the extent it contains third party Intellectual Property, Acquiror has
adequate rights to include such third party Intellectual Property in such
Acquiror Software.
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(b) There are no pending or, to the best of Acquiror's knowledge,
threatened claims against Acquiror alleging that the conduct of its business
infringes any Intellectual Property rights of others. The Intellectual
Property of Acquiror is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge. To the best of Acquiror's knowledge, Acquiror
has not engaged in unfair competition against any third party and the business
of Acquiror as now conducted does not infringe any third party Intellectual
Property rights.
(c) To the best of Acquiror's knowledge, no third party is
infringing upon any of Acquiror's Intellectual Property, and Acquiror has not
notified any third party that it believes such third party is interfering with,
infringing or misappropriating any of Acquiror's Intellectual Property or
engaging in any act of unfair competition. Acquiror represents and warrants
that it has the right to bring an action for the infringement of all of its
Intellectual Property.
(d) Each present or former employee, consultant, officer, director
or stockholder of Acquiror has executed a confidentiality and nondisclosure
agreement substantially in the form which has been made available to the
Company, and an Intellectual Property assignment agreement.
(e) Any third party to which Acquiror has disclosed or allowed
access to the proprietary and confidential Intellectual Property of Acquiror
has executed a confidentiality and nondisclosure agreement with respect to such
Intellectual Property.
(f) To the best of Acquiror's knowledge any hardware, software or
firmware licensed or purchased by Acquiror from third parties, accurately
processes date/time data (including but not limited to, calculating, comparing
and sequencing) from, into and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and leap year calculations. Acquiror
represents and warrants that Acquiror Software accurately processes date/time
data (including but not limited to, calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries, and the years
1999 and 2000 and leap year calculations when either (A) used as a standalone
application, or (B) integrated into or otherwise used in conjunction with the
Third Party Products with which such Acquiror Software was designed or intended
to operate at the time such Acquiror Software was (i) developed for internal
use or (ii) provided to Acquiror customers or tested by Acquiror for such
customers, whichever is later. Notwithstanding the foregoing, Acquiror shall
not be considered to be in breach of the representation and warranty set forth
in the immediately preceding sentence if the failure of such Acquiror Software
to comply with such representation and warranty is attributable solely to (i) a
failure by any Third Party Product to accurately process date/time data
(including but not limited to, calculating, comparing and sequencing) from,
into and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and
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leap year calculations; or (ii) any modification of the Acquiror Software by an
Acquiror customer following the provision of such Acquiror Software to such
customer or the testing of the Acquiror Software by Acquiror for such customer,
whichever is later.
SECTION 5.18. ENVIRONMENTAL MATTERS.
(a) Acquiror has complied and is in compliance in all material
respects with all Environmental Laws. Acquiror does not have any liability
under any Environmental Law, nor is Acquiror responsible for any liability of
any other person under any Environmental Law. There are no pending or, to the
knowledge of Acquiror, threatened actions, suits, claims, legal proceedings or
other proceedings based on, and Acquiror has not directly or indirectly
received any notice of any complaint, order, directive, citation, notice of
responsibility, notice of potential responsibility, or information request from
any Government Entity or any other person arising out of or attributable to:
(i) the current or past presence, Release or threatened Release of Hazardous
Materials at or from any part of the Acquiror Real Property; (ii) the off-site
disposal or treatment of Hazardous Materials originating on or from the
Acquiror Real Property or the businesses or Assets of Acquiror; or (iv) any
violation of Environmental Laws at any part of the Acquiror Real Property or
otherwise arising from Acquiror's activities involving Hazardous Materials.
(b) No consent, notification, approval or other action is required
by Acquiror under any Environmental Law in order to consummate the Merger.
SECTION 5.19. POOLING OF INTERESTS.
To the best knowledge of Acquiror, Acquiror has not taken any action
which would interfere with Acquiror's ability to account for the Merger as a
pooling of interests.
SECTION 5.20. BOOKS AND RECORDS.
The books of account, stock records, minute books and other records of
Acquiror are true and complete in all material respects, and the matters
contained therein are appropriately and accurately reflected in the financial
statements to the extent required to be reflected therein.
SECTION 5.21. TAXES AND ASSESSMENTS.
(a) Acquiror has (or, in the case of returns becoming due after the
date hereof and on or before the Effective Time, will have prior to the
Effective Time) duly filed all Tax returns required to be filed by Acquiror on
or before the
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Effective Time with respect to all applicable Taxes (as defined below). No
penalties or other charges are or will become due with respect to any of
Acquiror's Tax returns as the result of the late filing thereof. All of
Acquiror Tax returns are (or, in the case of returns becoming due after the
date hereof and on or before the Effective Time, will be) true and complete in
all material respects. Acquiror: (i) has paid all Taxes due or claimed to be
due by any taxing authority in connection with any of Acquiror Tax returns
(without regard to whether or not such Taxes are shown as due on such Acquiror
Tax returns); or (ii) has established (or, in the case of amounts becoming due
after the date hereof, prior to the Effective Time will have paid or
established) in its financial statements made available to the Company adequate
reserves (in conformity with generally accepted accounting principles
consistently applied) for the payment of such Taxes. The amounts set up as
reserves for Taxes on the financial statements of Acquiror made available to
the Company are, to Acquiror's knowledge, sufficient for the payment of all
unpaid Taxes, whether or not such Taxes are disputed or are yet due and
payable, for or with respect to the period, and for which Acquiror may be
liable or as a transferee of the assets of, or successor to, any corporation,
person, association, partnership, joint venture or other entity.
(b) Acquiror, either in its own right or as a transferee, has not
or on the Effective Time will not have any material liability for Taxes payable
for or with respect to any periods prior to and including the Effective Time in
excess of the amounts actually paid prior to the Effective Time or reserved for
in financial statements made available to the Company.
(c) There is no action, suit, proceeding, audit, investigation or
claim pending or, to the knowledge of Acquiror, threatened in respect of any
Taxes for which Acquiror is or may become liable, nor has any deficiency or
claim for any such Taxes been proposed, asserted or, to the knowledge of
Acquiror, threatened. Acquiror has not consented to any waivers or extensions
of any statute of limitations with respect to any taxable year of Acquiror.
There is no agreement, waiver or consent providing for an extension of time
with respect to the assessment or collection of any Taxes against Acquiror, and
no power of attorney granted by Acquiror with respect to any tax matters is
currently in force.
(d) Acquiror has made available to Acquiror true and complete
copies of all Acquiror Tax returns and all written communications by or to
Acquiror relating to any such Acquiror Tax returns or to any deficiency or
claim proposed and/or asserted, irrespective of the outcome of such matter, but
only to the extent such items relate to tax years (i) which are subject to an
audit, investigation, examination or other proceeding, or (ii) with respect to
which the statute of limitations has not expired.
