Exhibit 10.4
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
INTRODUCTION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement")
is entered into as of the 8th day of February, 1999 by and among InSite
Internet, Inc., a Delaware corporation (the "Parent"), InSite Internet V
Acquisition Co., Inc., a Connecticut corporation ("Newco"), Caravela Software,
Inc., a Connecticut corporation (doing business as "Connix") (the "Company") and
Xxxxx Xxxxx and Xxxx Xxxxxx, the stockholders of the Company (collectively, the
"Stockholders").
BACKGROUND
A. The Parent intends to undertake an initial public offering of its common
stock (the "IPO") and in connection therewith contemplates filing a registration
statement with the Securities and Exchange Commission ("SEC") within ninety (90)
days of the execution and delivery of this Agreement.
B. Contemporaneously with and conditioned upon the successful closing of the
IPO, the Parent, Newco and the Company intend to effect a merger of the Company
into Newco in accordance with this Agreement and the Connecticut Business
Corporation Act (the "Merger"). Upon consummation of the Merger, the Company
will cease to exist, and Newco will continue to exist as the surviving
corporation of the Merger.
C. It is intended that the Merger qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and that this Agreement constitute a plan of reorganization for
such purposes.
D. This Agreement has been adopted and approved by the respective boards of
directors of the Parent, Newco and the Company, and the shareholders of Newco
and the Stockholders have each unanimously approved this Agreement by written
consent.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual and dependent promises
and the representations and warranties hereinafter contained, the parties hereto
agree as follows:
SECTION 1. DESCRIPTION OF THE MERGER TRANSACTION.
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1.1 MERGER OF THE COMPANY INTO NEWCO. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
SECTION 1.2), the Company shall be merged with and into Newco, and the separate
existence of the Company shall cease.
1.2 EFFECTIVE TIME. The effective time of the Merger (the "Effective
Time") shall occur at the time a properly executed certificate of merger for the
merger of the Company into Newco, conforming to the requirements of the
Connecticut Business Corporation Act (the "Merger Certificate") has been
delivered and accepted for filing by the Secretary of State of the State of
Connecticut. At the Effective Time, Newco shall be merged with and into the
Company in accordance with the Merger Certificate and the separate existence of
the Company shall cease and Newco shall continue as the surviving corporation
(the "Surviving Corporation"). The Effective Time shall occur contemporaneously
with the IPO Closing Date as described in SECTION 1.7 below
1.3 ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF THE
SURVIVING CORPORATION. At the Effective Time:
(a) The Articles of Incorporation of Newco shall become the
Articles of Incorporation of the Surviving Corporation; and, subsequent to the
Effective Time, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation until changed as provided by law.
(b) The bylaws of Newco shall become the bylaws of the
Surviving Corporation; and, subsequent to the Effective Time, such bylaws shall
be the bylaws of the Surviving Corporation until they shall thereafter be duly
amended.
(c) The Board of Directors of the Surviving Corporation shall
be set forth on EXHIBIT 1.3 hereto and shall hold office subject to the
provisions to the laws of the Surviving Corporation's state of incorporation and
of the Articles of Incorporation and bylaws of the Surviving Corporation.
(d) The officers of the Surviving Corporation shall be set
forth on EXHIBIT 1.3 hereto, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and bylaws of the Surviving
Corporation, until his or her successor is elected and qualified.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the Connecticut Business
Corporation Act. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of Newco shall continue unaffected and unimpaired by the Merger and
the corporate franchises, existence and rights of the Company shall be merged
with
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and into Newco, and Newco, as the Surviving Corporation, shall be fully vested
therewith. At the Effective Time, the separate existence of the Company shall
cease and, in accordance with the terms of this Agreement, the Surviving
Corporation shall possess all the rights, privileges, immunities and franchises,
of a public as well as of a private nature, and all property, real, personal and
mixed, and all debts due on whatever account, including subscriptions to shares,
and all taxes, including those due and owing and those accrued, and all other
choses in action, and all and every other interest of or belonging to or due to
the Company and Newco shall be taken and deemed to be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all property,
rights and privileges, powers and franchises and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Company and Newco; and the title to any real estate, or
interest therein, whether by deed or otherwise, vested in the Company and Newco,
shall not revert or be in any way impaired by reason of the Merger. Except as
otherwise provided herein, the Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of the Company
and Newco and any claim existing, or action or proceeding pending, by or against
the Company or Newco may be prosecuted as if the Merger had not taken place, or
the Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of the Company or Newco shall be
impaired by the Merger, and all debts, liabilities and duties of the Company and
Newco shall attach to the Surviving Corporation, and may be enforced against the
Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by the Surviving Corporation.