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(e) Acquiror has made available to the Company information
regarding (i) all federal tax elections that currently are in effect with
respect to Acquiror, and (ii) all elections for purposes of foreign, state or
local Taxes and all consents or agreements for purposes of federal, foreign,
state or local Taxes in each case that reasonably could be expected to affect
or be binding upon Acquiror or its assets or operations after the Effective
Time, and (iii) changes in accounting methods for Tax purposes at any time
made, agreed to, requested or required with respect to Acquiror.
(f) Acquiror (i) is not and never has been a partner in a
partnership or an owner of an interest in an entity treated as a partnership
for federal income tax purposes; (ii) has not executed or filed with the
Internal Revenue Service any consent to have the provisions of Section 341(f)
of the Code apply to it; (iii) is not subject to Section 999 of the Code; (iv)
is not a passive foreign investment company as defined in Section 1296(a) of
the Code; and (v) is not a party to an agreement relating to the sharing,
allocation or payment of, or indemnity for, Taxes.
SECTION 5.22. EMPLOYMENT MATTERS.
(a) Acquiror has made available to the Company true and complete
information regarding the names, positions and annual rates of compensation
(including bonuses and other special compensation arrangements) of all current
directors, officers and employees of Acquiror. With respect to any persons
employed by Acquiror, Acquiror is in compliance with all Laws respecting
employment conditions and practices, have withheld all amounts required by any
applicable Laws to be withheld from wages or any Taxes or penalties for failure
to comply with any of the foregoing.
(b) There are no collective bargaining agreements applicable to any
Acquiror employees and Acquiror does not have a duty to bargain with any labor
organization with respect to any such persons. There is not pending any demand
for recognition or any other request or demand from a labor organization for
representative status with respect to any persons employed by Acquiror.
(c) With respect to any persons employed by Acquiror, (i) Acquiror
has not engaged in any unfair labor practice within the meaning of the National
Labor Relations Act and has not violated any legal requirement prohibiting
discrimination on the basis of race, color, national origin, sex, religion,
age, marital status, or handicap in its employment conditions or practices; and
(ii) there are no pending or, to the knowledge of Acquiror, threatened unfair
labor practice charges or discrimination complaints relating to race, color,
national origin, sex, religion, age, marital status, or handicap against
Acquiror before any Government Entity nor, to the knowledge of Acquiror, does
any basis therefor exist.
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SECTION 5.23. EMPLOYEE BENEFIT PLANS.
(a) Acquiror has made available to the Company copies of all of the
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, sabbatical, vacation, bonus, loans,
medical, dental, vision care, disability, life insurance or other employee
programs, arrangements or agreements and all other material employee benefit
plans or fringe benefit plans, including, without limitation, all "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
Acquiror or for which Acquiror could incur a liability or any entity required
to be aggregated with Acquiror (each, an "Acquiror Commonly Controlled Entity")
pursuant to Section 414 of the Code for the benefit of present and former
employees or directors of Acquiror or their beneficiaries, or providing
benefits to such persons in respect of services provided to any such entity
(collectively, the "Acquiror Benefit Plans"). Any of the Acquiror Benefit
Plans which is an "employee pension benefit plan", as that term is defined in
Section 3(2) of ERISA, is referred to herein as an "Acquiror ERISA Plan".
(b) Each of the Acquiror Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) or 501 of the Code has been determined by
the Internal Revenue Service to be so qualified and to Acquiror's knowledge, no
circumstances exist that could reasonably be expected by Acquiror to result in
the revocation of any such determination. Each of the Acquiror Benefit Plans
is in compliance with their terms and the applicable terms of ERISA and the
Code and any other applicable laws, rules and regulations the breach or
violation of which could result in a material liability to Acquiror or any
Acquiror Commonly Controlled Entity.
(c) No Acquiror ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability", as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan equals or exceeds the plan's "benefit liabilities", as that term is
defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. All contributions, premiums and other payments
with respect to each Acquiror ERISA Plan which have become due and payable have
been paid.
(d) No Acquiror Benefit Plan is or has been a Multiemployer Plan.
Neither Acquiror nor any Acquiror Commonly Controlled Entity has completely or
partially withdrawn from any Multiemployer Plan. No termination liability to
the Pension Benefit Guaranty Corporation or withdrawal liability to any
Multiemployer Plan that is material in the aggregate has been or is reasonably
expected to be incurred with respect to any Multiemployer Plan by Acquiror or
any Acquiror Commonly Controlled Entity.
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(e) Acquiror has made available to the Company complete copies, as
of the date hereof, of all of the Acquiror Benefit Plans that have been reduced
to writing, together with all documents establishing or constituting any
related trust, annuity contract, insurance contract or other funding
instrument. Acquiror has made available to the Company complete copies of
current plan summaries, employee booklets, personnel manuals and other material
documents or written materials concerning the Acquiror Benefit Plans that are
in the possession of Acquiror as of the date hereof.
(f) No claim, lawsuit, arbitration or other action has been
threatened or instituted against any Acquiror Benefit Plan.
(g) Except as contemplated by the terms of this Agreement, the
consummation of the transactions contemplated by this Agreement will not give
rise to any liability, including, without limitation, liability for severance
pay or termination pay, or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any employee, director
or stockholder of Acquiror (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions. No amounts payable under
any Acquiror Benefit Plan will fail to be deductible for federal income tax
purposes by virtue of Section 280G or 162(m) of the Code.
(h) Acquiror does not maintain, contribute to, or in any way
provide for any benefits of any kind (other than under Section 4980B of the
Code, the Federal Social Security Act, or a plan qualified under Section 401(a)
of the Code) to any current or future retiree or terminee.
(i) Neither Acquiror nor any Acquiror Commonly Controlled Entity
has (or could incur) any liability under Title IV of ERISA.
SECTION 5.24. TRANSACTIONS WITH RELATED PARTIES.
Except for expense advances to employees in the ordinary course of
business and except for the transactions and agreements previously disclosed to
the Company, no present or former officer, director, stockholder or person
known by Acquiror to be an affiliate of Acquiror, nor any person known by
Acquiror to be an affiliate of any such person, is currently a party to any
transaction or agreement with Acquiror, including any agreement providing for
any loans or advances in an amount in excess of One Thousand Dollars ($1,000)
individually (or Five Thousand Dollars ($5,000) in the aggregate for all such
agreements), the employment of, furnishing of services by, rental of their
respective Assets from or to, or otherwise requiring payments to, any such
officer, director, stockholder or affiliate.
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SECTION 5.25. INSURANCE.
Acquiror has made available to the Company true and correct copies of
all insurance policies of title, property, fire, casualty, liability, life,
worker's compensation, libel and slander, and other forms of insurance of any
kind relating to the Assets or the business and operations of Acquiror. All
premiums with respect to such policies covering all periods up to and including
the date hereof have been paid, and no notice of cancellation or termination
has been received with respect to any such policy. All such policies (a) are
in full force and effect; (b) are sufficient for compliance by Acquiror with
all requirements of applicable Law and of all licenses, franchises and other
agreements to which Acquiror is a party; (c) are valid, outstanding, and
enforceable policies; and (d) provide adequate insurance coverage for the
respective Assets and the business and operations of Acquiror. There are no
pending claims under any insurance policies and to Acquiror's knowledge there
are no facts which would lead Acquiror to believe that Acquiror will likely
receive a claim under any insurance policies.