1.5 MERGER CONSIDERATION; CONVERSION OF SHARES.
(a) As of the Effective Time, all of the shares of Common
Stock of the Company, $10 par value per share ("Company Stock"), issued and
outstanding immediately prior to the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, shall be automatically
converted to, in the aggregate, shares of Common Stock of the Parent, par value
$.01 per share ("Parent Stock") and cash, as follows (collectively, the "Merger
Consideration"):
(1) a number of shares of Parent Stock equal to the
quotient of $2,800,000 divided by the public offering price
per share of Parent Stock offered to the public in the IPO;
and
(2) cash, certified check, wire transfer or other
immediately available funds in the amount of $2,180,000,
subject to the post-closing adjustment with respect to such
amount as set forth in SECTION 2 below.
(b) Each share of Company Stock held in the treasury of the
Company immediately prior the Effective Time (if any) shall be canceled without
any conversion thereof and no payment shall be made with respect thereto.
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(c) As of and after the Effective Time, the Surviving
Corporation shall not be bound by any options, warrants, rights or agreements
with respect to the issuance or acquisition of capital stock of the Company
which would entitle any person to own, purchase or receive any capital stock of
the Company. As of the date hereof, there are no options, warrants, rights or
agreements with respect to the issuance or acquisition of the capital stock of
the Company except for the Merger transaction contemplated by this Agreement.
1.6 DELIVERY OF MERGER CONSIDERATION/ESCROW OF SHARES/SET-OFF.
(a) At the Closing, the Stockholders shall, upon surrender of
certificates representing all outstanding shares of Company Stock, receive their
pro rata share of the aggregate Merger Consideration set forth in SECTION 1.5
above in accordance with the percentage ownership interests of the Stockholders
reflected on SCHEDULE 3.4 hereto, provided, however, that a number of shares of
Parent Stock included in the aggregate Merger Consideration with a value of
$100,000 based on the public offering price per share of Parent Stock offered to
the public in the IPO (the "Escrow Shares") and allocated pro rata among the
Stockholders shall be delivered into escrow at the Closing pursuant to the
Escrow Agreement attached hereto as EXHIBIT 1.6. In addition to all other rights
and remedies of the Parent, Newco and the Surviving Corporation for breach by
the Company or the Stockholders of the representations and warranties of the
Company and Stockholders herein, both at law and in equity, the Parent shall
have the right to set-off against the Escrow Shares for any claims of the Parent
or the Surviving Corporation arising under the post Closing adjustment
provisions of SECTION 2 below and/or the indemnity provisions of SECTION 12
below.
(b) The Stockholders shall deliver to the Parent at the
Closing the certificates representing Company Stock, duly endorsed in blank by
each Stockholder, or accompanied by duly executed stock powers. The Stockholders
shall cure any deficiencies with respect to the endorsement of the certificates
or other documents of conveyance with respect to Company Stock or with respect
to the stock powers accompanying any of Company Stock.
(c) Upon surrender of the certificates representing shares of
Company Stock, such certificates shall be canceled, and as of the Effective
Time, the stock transfer books of the Company shall be closed and there shall be
no further registration of transfers of shares of the Company thereafter.
(d) No certificates representing fractional shares of Parent
Stock shall be issued upon the surrender of certificates which, prior to the
Effective Time, represented shares of Company Stock. In lieu of any such
fractional shares, the Stockholders will be paid an amount in cash based on the
public offering price of Parent Stock in the IPO.
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1.7 CLOSING. Within two (2) business days following the date
on which the price of the shares of Parent Stock offered to the public in the
IPO shall have been determined, the Parent, the Company and Newco shall take all
actions necessary to effect the Merger (including filing the Merger Certificate
which shall become effective at the Effective Time) and to effect the conversion
and delivery of shares referred to in SECTION 1.6 hereof (hereinafter referred
to as the "Closing"); provided, however, that such actions shall not include the
actual completion of the Merger or the conversion and delivery of the shares
referred to in SECTION 1.6 hereof, which actions shall only take place at the
Effective Time (which shall be contemporaneous with the IPO closing date) as
herein provided. The Closing shall take place at the offices of Xxxxx & Xxxxxxx,
LLP, 000 Xxxxx Xxxx Xxxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000, or at such other
place and time or date as may be mutually agreed upon by the parties hereto. The
actual date of the Closing is referred to herein as the "Closing Date".
Concurrently with the closing of the IPO, the Merger shall become effective and
all transactions contemplated by this Agreement, including the conversion and
delivery of shares and the delivery of checks in for the cash portion of the
Merger Consideration, shall be completed. Except as otherwise provided in
SECTION 9 hereto, during the period between the date of the final pricing of the
shares of Parent Stock to be offered to the public in the contemplated IPO (as
determined by the Parent and its underwriters), and the Closing Date, this
Agreement may only be terminated by the parties if the underwriting agreement in
respect of the IPO is terminated pursuant to its terms. This Agreement shall in
any event terminate if the Effective Time has not occurred within 15 business
days of the Closing Date. Time is of the essence.
SECTION 2. POST CLOSING ADJUSTMENT
2.1 POST-CLOSING ADJUSTMENT. Within forty-five (45) days after the
Closing, the Parent shall engage KPMG Peat Marwick LLP to audit a balance sheet
prepared in accordance with generally accepted accounting principles ("GAAP") of
the Company as of 5:00 PM (EST) on the day prior to the Closing Date (the
"Closing Date Balance Sheet"). Such Closing Date Balance Sheet will utilize the
accrual method of accounting even if the Company has heretofore utilized the
cash basis method of accounting. If the aggregate shareholders' equity as shown
on the Closing Date Balance Sheet is less than $40,000 (the amount of such
shortfall being hereafter known as the "Net Worth Deficiency"), the Stockholders
shall pay, within five (5) days of the date of determination of the Net Worth
Deficiency (subject to the dispute resolution procedure set forth below) (i) 40%
of the Net Worth Deficiency to the Parent in cash, by certified check or by wire
transfer of immediately available funds, and (ii) 60% of the Net Worth
Deficiency in Shares of Parent Common Stock which shall be valued at the
"closing sales price" (as defined in SECTION 4(B)(I) of the Escrow Agreement
attached hereto as EXHIBIT 1.6) for the ten (10) business day period immediately
preceding the date the parties reach agreement as to any Net Worth Deficiency.
The Parent shall have the option, at its sole discretion and notwithstanding any
language to the contrary in the Escrow Agreement, to receive the shares of
Parent Stock necessary to satisfy 60% of the Net Worth Deficiency from the
Stockholders directly (i.e. not from the "Escrow Shares") or from the Escrow
Shares. Notwithstanding anything in this SECTION
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2 to the contrary, if there is any Net Worth Deficiency and the Stockholders
dispute any item contained on the Closing Date Balance Sheet, the Stockholders
shall notify the Parent in writing of each disputed item (collectively, the
"Disputed Amounts"), and specify the amount thereof in dispute within thirty
(30) business days after the delivery of the Closing Date Balance Sheet. If the
Parent and the Stockholders cannot resolve any such dispute which would
eliminate or reduce the amount of the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to the Parent and the Stockholders (the "Independent
Accounting Firm"). The determination of the Independent Accounting Firm shall be
made as promptly as practical and shall be final and binding on the parties,
absent manifest error which error may only be corrected by such Independent
Accounting Firm. Any expenses relating to the engagement of the Independent
Accounting Firm shall be allocated between the Parent and the Stockholders so
that the Stockholders' aggregate share of such costs shall bear the same
proportion to the total costs that the Disputed Amounts unsuccessfully contested
by the Stockholders (as finally determined by the Independent Accounting Firm)
bear to the total of the Disputed Amounts so submitted to the Independent
Accounting Firm.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to the Parent and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, the Company and each of the Stockholders
hereby jointly and severally make to the Parent and Newco the representations
and warranties contained in this SECTION 3.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Connecticut with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased and where such business is currently
conducted or proposed to be conducted. The copies of the Certificate of
Incorporation of the Company as amended to date, certified by the Secretary of
State of Connecticut and the bylaws certified by the Secretary of the Company
and heretofore delivered to the Parent's counsel, are complete and correct, and
no amendments thereto are pending. The stock records and minute books of the
Company which have heretofore been delivered to the Parent's counsel are correct
and complete. The Company is not conducting business in any state other than
Connecticut, to the best of its knowledge, is not required to qualify to do
business as a foreign corporation in any jurisdiction.
3.3 SUBSIDIARIES; INVESTMENTS. Except as set forth in SCHEDULE 3.3, the
Company has no direct or indirect subsidiaries and owns no securities issued by
any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Except as set forth in SCHEDULE 3.3, the Company neither owns nor has any direct
or
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indirect interest in or control over any corporation, partnership, joint venture
or entity of any kind. For purposes of this Agreement, the term "subsidiary"
means, with respect to any person, any corporation 20% or more of the
outstanding voting securities of which, or any partnership, joint venture or
other entity 20% or more of the total equity interest of which, is directly or
indirectly owned by such person.