SECTION 5.26. PERMITS.
Acquiror holds all licenses and permits from Government Entities which
are necessary for the conduct of its business, except where the failure to hold
any such license or permit would not have a Acquiror Material Adverse Effect.
SECTION 5.27. MINUTE BOOKS.
The minute books of Acquiror made available to the Company contain a
complete and accurate summary of all meetings of directors and stockholders or
actions by written consent since the time of incorporation of Acquiror through
the date of this Agreement, and reflect all transactions referred to in such
minutes accurately in all material respects.
SECTION 5.28. DISCLOSURE.
No representations or warranties by Acquiror in this Agreement and no
statement or information contained in the Schedules hereto or any certificate
furnished or to be furnished by Acquiror to the Company pursuant to the
provisions of this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF MERGER SUB
Acquiror and Merger Sub jointly and severally represent and warrant to
the Company and the Stockholders as follows:
SECTION 6.1. ORGANIZATION AND QUALIFICATION.
Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement. As of the date of this Agreement, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 6.2. ARTICLES OF INCORPORATION AND BYLAWS.
Merger Sub has heretofore made available to the Company a complete and
correct copy of the articles of incorporation and the bylaws of Merger Sub,
each as amended to date. Such articles of incorporation and bylaws are in full
force and effect. Merger Sub is not in violation of any of the provisions of
its articles of incorporation or bylaws or other organizational or governing
document.
SECTION 6.3. AUTHORITY.
Merger Sub has the necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Merger Sub and, assuming the due authorization, execution and delivery by the
Company and Acquiror, constitutes a legal, valid and binding obligation of
Merger Sub, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of
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general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
SECTION 6.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Merger Sub do
not, and the performance by Merger Sub of its obligations under this Agreement
will not, (i) conflict with or violate the articles of incorporation or bylaws
of Merger Sub, (ii) conflict with or violate any Laws applicable to Merger Sub
or its Assets, or (iii) result in any breach of or constitute a default under
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Merger Sub is a
party or by which Merger Sub is bound, or by which any of its Assets is
subject.
(b) The execution and delivery of this Agreement by Merger Sub does
not, and the performance of this Agreement by Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Government Entity, except for the filing and recordation of appropriate
merger documents as required by the CGCL and the DGCL.
ARTICLE VII
COVENANTS
SECTION 7.1. AFFIRMATIVE COVENANTS.
Each of the Company and Acquiror hereby covenants and agrees that,
prior to the Effective Time, unless otherwise expressly contemplated by this
Agreement or consented to in writing by the other party, it shall (a) operate
its business in the usual and ordinary course consistent with past practices
and in accordance with applicable Laws; (b) preserve intact its business
organization, maintain its rights and contracts, use its best efforts to retain
the services of its respective principal officers and key employees and
maintain its relationship with its respective suppliers, contractors,
distributors, customers and others having business relationships with it; (c)
keep its Assets in as good repair and condition as at present, ordinary wear
and tear excepted; and (d) keep in full force and effect in all material
respects insurance comparable in amount and scope of coverage to that currently
maintained.
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SECTION 7.2. NEGATIVE COVENANTS.
Except as expressly contemplated by this Agreement or otherwise
consented to in writing by the other party, from the date hereof until the
Effective Time, each of the Company and Acquiror shall not do any of the
following:
(a) (i) increase the compensation payable to or to become payable
to any of its directors, officers or employees; (ii) grant any severance or
termination pay to, or enter into or modify any employment or severance
agreement with, any of its directors, officers or employees; or (iii) adopt or
amend any employee benefit plan or arrangement, except as may be required by
applicable Law;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, except for the purposes
of making tax payments by the Stockholders as a result of the Company's
classification as an "S Corporation" within the meaning of Code Sections 1361
and 1362;
(c) (i) redeem, repurchase or otherwise reacquire any share of its
capital stock or any securities or obligations convertible into or exchangeable
for any share of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock or any such securities
or obligations; (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant of
any Encumbrances) of, any shares of any class of its capital stock (including
shares held in treasury) or other equity securities, any securities or
obligations directly or indirectly convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to
acquire, any such shares or securities or any rights, warrants or options
directly or indirectly to acquire any such shares or securities, except, in the
case of Acquiror, for grants of options and issuances of Acquiror Common Stock
upon the exercise of options in the ordinary course of business; or (ii) amend
or otherwise modify the terms of any such securities, obligations, rights,
warrants or options in a manner inconsistent with the provisions of this
Agreement or the effect of which shall be to make such terms more favorable to
the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or a substantial portion of the Assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any Assets of any other person (other than the
purchase of inventory in the ordinary
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52
course of business and consistent with past practice), or make or commit to
make any capital expenditures;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its Assets, except for the granting of licenses to
use Intellectual Property in the ordinary course of business;
(g) propose or adopt any amendments to its articles of
incorporation or bylaws;
(h) (i) change any of its methods of accounting, (ii) make or
rescind any express or deemed election relating to taxes, settle or compromise
any claim, action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to taxes, or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns for the taxable
years ending December 31, 1996 and 1997, except, in the case of clause (i) or
clause (ii), as may be required by law or generally accepted accounting
principles, consistently applied; or (iii) in the case of the Company, take any
action, or permit any of the Stockholders to take any action, that would cause
the Company to not be classified as an "S Corporation" within the meaning of
Code Sections 1361 and 1362 at any time prior to the Effective Time;
(i) prepay, before the scheduled maturity thereof, any of its
long-term debt, or incur any obligation for borrowed money, whether or not
evidenced by a note, bond, debenture or similar instrument, other than trade
payables incurred in the ordinary course of business consistent with past
practices.
(j) in the case of the Company, enter into or modify in any
material respect any Company Contract and, in the case of Acquiror, enter into
or modify in any material respect any Acquiror Contract, except for any
modifications to Acquiror's existing lease of space for its Reston, Virginia,
building in connection with the renewal thereof;
(k) take any action that would or could reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being untrue or in any of the conditions to the Merger set forth in Article IX
not being satisfied; or
(l) agree in writing or otherwise to do any of the foregoing.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1. CONSENTS AND APPROVALS; FILINGS AND NOTICES.
Each of the Company and Acquiror shall use reasonable efforts to as
promptly as possible make all filings with, provide all notices to and obtain
all consents and approvals from third parties required to be obtained by the
Company in connection with the transactions contemplated hereunder, including
all filings with, notices to and consents and approvals from any Government
Entities and other persons.
SECTION 8.2. ACCESS TO INFORMATION.