3.4 CAPITAL STOCK. The total authorized capital stock of the Company
consists solely of the shares listed on SCHEDULE 3.4. All of the issued and
outstanding shares of the Company Common Stock are duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the Stockholders as set forth in SCHEDULE 3.4 free and clear of any liens,
claims, encumbrances, restrictions, security interests, mortgages, pledges or
other demands, and all such shares were offered, issued, sold and delivered by
the Company in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present stockholder. No shares
of the Company Stock are held in the treasury of the Company. SCHEDULE 3.4
contains a complete and correct listing of the Stockholders of the Company at
the date hereof, together with the number and class of the capital stock of the
Company owned by each such stockholder. There are no outstanding subscriptions,
options, warrants, commitments, preemptive rights, agreements, arrangements or
commitments of any kind for or relating to the issuance, sale, registration or
voting of, or outstanding securities convertible into or exchangeable for, any
shares of capital stock of any class or other equity interests of the Company.
The Company has never acquired any treasury stock.
3.5 AUTHORITY OF THE COMPANY AND THE STOCKHOLDERS
(a) The Company has full right, power and authority to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by it pursuant to or as contemplated by this Agreement and to
carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement and each such other
agreement, document and instrument have been duly authorized by the Company's
Board of Directors, and have been approved by the Stockholders by a unanimous
written consent vote executed by each Stockholder. This Agreement and each
agreement, document and instrument to be executed and delivered by the Company
pursuant to or as contemplated by this Agreement (to the extent it contains
obligations to be performed by the Company) constitutes, or when executed,
delivered and approved by the Company Stockholders will constitute, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms. The execution, delivery and performance by the Company of this
Agreement and each such other agreement, document and instrument:
(i) does not and will not violate any provision of
the Certificate of Incorporation or bylaws of the Company;
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(ii) does not and will not violate any laws of the
United States, or any state or other jurisdiction applicable to the
Company or require the Company to obtain any court, regulatory body,
administrative agency or other approval, consent or waiver, or make any
filing with, any federal, state, local or foreign governmental body,
agency or official ("Governmental Entity") that has not been obtained or
made, other than the filing of the Certificate of Merger in accordance
with the Connecticut Business Corporation Act and except for any other
approvals, consents, waivers and filings that, if not obtained or made,
individually or in the aggregate, would not have a material adverse
effect on the properties, assets, business, financial condition or
prospects of the Company; and
(iii) except as otherwise indicated on SCHEDULE 3.15
hereto, do not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination
or arbitration award, whether written or oral, to which the Company is a
party or by which the property of the Company is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets of
the Company, except where such breach, default, acceleration or right of
termination would not have a material adverse effect on the properties,
assets, business, financial condition or prospects of the Company, and
would not result in the creation or imposition of any mortgage, pledge,
lien, security interest or other charge or encumbrance on any of the
assets of the Company.
(b) Each Stockholder has full right, authority and power to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to or as contemplated by
this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument to be
executed and delivered by each Stockholder pursuant to or as contemplated by
this Agreement (to the extent it contains obligations to be performed by such
Stockholder) constitutes, or when executed and delivered will constitute, valid
and binding obligations of such Stockholder enforceable in accordance with their
respective terms, subject to the terms hereof. The execution, delivery and
performance by each Stockholder of this Agreement and each such agreement,
document and instrument:
(i) do not and will not violate any provision of the
Articles of Incorporation or bylaws of the Company;
(ii) do not and will not violate any laws of the
United States, or any state or other jurisdiction applicable to such
Stockholder or require such Stockholder to obtain any approval, consent
or waiver of, or make any filing with, any Governmental Entity that has
not been obtained or made; and
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(iii) do not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give rise
to a right of termination of any indenture or loan or credit agreement
or any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Stockholder is a party
or by which the property of such Stockholder is bound or to which the
property of such Stockholder is subject or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other
charge or encumbrance on any of the assets or properties of the Company.
Except as disclosed on SCHEDULE 3.15, there are no Stockholder
agreements with respect to the ownership or operation of the Company,
and any such agreements shall be terminated prior to the Closing.
3.6 STATUS OF PROPERTY OWNED OR LEASED.
(a) REAL PROPERTY. The real property identified as being owned
or leased by the Company on SCHEDULE 3.6(A) is collectively referred to herein
as the "Real Property". The Real Property constitutes all the real property
owned and leased by the Company.
(i) TITLE. Except as set forth on SCHEDULE 3.6(A),
there are no unrecorded mortgages, deeds of trust, ground leases,
security interests or similar encumbrances, liens, assessments,
licenses, claims, rights of first offer or refusal, options, or options
to purchase, or any covenants, conditions, restrictions, rights of way,
easements, judgments or other encumbrances or matters affecting title
to the Real Property. There are no leases, tenancies or occupancy
rights of any kind affecting any of the Real Property.