Each of the Company and Acquiror shall afford to the other party and
such other party's accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior to the Effective
Time to (a) all of its properties, books, contracts, commitments and records,
and (b) all other material information concerning its business, properties and
personnel (subject to restrictions imposed by applicable law) as the other
party may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 8.2 shall affect or be deemed to modify
any representation or warranty of any party contained herein. In the event of
the termination of this Agreement, each of the Company and Acquiror shall
destroy or deliver to the other party all confidential documents, work papers
and other materials, and all copies thereof, obtained from the other party as a
result of this Agreement or in connection herewith, whether obtained before or
after the execution and delivery of this Agreement.
SECTION 8.3. CONFIDENTIALITY.
Each of the parties hereto hereby agrees that disclosure of any and all
information or knowledge obtained pursuant to this Agreement, or pursuant to
the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, shall be subject to the terms and conditions
of the Confidentiality Agreement dated June 12, 1998, between the Company and
Acquiror (the "Confidentiality Agreement").
SECTION 8.4. FURTHER ACTION; REASONABLE BEST EFFORTS.
Subject to the terms and conditions herein provided, each of the
parties shall use reasonable best efforts to take, or cause to be taken, all
appropriate action,
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and do, or cause to be done, all things necessary, proper or advisable under
applicable Laws or otherwise to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, including using its
reasonable best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Government Entities and parties to
contracts with the Company and Acquiror as are necessary for the transactions
contemplated herein.
SECTION 8.5. PUBLIC ANNOUNCEMENTS.
The Company and the Stockholders on the one hand, and Acquiror and
Merger Sub on the other hand, agree that neither will issue any press release or
otherwise make any public statements concerning this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party.
SECTION 8.6. NO SOLICITATION.
During the term of this Agreement, neither the Company, any
Stockholder nor any of their respective affiliates or any person acting on
behalf of such party or affiliate shall (a) solicit or favorably respond to
indications of interest from, or enter into negotiations with, any third party
for any proposed merger, consolidation, sale or acquisition of the Company,
the Assets or the Company Common Stock or (b) furnish or cause to be furnished
any nonpublic information concerning the business to any person other than in
the ordinary course of business or pursuant to applicable Laws and after prior
written notice to Acquiror.
SECTION 8.7. EMPLOYEES.
Each of the Company and Acquiror shall, subject to the terms and
conditions of this Agreement, use its reasonable best efforts to encourage the
current employees of the Company to continue their employment and relationship
with the Company following the Effective Time.
SECTION 8.8. POOLING ACCOUNTING.
Acquiror and the Company shall each use its reasonable efforts to
cause the business combination to be effected by the Merger to be accounted
for as a pooling of interests. Each of Acquiror and the Company shall use its
reasonable efforts to cause its affiliates not to take any action that would
adversely affect the ability of Acquiror to account for the business
combination to be effected by the Merger as a pooling of interests.
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SECTION 8.9. STOCKHOLDERS' COVENANTS NOT TO COMPETE
(a) Each Stockholder acknowledges that the business of the Company
and Acquiror are conducted throughout the United States, and acknowledges and
recognizes the highly competitive nature of the industry in which such business
is involved. Accordingly, in consideration of the premises contained herein,
the consideration to be received by the Stockholders hereunder for the sale of
the goodwill of the Company's business, and in consideration of and as an
inducement to Acquiror to consummate the transactions contemplated hereby, each
Stockholder covenants and agrees that during the Noncompete Period (as defined
below), such Stockholder shall not, directly or indirectly: (i) engage in,
participate in, represent in any way or be connected with, as officer,
director, partner, owner, employee, agent, sales representative, distributor,
independent contractor, consultant, proprietor, stockholder or otherwise, any
Competitive Business (as defined below) in the United States; (ii) solicit
(other than on behalf of the Company or Acquiror) business or contracts for any
products or services of the type provided, developed or under development by
the Company or Acquiror during the Noncompete Period, from or with (A) any
person or entity which was a client of the Company or Acquiror for such
products or services as of, or within twelve (12) months prior to the
expiration of, the Noncompete Period, or (B) any prospective client which the
Company or Acquiror was actively soliciting as of, or within twelve (12) months
prior to the expiration of, the Noncompete Period; (iii) solicit or induce or
attempt to solicit or induce any employee of the Company or Acquiror to leave
the employ of the Company or Acquiror for any reason whatsoever, or hire any
employee or any person who was an employee of the Company or Acquiror within
the twelve (12) month period prior to such hiring; or (iv) interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company or Acquiror and any third party, including, without
limitation, any customer, supplier or employee of the Company or Acquiror;
provided, however, that the foregoing shall not preclude any Stockholder from
owning, collectively, less than five percent (5%) of the securities of a
company engaged in a Competitive Business as long as such securities are traded
on a national securities exchange or reported on the NASDAQ National Market.
The "Noncompete Period" for each Stockholder shall mean the
period from and after the Effective Time until two (2) years after the
Effective Time. A "Competitive Business" shall mean any business in which the
Company or Acquiror is engaged at any time during the Noncompete Period.
(b) The covenants contained in this Section 8.9 shall be construed
as a series of separate and severable covenants which are identical in terms
except for geographic coverage. The parties hereto agree that if in any
proceeding, the tribunal shall refuse to enforce fully any covenants contained
herein because such covenants cover too extensive a geographic area or too long
a period of time or for
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any other reason whatsoever, any such covenant shall be deemed amended to the
extent (but only to the extent) required by law. Each party acknowledges that
the covenants contained in this Section 8.9 are reasonable and necessary to
protect the business and interests of the Company and Acquiror and that any
violation of these covenants would cause substantial irreparable injury.
Accordingly, each party agrees that a remedy at law for any breach of the
foregoing covenants would be inadequate and that the Company and Acquiror, in
addition to any other remedies available, shall be entitled to obtain
preliminary and permanent injunctive relief to secure specific performance of
such covenants and to prevent a breach or contemplated breach of such covenants
without the necessity of proving actual damage.
(c) The obligations of each Stockholder under this Section 8.9
shall survive the Effective Time of the Merger.
SECTION 8.11. STOCKHOLDERS' NOMINEE ON ACQUIROR'S BOARD OF DIRECTORS.
The Stockholders hereby nominate Xxxxxx Xxxx to serve on Acquiror's
Board of Directors. Prior to the Effective Time, Acquiror shall take such
actions as may be reasonably necessary so that such nominee will be duly
elected to the Acquiror's Board of Directors as a Class I Director, effective
one (1) day after the Effective Time, to fill the vacancy created by the
resignation of Xxxxxxxxxxx Xxxxxxx.
SECTION 8.12. SALE OF CERTAIN MERGER STOCK IN ACQUIROR'S IPO.