(ii) SECURITY INTERESTS. There is not now, nor, as a
result of the consummation of the transactions contemplated hereby,
will there be, any mortgages, deeds of trust, ground leases, security
interests or similar encumbrances on the Real Property, except as set
forth on SCHEDULE 3.6(A) (collectively, the "Encumbrances"). There is
no outstanding principal balance or accrued unpaid interest or other
amount due as of the date hereof under any instrument secured by any of
the Encumbrances and all payments required under each Encumbrance to
the date hereof have been made in full. No condition or fact does or
will exist, as a result of the consummation of the transactions
contemplated hereby, which, with the lapse of time or the giving of
notice or both, would constitute a material default thereunder or
result in any acceleration of the indebtedness secured thereby or any
increase in the amount of interest, premiums or penalties payable on
such indebtedness.
(iii) COMMISSIONS. There are no brokerage or leasing
fees or commissions or other compensation due or payable on an absolute
or contingent basis to any person, firm, corporation, or other entity
with respect to or on account of any of the
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Encumbrances or the Real Property, and no such fees, commissions or
other compensation shall, by reason on any existing agreement, become
due after the date hereof.
(iv) PHYSICAL CONDITION. Except as set forth on
SCHEDULE 3.6(A), there is no material defect in the physical condition
of any of the Real Property. Except as set forth on SCHEDULE 3.6(A),
there is no material defect in any material improvements located on or
constituting a part of any of the Real Property, including, without
limitation, the structural elements thereof, the mechanical systems
(including without limitation all heating, ventilating, air
conditioning, plumbing, electrical, elevator, security,
telecommunication, utility, and sprinkler systems) therein, the roofs
or the parking and loading areas (collectively, the "Improvements").
All of the Improvements located on or constituting a part of any of the
Real Property, including, without limitation, the structural elements
thereof, the mechanical systems therein, the roofs and the parking and
loading areas are in generally good operating condition and repair.
(v) UTILITIES. The Company has not received any
written notice of any termination or impairment of the furnishing of,
or any material increase in rates for, services to any of the Real
Property of water, sewer, gas, electric, telecommunication, drainage or
other utility services, except ordinary and usual rate increases
applicable to all customers (or all customers of a certain class) of a
utility provider. The Company has not entered into any agreement
requiring it to pay to any utility provider rates which are less
favorable than rates generally applicable to customers of the same
class as the Company.
(vi) COMPLIANCE. Except as set forth on SCHEDULE
3.6(A), the Company has not received any written notice from any
municipal, state, federal or other governmental authority with respect
to any violation of any zoning, building, fire, water, use, health,
environmental or other statute, ordinance, code or regulation issued in
respect of any of the Real Property that has not been heretofore
corrected, and except in either case as set forth in SCHEDULE 3.6(A)
hereto.
(vii) GOVERNMENT APPROVALS. The Company has not
received any notice of any plan, study or effort by any Governmental
Entity which would adversely affect the present use, zoning or value to
the Company of any of the Real Property or which would modify or
realign any adjacent street or highway in a manner materially adverse
to the Company.
(viii) ZONING. The Company has not received any
notice of any zoning violations. All buildings and improvements
situated on the Real Property were built pursuant to validly issued
building permits. Certificates of occupancy were issued for all such
structures as built, and all such structures have been maintained as
built since such certificates were issued.
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(ix) REAL PROPERTY TAXES. Except as set forth in said
SCHEDULE 3.6(A), no special assessments of any kind (special, bond or
otherwise) are or have been levied against any Real Property, or any
portion thereof, which are outstanding or unpaid. Each property
constituting part of the Real Property is assessed as a separate and
distinct tax lot.
(x) SERVICE CONTRACTS. A complete list of all
material existing service, management, supply or maintenance or
equipment lease contracts and other contractual agreements affecting
the Real Property or any portion thereof to which the Company is a
party (the "Service Contracts") is set forth on SCHEDULE 3.6(A). All
such Service Contracts are terminable upon no more than thirty (30)
days written notice, at no cost, except as specified in SCHEDULE
3.6(A).
(b) PERSONAL PROPERTY. A list of each item of the machinery,
equipment and other fixed assets owned or leased by the Company having a fair
market value of at least $5,000 (the "Equipment"), is contained in SCHEDULE
3.6(B) hereto. All of the Equipment and other machinery, equipment and personal
property of the Company is located on the Real Property or used in the operation
of the Company. Except as specifically disclosed in SCHEDULE 3.6(B) or in the
Company Financial Statements (as hereinafter defined), the Company has good and
marketable title to all of the personal property owned by it. None of such
personal property or assets is subject to any mortgage, pledge, lien,
conditional sale agreement, security title, encumbrance or other charge except
as specifically disclosed in any Schedule hereto or in the Financial Statements.
The Financial Statements reflect all personal property of the Company, subject
to dispositions and additions in the ordinary course of business consistent with
this Agreement. Except as otherwise specified in SCHEDULE 3.6(B) hereto, all
leasehold improvements, furnishings, machinery and equipment of the Company are
in generally good repair, normal wear and tear excepted, have been well
maintained, and conform in all material respects with all applicable ordinances,
regulations and other laws.
3.7. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has delivered to the Parent the following
financial statements, copies of which are attached hereto as SCHEDULE 3.7:
(i) Audited balance sheets of the Company dated
December 31, 1995, December 31, 1996, and December 31, 1997, and audited
statements of income, stockholders' equity and cash flows for each of
the three (3) years ended December 31, 1995, 1996 and 1997 (the
"Year-End Company Financial Statements");
(ii) Unaudited balance sheets of the Company as of
December 31, 1998 (herein the "Company Balance Sheet Date") and
statements of income, stockholders'
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equity and cash flows for the year ended December 31, 1998, certified by
the chief financial officer of the Company (the "Interim Company
Financial Statements", together with the Year-End Company Financial
Statements, the "Company Financial Statements");
The Company Financial Statements have been prepared in accordance with GAAP
applied consistently during the periods covered thereby (except that the Interim
Company Financial Statements are subject to normal year-end audit adjustments
and do not include footnotes), and present fairly in all respects the financial
condition of the Company at the dates of said statements and the results of
their operations for the periods covered thereby.
(b) As of the Company Balance Sheet Date, the Company had no
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others or contingent liabilities arising prior to the Company
Balance Sheet Date) except liabilities stated or adequately reserved for on the
Company Financial Statements or reflected in Schedules furnished to Parent
hereunder as of the date hereof.
(c) As of the date hereof, the Company has no liabilities of
any nature, whether accrued, absolute, contingent or otherwise, (including
without limitation liabilities as guarantor or otherwise with respect to
obligations of others, or liabilities for taxes due or then accrued or to become
due or contingent liabilities arising prior to the date hereof or the Closing,
as the case may be) except liabilities (i) stated or adequately reserved for on
the appropriate Company Financial Statement or the notes thereto, (ii) reflected
in Schedules furnished to Parent hereunder on the date hereof or (iii) incurred
in the ordinary course of business of the Company consistent with prior
practices.
(d) All financial information delivered to KPMG LLP in
connection with their audit of the Company's financial statements for the
contemplated IPO as of the date hereof are true and correct in all material
respects and reflect all material liabilities of the Company as of the date(s)
of such information, and have been prepared in accordance with accounting
principles applied consistently during the periods covered thereby.
3.8 TAXES.
(a) The Company has paid or caused to be paid all federal,
state, local, foreign and other taxes, including without limitation income
taxes, estimated taxes, alternative minimum taxes, excise taxes, sales taxes,
use taxes, value-added taxes, gross receipts taxes, franchise taxes, capital
stock taxes, employment and payroll-related taxes, withholding taxes, stamp
taxes, transfer taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), in the amounts indicated
on tax returns filed by the Company through the date hereof or in correspondence
received from any federal, state, local or foreign government taxing
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authority, whether disputed or not (other than current taxes the liability for
which is adequately reserved for on the financial statements provided to the
Parent pursuant to SECTION 3.7 hereof).
(b) The Company has in accordance with applicable law filed
all federal, state, local and foreign tax returns required to be filed by it
through the date hereof and all such returns correctly and accurately set forth
the amount of any Taxes relating to the applicable period. For every taxable
period of the Company, the Company has delivered or made available to Parent
complete and correct copies of all federal, state, local and foreign income tax
returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company. SCHEDULE 3.8 attached hereto sets forth all federal
tax elections under the Internal Revenue Code of 1986, as amended (the "Code"),
that are in effect with respect to the Company or for which an application by
the Company is pending.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting in writing or threatening to assert
against the Company any deficiency or claim for additional Taxes or a claim that
the Company is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax. The Company has not
entered into a closing agreement pursuant to Section 7121 of the Code.
(d) Except as set forth in SCHEDULE 3.8 attached hereto, there
has not been any audit of any tax return filed by the Company, no audit of any
tax return of the Company is in progress, and the Company has not been notified
by any tax authority that any such audit is contemplated or pending. Except as
set forth in SCHEDULE 3.8, no extension of time with respect to any date on
which a tax return was or is to be filed by the Company is in force, and no
waiver or agreement by the Company is in force for the extension of time for the
assessment or payment of any Taxes.