Subject to the restrictions set forth in Section 2.5(c) of this
Agreement, Acquiror shall use its reasonable efforts to include in the
registration statement for an initial public offering of Acquiror Common Stock
(an "IPO"), a number of shares of Acquiror Common Stock issued to each
Stockholder in the Merger that is equal to the percentage of such Stockholder's
Acquiror Common Stock as of the effective date of such IPO that is no less than
the percentage of Acquiror Common Stock held by Xxxx Xxxxxxxxx as of the
effective date of such IPO that is included in such registration statement.
Such inclusion shall be in the discretion of underwriters, and Acquiror makes
no commitments regarding the amount of Merger Stock, if any, that the
underwriters will permit to be included in such IPO. In connection with any
such IPO, each Stockholder agrees to enter into an agreement reasonably
requested by the representatives of the underwriters in the IPO, pursuant to
which such Stockholder will agree not to offer, pledge, sell, contract to offer
or sell or otherwise dispose of, any shares of Acquiror Common Stock
beneficially owned by such Stockholder for such period after the effective date
of the registration statement filed with the SEC in connection with the IPO as
requested by such representatives, provided that all other directors of
Acquiror and holders of ten
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percent (10%) or more of the outstanding shares of Acquiror Common Stock also
so agree.
SECTION 8.13. ADDITIONAL ACQUIROR STOCK OPTIONS.
In addition to the New Options, promptly after the Effective Time,
Acquiror shall issue to certain employees of the Company such additional
options to purchase shares of Acquiror Common Stock that, in the aggregate,
equal options to acquire six hundred fifty thousand (650,000) shares of
Acquiror Common Stock. Each such additional option shall have an exercise
price of Ten Dollars ($10.00) per share of Acquiror Common Stock and shall be
subject to the terms and conditions of Acquiror's Stock Option Plan.
ARTICLE IX
CLOSING CONDITIONS
SECTION 9.1. CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB.
The obligations of Acquiror and Merger Sub to effect the Merger and
the other transactions contemplated in this Agreement are also subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. The representations and
warranties of the Company and the Stockholders made in this Agreement shall be
true and correct in all material respects, on and as of the Effective Time with
the same effect as though such representations and warranties had been made on
and as of the Effective Time (provided that any representation or warranty
contained herein that is qualified by a materiality standard shall not be
further qualified hereby), except for representations and warranties that speak
as of a specific date or time (which need only be true and correct in all
material respects as of such date or time). Acquiror shall have received a
certificate signed on behalf of the Company by the President of the Company to
that effect and a certificate signed by each Stockholder to that effect.
(b) Agreements and Covenants. The agreements and covenants of the
Company and the Stockholders required to be performed on or before the
Effective Time shall have been performed in all material respects. Acquiror
shall have received a certificate signed on behalf of the Company by the
President of the Company to that effect with respect to the Company's covenants
and agreements
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and a certificate signed by each Stockholder to that effect with respect to
such Stockholder's covenants and agreements.
(c) No Company Material Adverse Effect. Since the date of this
Agreement, no Company Material Adverse Effect shall have occurred and be
continuing.
(d) Legal Proceedings. No action or proceeding before any
Government Entity shall have been instituted or threatened (and not
subsequently settled, dismissed, or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the Merger or other transactions
contemplated by this Agreement other than an action or proceeding instituted or
threatened by a party hereto.
(e) Required Consents. The Company shall have delivered to
Acquiror at or before Closing all consents or notices necessary to be obtained
or made by the Company in connection with the transactions contemplated by this
Agreement.
(f) Pooling of Interests. Acquiror shall have received reasonable
assurances from Price Waterhouse, in form and substance reasonably satisfactory
to Acquiror that the Merger will qualify as a "pooling of interests" in
accordance with generally accepted accounting principles.
(g) Escrow Agreement. The Escrow Agent and the Stockholders'
Representative shall have entered into the Escrow Agreement at or before
Closing pursuant to which the Escrow Stock shall have been retained in escrow.
(h) Legal Opinion. Acquiror shall have received an opinion from
Xxxxxxx Xxxxx & Xxxxx LLP, counsel to the Company, in a form reasonably
acceptable to Acquiror and its counsel.
(i) Employment Agreements. The Employment Agreements shall remain
in full force and effect.
(j) Amendment No. 2 to Stockholders' Agreement. Each Stockholder
shall have executed and delivered the Amendment No. 2 to Stockholders'
Agreement.
(k) Other Closing Documents. The Company shall have executed
and/or delivered to Acquiror such additional documents, certificates, opinions
and agreements as Acquiror may reasonably request.
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SECTION 9.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS.
The obligations of the Company and the Stockholders to effect the
Merger and the other transactions contemplated in this Agreement are also
subject to the fulfillment at or prior to the Effective Time of the following
conditions any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Representations and Warranties. The representations and
warranties of Acquiror and Merger Sub made in this Agreement shall be true and
correct in all material respects, on and as of the Effective Time with the same
effect as though such representations and warranties had been made on and as of
the Effective Time (provided that any representation or warranty contained
herein that is qualified by a materiality standard shall not be further
qualified hereby), except for representations and warranties that speak as of a
specific date or time other than the Effective Time (which need only be true
and correct in all material respects as of such date or time). The Company and
the Stockholders shall have received a certificate of the Chief Executive
Officer of Acquiror and the President of Merger Sub to that effect.
(b) Agreements and Covenants. The agreements and covenants of
Acquiror and Merger Sub required to be performed on or before the Effective
Time shall have been performed in all material respects. The Company and the
Stockholders shall have received a certificate of the Chief Executive Officer
of Acquiror and the President of Merger Sub to that effect.
(c) Legal Proceedings. No action or proceeding before any
Government Entity shall have been instituted or threatened (and not
subsequently settled, dismissed, or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the Merger or other transactions
contemplated by this Agreement other than an action or proceeding instituted or
threatened by a party hereto.
(d) Legal Opinion. The Company and the Stockholders shall have
received opinions from Acquiror's General Counsel and Xxxxx & Xxxxxxx L.L.P.,
counsel to the Company, each in a form reasonably acceptable to the Company and
its counsel.
(e) No Acquiror Material Adverse Effect. Since the date of this
Agreement, no Acquiror Material Adverse Effect shall have occurred and be
continuing.
(f) Pooling of Interests. The Company and the Stockholders shall
have received reasonable assurances from Price Waterhouse, in form and
substance
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reasonably satisfactory to the Company, that the Merger will qualify as a
"pooling of interests" in accordance with generally accepted accounting
principles.
(g) Escrow Agreement. The Company, Merger Sub and the Escrow Agent
shall have entered into the Escrow Agreement at or before Closing pursuant to
which the Escrow Stock shall have been retained in escrow.
(h) Registration Rights Agreement. Acquiror and the other parties
to Acquiror's Amended and Restated Registration Rights Agreement dated November
27, 1997, shall have executed and delivered the Amended and Restated
Registration Rights Agreement in substantially the same form as Exhibit C
hereto (the "Amended and Restated Registration Rights Agreement").
(i) Amendment No. 2 to Stockholders' Agreement. Acquiror and each
of the other parties to the Stockholders' Agreement shall have executed and
delivered the Amendment No. 2 to Stockholders' Agreement.
(j) Required Consents. Acquiror and Merger Sub shall have obtained
all consents or made all notices necessary to be obtained or made by Acquiror
or Merger Sub in connection with the transactions contemplated by this
Agreement.
(k) Other Closing Documents. Acquiror shall have executed and/or
delivered to the Company such additional documents, certificates, opinions and
agreements as the Company may reasonably request.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. TERMINATION.
This Agreement may be terminated at any time prior to the Effective
Time:
(a) by mutual written consent of Acquiror and the Company;
(b) by Acquiror if the Company or any Stockholder shall have
breached any of its representations, warranties, covenants or agreements
contained in this Agreement, or any such representation or warranty shall have
become untrue, in any such case such that the conditions precedent to the
obligations of Acquiror to close specified in Section 9.1 will not be satisfied
and such breach has not been promptly cured within thirty (30) days following
receipt by the Company of written notice of such breach;
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(c) by the Company if Acquiror or Merger Sub shall have breached
any of its representations, warranties, covenants or agreements contained in
this Agreement, or any such representation or warranty shall have become
untrue, in any such case such that the conditions precedent to the obligation
of the Company and the Stockholders to close specified in Section 9.2, will not
be satisfied and such breach has not been promptly cured within thirty (30)
days following receipt by Acquiror of written notice of such breach;
(d) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Government Entity preventing or prohibiting consummation of
the Merger shall have become final and non-appealable; or
(e) by either Acquiror or the Company if the Effective Time has not
occurred on or prior to September 30, 1998 (unless such date shall be extended
by the mutual written consent of the Company and Acquiror); provided, that the
right to terminate this Agreement under this Section 10.1(e) shall not be
available to any party whose breach of representations, warranties, covenants
or agreements contained in this Agreement has been the sole cause of, or
resulted in, the failure of the Effective Time to occur by such date or the
inability of such condition to be satisfied.
SECTION 10.2. EFFECT OF TERMINATION.
If this Agreement is terminated pursuant to Section 10.1, this
Agreement and all Related Agreements shall forthwith become void and there
shall be no obligation on the part of any party hereto, except that the
provisions of Sections 8.3 and 12.11 shall not be extinguished but shall
survive such termination, and nothing herein shall relieve any party from
liability for any breach hereof and each party shall be entitled to any
remedies at law or in equity for such breach.
SECTION 10.3. AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the Company, Acquiror, Merger Sub and the Stockholders'
Representative.
SECTION 10.4. WAIVER.
At any time prior to the Effective Time, one party may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement of the other party and (c) waive compliance by the other party with
any of the agreements or
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conditions contained in this Agreement. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS; ESCROW ARRANGEMENTS; REMEDIES
SECTION 11.1. SURVIVAL OF REPRESENTATIONS.
All representations, warranties, covenants, indemnities and other
agreements made by any party to this Agreement herein, shall be deemed made on
and as of the Effective Time as though such representations, warranties,
covenants, indemnities and other agreements were made on and as of such date,
and all such representations, warranties, covenants, indemnities and other
agreements shall survive the Effective Time and shall remain in full force and
effect as follows: (a) unless otherwise specified hereinbelow,
representations, warranties, covenants and agreements shall survive for a
period of twelve (12) months after the Effective Time, (b) the representations
and warranties of the Company and the Stockholders set forth in Section 3.14(g)
shall survive for a period of twenty four (24) months after the Effective Time,
(c) the representations and warranties of the Stockholders for matters relating
to title to the Company Common Stock shall continue in full force and effect in
perpetuity, (d) the covenants and agreements of the Stockholders set forth in
Sections 2.5 and 8.9 shall survive until such covenants and agreements have
been performed or discharged in full, (e) the covenants and agreements in this
Article XI shall continue in full force and effect until fully discharged,
except for the indemnification obligations of the Stockholders set forth in
Section 11.2(c) which shall survive for a period of twelve (12) months after
the Effective Time, and (f) any representation, warranty, covenant, indemnity
or agreement that is the subject of a claim which is asserted in writing prior
to the expiration of the applicable period set forth above shall survive with
respect to such claim until the final resolution thereof.
SECTION 11.2. INDEMNIFICATION BY THE STOCKHOLDERS; ESCROW
ARRANGEMENTS.
(a) From and after the Effective Time and for the survival periods
described in Section 11.1, each Stockholder, severally as to such Stockholder's
representations, warranties, covenants and agreements, and jointly with the
other Stockholders as to the Company's representations, warranties, covenants
and agreements, hereby agrees to indemnify and hold harmless Acquiror, the
Surviving Corporation, and their respective officers, directors, agents and
representatives (collectively, the "Acquiror Indemnified Persons") from and
against all Losses
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resulting from, imposed upon or incurred by any Acquiror Indemnified Person,
directly or indirectly, as a result of (a) any inaccuracy or breach of a
representation or warranty of the Company or any Stockholder, including,
without limitation, the inaccuracy or breach of any representation or warranty
in Section 3.20(a) hereof, (b) any failure by the Company or any Stockholder to
perform or comply with any covenant or agreement contained in this Agreement,
any Related Agreement or any document, certificate or agreement furnished
pursuant to this Agreement, (c) any claim, demand or suit asserting that (i)
any use by the Company of the Company Intellectual Property with respect to the
trade name "Ibis" during the period prior to September 30, 1998, infringes or
violates any trademark right of any third party, and (ii) any use by the
Company of any other Company Intellectual Property during the period prior to
the Effective Time infringes or violates any trademark right of any third
party.
(b) The Escrow Stock shall be available to the Acquiror Indemnified
Persons to compensate them for any such Losses pursuant to the terms and
conditions of the Escrow Agreement; provided, that, subject to the limitations
and qualifications set forth in this Article XI, the indemnification
obligations of the Stockholders hereunder shall survive until the expiration of
the respective survival periods set forth in Section 11.1 notwithstanding the
release of any Escrow Stock. Acquiror, for itself and on behalf of the other
Acquiror Indemnified Persons, acknowledges and agrees that if any Acquiror
Indemnified Persons shall bring a claim for monetary Losses under this Section
11.2 during the twelve (12) month period after the Effective Time, the Acquiror
Indemnified Persons shall first seek to be compensated for such monetary Losses
out of the Escrow Stock before seeking compensation for such monetary Losses
against any other assets of the Stockholders; provided, however, that the
foregoing shall not apply to any equitable remedies that may be available to
the Acquiror Indemnified Persons, or for any claims for Losses arising out of a
willful or intentional breach of representations, warranties or covenants by
the Company or any Stockholder. Notwithstanding any other provision of this
Agreement to the contrary, and except for (i) remedies that the Acquiror
Indemnified Persons may have for Losses arising out of a willful or intentional
breach of representations, warranties or covenants by the Company or any
Stockholder, (ii) equitable remedies that may be available to the Acquiror
Indemnified Persons, including, without limitation, a remedy of specific
performance, and (iii) any remedies for Losses that the Acquiror Indemnified
Persons may have in the event of a termination of this Agreement, Acquiror and
Merger Sub acknowledge and agree that the maximum aggregate liability of the
Stockholders pursuant to this Agreement or otherwise (including, without
limitation, liability for any incidental, consequential or punitive damages),
shall not exceed an amount equal to the number of shares of Escrow Stock issued
as of the Effective Time, multiplied by Ten Dollars ($10.00), regardless of the
form of action or theory of recovery. The parties acknowledge and agree that
the Escrow Stock is being valued at $10.00 per share for such purpose.