(e) (i) The Company has not consented to have the provisions
of Section 341(f)(2) of the Code applied to it, (ii) the Company has not agreed
to, and has not been requested by any governmental authority to, make any
adjustments under Section 481(a) of the Code by reason of a change in accounting
method or otherwise and (iii) the Company has never made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances would obligate it to make any payments, that will not be
deductible under Section 280G of the Code. The Company has disclosed on its
federal income tax returns all positions taken therein that could give rise to a
penalty for underpayment of federal Tax under Section 6662 of the Code. The
Company has never had any liability for unpaid Taxes because it is a member of
an "affiliated group" (as defined in Section 1504(a) of the Code). The Company
has never filed, nor has it ever been required to file, a consolidated, combined
or unitary tax return with any entity. The Company is not a party to any tax
sharing agreement.
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(f) The Company computes its federal taxable income under the
cash basis method of accounting.
(g) For purposes of this SECTION 3.8, all references to
Sections of the Code shall include any predecessor provisions to such Sections
and any similar provisions of federal, state, local or foreign law.
3.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company as of
the respective balance sheet dates in the Company Financial Statements and all
accounts receivable arising thereafter or hereafter to the Closing Date, arose
or will arise from valid sales in the ordinary course of business. Except as set
forth in SCHEDULE 3.9, the Company has no accounts or loans receivable from any
person, firm or corporation which is affiliated with the Company. For purposes
hereof, "affiliate" means (i) any Stockholder, or (ii) any business entity which
controls, or is controlled by, or is under common control with the Company or
with any Stockholder (where "control" shall mean a 20% or greater ownership
interest).
3.10 INVENTORIES. The Company maintains less than $10,000 of inventory,
all saleable in the ordinary course and stated in accordance with GAAP.
3.11 ABSENCE OF CERTAIN CHANGES.
Since December 31, 1997, the Company has conducted its business only in
the ordinary course and consistent with past practices and except as disclosed
in SCHEDULE 3.11 there has not been:
(i) Any change in the properties, assets, liabilities,
business, operations, financial condition or prospects of the Company
which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, has been
materially adverse with respect to the Company;
(ii) Except for the endorsement of checks in the ordinary
course of business any material contingent liability incurred by the
Company as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or
waiver of any material right of, the Company;
(iii) Any mortgage, encumbrance or lien placed on any of the
properties of the Company which remains in existence on the date hereof
or will remain on the Closing Date except for liens permitted by any
current agreement of the Company with respect to borrowed money;
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(iv) Any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other
disposition, of any capital assets of the Company costing more than
$10,000;
(v) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting any of the properties,
assets or business of the Company;
(vi) Any declaration, setting aside or payment of any
dividend by the Company, or the making of any other distribution in
respect of the capital stock of the Company, any direct or indirect
redemption, purchase or other acquisition by the Company of its own
capital stock, any issuance or sale of any securities convertible into
or exchangeable for debt or equity securities of the Company or any
grant, issuance or exercise of options, warrants, subscriptions,
preemptive rights, agreements, arrangements or commitments of any kind
for or relating to the issuance, sale, registration or voting of any
shares of capital stock of any class or other equity interests of the
Company;
(vii) Any claim of unfair labor practices asserted against
the Company; any change in the compensation (in the form of salaries,
wages, incentive arrangements or otherwise) payable or to become
payable by the Company to any of its officers, employees, agents or
independent contractors other than customary merit or cost of living
increases in accordance with its usual practices, or any bonus payment
or arrangement made to or with any of such officers, employees, agents
or independent contractors; any entering into any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any officer, director or employee of the
Company except for employment arrangements providing for salary or
wages of less than $20,000 per annum and any oral agreement terminable
at will by the Company;
(viii) Any change with respect to the officers or senior
management of the Company, any grant of any severance or termination
pay to any officer or employee of the Company;
(ix) Any payment or discharge of a material lien or
liability of the Company which was not shown on the Company Financial
Statements or incurred in the ordinary course of business thereafter;
(x) Any obligation or liability incurred by the Company to
any of its officers, directors or stockholders, or any loans or
advances made by the Company to any of its officers, directors,
stockholders, except normal compensation and expense allowances payable
to officers or employees;
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(xi) Any change in accounting methods or practices, credit
practices or collection policies used by the Company other than to
comply with new accounting pronouncements;
(xii) Any other transaction entered into by the Company
other than transactions in the ordinary course of business; or
(xiii) Any agreement or understanding whether in writing or
otherwise, that would result in any of the transactions or events or
require the Company to take any of the actions specified in paragraphs
(i) through (xii) above.