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(c) Each Stockholder hereby irrevocably waives any and all right to
recourse against the Company and the Surviving Corporation with respect to any
misrepresentation or breach of any representation, warranty or indemnity, or
noncompliance with any conditions or covenants, given or made by the
Stockholders or the Company in this Agreement. No Stockholder shall be
entitled to contribution from, subrogation to or recovery against the Company
with respect to any liability of any Stockholder that may arise under or
pursuant to this Agreement or the transactions contemplated hereby; provided,
however, the foregoing waiver of recourse and contribution shall not apply in
the case of a claim for Losses against the Stockholders to the extent that the
Acquiror Indemnified Persons have a right to be fully compensated for such
Losses under a liability insurance policy maintained by the Company prior to
the Effective Time, or by the Surviving Corporation or Acquiror from and after
the Effective Time; provided, further, however, that nothing herein shall
obligate Acquiror or the Surviving Corporation to continue, carry or maintain
any liability insurance policy.
SECTION 11.3. THIRD PARTY CLAIMS.
The obligations and liabilities of the Stockholders pursuant to
Section 11.2 resulting from any Third Party Claim shall be subject to the
following terms and conditions:
(a) The Acquiror Indemnified Person seeking indemnification (the
"Indemnified Party") must give the Stockholders (collectively, the
"Indemnifying Party"), notice of any Third Party Claim which is asserted
against, resulting to, imposed upon or incurred by the Indemnified Party and
which may give rise to liability of the Indemnifying Party pursuant to this
Article XI, stating (to the extent known or reasonably anticipated) the nature
and basis of such Third Party Claim and the amount thereof; provided that the
failure to give such notice shall not affect the rights of the Indemnified
Party hereunder except to the extent (i) that the Indemnifying Party shall have
suffered actual material damage by reason of such failure, or (ii) such failure
or delay materially adversely affects the ability of the Indemnifying Party to
defend, settle or compromise such Third Party Claim.
(b) Subject to Section 11.3(c) below, if the Indemnifying Party
assumes responsibility for Losses arising out of such Third Party Claim, then
the Indemnifying Party shall have the right to undertake, by counsel or other
representatives of its own choosing, the defense of such Third Party Claim at
the Indemnifying Party's risk and expense.
(c) In the event that (i) the Indemnifying Party shall elect not to
undertake such defense, (ii) within a reasonable time after notice from the
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Indemnified Party of any such Third Party Claim, the Indemnifying Party shall
fail to undertake to defend such Third Party Claim, or (iii) such Third Party
Claim seeks injunctive or other equitable relief and there is a reasonable
probability that such Third Party Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments, then the Indemnified Party (upon further written notice to the
Indemnifying Party) shall have the right to undertake the defense, compromise
or settlement of such Third Party Claim, by counsel or other representatives of
its own choosing, on behalf of and for the account and risk of the Indemnifying
Party. In the event that the Indemnified Party undertakes the defense of a
Third Party Claim under this Section 11.3(c), the Indemnifying Party shall pay
to the Indemnified Party, in addition to the other sums required to be paid
hereunder, the reasonable costs and expenses incurred by the Indemnified Party
in connection with such defense, compromise or settlement as and when such
costs and expenses are so incurred.
(d) Anything in this Section 11.3 to the contrary notwithstanding,
(i) neither Party shall, without the other party's written consent (which
consent shall not be unreasonably withheld or delayed), settle or compromise
such Third Party Claim or consent to entry of any judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect
of such Third Party Claim in form and substance satisfactory to the Indemnified
Party; (ii) in the event that a party hereto undertakes defense of such Third
Party Claim in accordance with this Section 11.3, the other parties, by counsel
or other representative of their own choosing and at their sole cost and
expense, shall have the right to participate in the defense, compromise or
settlement thereof and each party and its counsel and other representatives
shall cooperate with the other party and its counsel and representatives in
connection therewith; and (iii) the party that undertakes the defense of such
Third Party Claim in accordance with this Section 11.3, shall have an
obligation to keep the other parties informed of the status of the defense of
such Third Party Claim and furnish the other parties with all documents,
instruments and information that the other parties shall reasonably request in
connection therewith.
(e) Any claim for indemnification under this Article XI must be
made (i) on or prior to the Claims Deadline (as defined in the Escrow
Agreement) for any claims against the Escrow Stock, and (ii) on or prior to the
expiration of the applicable survival period set forth in Section 11.1
otherwise.
SECTION 11.4. LIMITATION OF LIABILITY OF ACQUIROR AND MERGER SUB.
Notwithstanding any other provision of this Agreement to the contrary,
and except for (i) remedies that the Stockholders may have for Losses
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arising out of a willful or intentional breach of representations, warranties
or covenants by Acquiror or Merger Sub, (ii) equitable remedies that may be
available to the Stockholders to have the obligations of Acquiror hereunder and
under the Related Agreements specifically performed, and (iii) any remedies for
Losses that the Company or the Stockholders may have in the event of a
termination of this Agreement, the Company and the Stockholders acknowledge and
agree that the maximum aggregate liability of Acquiror and Merger Sub (taken as
a whole) pursuant to this Agreement or otherwise (including, without
limitation, liability for any incidental, consequential or punitive damages),
shall not exceed an amount equal to the number of shares of Escrow Stock issued
as of the Effective Time multiplied by Ten Dollars ($10.00), regardless of the
form of action or theory of recovery.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1. NOTICES.
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered,
sent by overnight courier or mailed by first-class, registered or certified
mail, return receipt requested, postage prepaid, or transmitted by telegram,
telecopy or telex, addressed as follows:
(a) If to Acquiror:
Proxicom, Inc.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxxxxx Xxxxxxx, Esq.,
General Counsel
With a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X.X. Xxxxxx, Xx.
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(b) If to the Company:
IBIS Consulting, Inc.
Xxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx Xxxx
President
With a copy (which shall not constitute notice) to:
Xxxxxxx Xxxxx & Xxxxx LLP
Xxx Xxxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx X. Low
(c) If to the Stockholders:
Xxxxxx Xxxx
c/o IBIS Consulting, Inc.
Xxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Xxxxx XxXxxxxx
c/o IBIS Consulting, Inc.
Xxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Xxxxxxx Xxxxxxxxx
c/o IBIS Consulting, Inc.
Xxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Each party may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so given,
served or sent. Each notice, demand, request, or communication which shall be
hand delivered, sent, mailed, telecopied or telexed in the manner described
above, or which shall be delivered to a telegraph company, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at
such time as it is delivered to the addressee (with the return receipt, the
delivery receipt, or (with respect to a
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telecopy or telex) the answerback being deemed conclusive, but not exclusive,
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
SECTION 12.2. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
(a) "Acquiror Material Adverse Effect" means any material
adverse effect on the Assets or the business, financial condition or results of
operations of Acquiror taken as a whole.
(b) "Acquiror Software" means the software developed by
employees, consultants and independent contractors of Acquiror for Acquiror's
internal use and/or provided to Acquiror customers, including any documentation
relating to such software.
(c) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(d) "Assets" shall mean the assets, rights and properties,
whether owned, leased or licensed, real, personal or mixed, tangible or
intangible, that are used, useful or held for use in connection with the
business of an entity.
(e) "business day" shall mean any day other than a day on which
banks in the Commonwealth of Virginia are authorized or obligated to be closed.
(f) "Company Custom Software" means the software developed by
employees, consultants and independent contractors of the Company for the
Company's internal use and/or provided to the Company customers, including any
documentation relating to such software, but does not include the Company
Software as defined in Schedule 3.14 (I)(A)(4).
(g) "Company Material Adverse Effect" means any material adverse
effect on the Assets or the business, financial condition or results of
operations of the Company taken as a whole.
(h) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
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(i) "Encumbrances" means mortgages, liens, pledges, encumbrances,
security interests, deeds of trust, options, encroachments, reservations,
orders, decrees, judgments, restrictions, charges, contract rights, claims or
equity of any kind.
(j) "Government Entity" means any United States or other
national, state, municipal or local government, domestic or foreign, any
subdivision, agency, entity, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority.
(k) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
(l) "Intellectual Property" means all inventions, improvements
thereto, patents, patent applications, patent disclosures, trademarks, service
marks, trade dress, logos, trade names, and corporate names, copyrights,
maskworks, moral rights, know-how, computer software, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, business and marketing
plans and proposals, and general intangibles of a like nature, trade secrets,
licenses, and rights and filings with respect to the foregoing, and all
reissues, extensions and renewals thereof.
(m) "Laws" means all foreign, federal, state and local laws,
statutes, ordinances, regulations, rules, resolutions, orders, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified persons or
entities.
(n) "Losses" means all demands, losses, claims, actions or
causes of action, assessments, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements.
(o) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended).
(p) "Related Agreements" mean the Escrow Agreement, the
Employment Agreements, the Amendment No. 2 to Stockholders' Agreement, the
Amended and Restated Registration Rights Agreement and all other agreements
entered into pursuant to this Agreement.
(q) "Subsidiary" means any corporation, partnership, joint
venture or other legal entity of which such person (either alone or through or
together with any other Subsidiary) (i) owns, directly or indirectly, fifty
percent (50%) or more of
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the stock, partnership interests or other equity interests the holders of which
are generally entitled to vote for the election of the board of directors or
other governing body of such corporation, partnership, joint venture or other
legal entity; or (ii) possesses, directly or indirectly, control over the
direction of management or policies of such corporation, partnership, joint
venture or other legal entity (whether through ownership of voting securities,
by agreement or otherwise).
(r) "Taxes" shall mean all federal, state, local and foreign taxes
(including income, profit, franchise, sales, use, real property, personal
property, ad valorem, excise, employment, social security and wage withholding
taxes) and installments of estimated taxes, assessments, deficiencies, levies,
imports, duties, license fees, registration, fees, withholdings or other
similar charges of every kind, character or description imposed by any
governmental authorities, and any interest, penalties or additions to tax
imposed thereon or in connection therewith.
(s) "Third Party Claim" means any claim or other assertion of
liability by any third party.
SECTION 12.3. HEADINGS.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
SECTION 12.4. SEVERABILITY.
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 12.5. ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the Schedules and the
other documents delivered pursuant hereto), together with the Related
Agreements and the Confidentiality Agreement constitute the entire agreement of
the parties and supersede all prior agreements and undertakings (including,
without limitation, the Letter of Intent dated July 21, 1998, between Acquiror
and the
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Company), both written and oral, between the parties, or any of them, with
respect to the subject matter hereof and, except as otherwise expressly
provided herein, are not intended to confer upon any other person any rights or
remedies hereunder.
SECTION 12.6. SPECIFIC PERFORMANCE.
The transactions contemplated by this Agreement are unique.
Accordingly, each of the parties acknowledges and agrees that, in addition to
all other remedies to which it may be entitled, each of the parties hereto is
entitled to a decree of specific performance, provided such party is not in
material default hereunder.
SECTION 12.7. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party;
provided, however, that Acquiror and Merger Sub shall have the right to assign
this Agreement without the prior written consent of the Company to a direct or
indirect subsidiary of Acquiror, but no such assignment shall relieve Acquiror
or Merger Sub, as the case may be, of its obligations hereunder. Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
SECTION 12.8. THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
SECTION 12.9. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Virginia, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law, except that,
to the extent applicable, the laws of the State of California shall govern the
effectiveness and effect of the Merger.
SECTION 12.10. COUNTERPARTS.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of
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72
which when executed and delivered shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
SECTION 12.11. FEES AND EXPENSES.
Except as otherwise provided for in this Agreement, each party hereto
shall pay its own fees, costs and expenses incurred in connection with this
Agreement and in the preparation for and consummation of the transactions
provided for herein; provided, however, that if the legal fees, costs and
expenses of the Company exceed One Hundred Fifty Thousand Dollars ($150,000),
then the Stockholders shall be jointly and severally liable for the amount of
such excess.
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73
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT AND
PLAN OF MERGER to be executed and delivered as of the date first written above.
PROXICOM, INC.
By: /s/ Xxxx Xxxxxxxxx
----------------------------
Name: Xxxx Xxxxxxxxx
--------------------------
Title: CEO
-------------------------
PROXICOM MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------
Title: Director
-------------------------
IBIS CONSULTING, INC.
By: /s/ Xxxxxx Xxxx
----------------------------
Name: Xxxxxx Xxxx
--------------------------
Title: President
-------------------------
STOCKHOLDERS
/s/ Xxxxxx Xxxx
-------------------------------
Xxxxxx Xxxx
/s/ [signature illegible]
-------------------------------
Spouse of Xxxxxx Xxxx
/s/ Xxxxx XxXxxxxx
-------------------------------
Xxxxx XxXxxxxx
/s/ Xxxxxxx Xxxxxxxxx
-------------------------------
Xxxxxxx Xxxxxxxxx