3.12 BANKING RELATIONS. All of the arrangements which the Company has
with any banking institution are described in SCHEDULE 3.12 attached hereto,
indicating with respect to each of such arrangements the type of arrangement
maintained (such as checking account, borrowing arrangements, safe deposit box,
etc.), the names in which the accounts are held, the account number, and the
name of each person, corporation, firm or other entity authorized in respect
thereof.
3.13 PATENTS, TRADE NAMES, TRADEMARKS, COPYRIGHTS AND PROPRIETARY
RIGHTS. All patents, patent applications, trademark registrations, trademark
registration applications, copyright registrations, copyright registration
applications and all material trade names, trademarks, copyrights and other
material proprietary rights owned by or licensed to the Company or used in its
respective business as presently conducted (the "Proprietary Rights") are listed
in SCHEDULE 3.13 attached hereto. All of the material patents, registered
trademarks and copyrights of the Company and all of the material patent
applications, trademark registration applications and copyright registration
applications of the Company have been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United States Register of
Copyrights or the corresponding offices of other countries identified on said
schedule. Except as set forth in SCHEDULE 3.13: (a) use of said patents, trade
names, trademarks, copyrights or other proprietary rights in the ordinary course
of business as presently conducted does not require the consent of any other
person and (b) the Company has sufficient title or adequate rights or licenses
to use all material patents, trade names, trademarks, copyrights, or other
proprietary rights used by it in its business as presently conducted free and
clear of any attachments, liens, encumbrances or adverse claims. The Company has
not received written notice that its present or contemplated activities or
products infringe any such patents, trade names, trademarks or other proprietary
rights of others. Except as set forth in SCHEDULE 3.13: (i) no other person has
an interest in or right or license to use, or the right to license others to
use, any of said patents, patent applications, trade names, trademarks,
copyrights or other proprietary rights; (ii) there are no written claims or
demands of any other person pertaining thereto and no proceedings have been
instituted, or are pending or threatened, which challenge the rights of the
Company in respect thereof; (iii) none of the patents, trade names, trademarks,
copyrights or other proprietary rights listed in said schedule is subject to any
outstanding order, decree, judgment or stipulation,
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or is being infringed by others; and (iv) no proceeding charging the Company
with infringement of any adversely held patent, trade name, trademark or
copyright has been filed or is threatened to be filed.
3.14 TRADE SECRETS AND CUSTOMER LISTS. The Company has the right to use
in the ordinary course of its business as presently conducted, free and clear of
any claims or rights of others, all trade secrets, inventions, customer lists
and secret processes required for or incident to the manufacture or marketing of
all products presently sold, manufactured, licensed, under development or
produced by it, including products licensed from others. Any payments required
to be made by the Company for the use of such trade secrets, inventions,
customer lists and secret processes are described in SCHEDULE 3.14. The Company
is not using or in any way making use of any confidential information or trade
secrets of any third party, including without limitation, a former employer of
any present or past employee of the Company or any of the predecessors of the
Company.
3.15 CONTRACTS.
(a) Except for contracts, commitments, plans, agreements and
licenses described in SCHEDULE 3.15 (complete and accurate copies of which have
been delivered to the Parent), the Company is neither a party to nor subject to:
(i) any plan or contract providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement
payments, profit sharing, severance or termination pay, collective
bargaining or the like, or any contract or agreement with any labor
union;
(ii) any employment contract or contract for services
which requires the payment of $20,000 or more annually or which is not
terminable within thirty (30) days by the Company without liability for
any penalty or severance payment other than pursuant to the Company's
severance policies existing on the date hereof;
(iii) any contract or agreement for the purchase of
any commodity, material or equipment except purchase orders in the
ordinary course for less than $10,000 each;
(iv) any other contracts or agreements creating any
obligation of the Company of $10,000 or more with respect to any such
contract;
(v) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a
particular product from a supplier;
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(vi) any contract or agreement which by its terms
does not terminate or is not terminable by the Company or any successor
or assign within six months after the date hereof without payment of a
penalty;
(vii) any contract or agreement for the sale or lease
of its products or services not made in the ordinary course of
business;
(viii) any contract with any sales agent or
distributor of products of the Company or any subsidiary;
(ix) any contract containing covenants limiting the
freedom of the Company to compete in any line of business or with any
person or entity;
(x) any contract or agreement for the purchase of any
fixed asset for a price in excess of $10,000 whether or not such
purchase is in the ordinary course of business;
(xi) any license agreement (as licensor or licensee);
(xii) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing
of money and any related security agreement;
(xiii) any contract or agreement with any officer,
employee, director or stockholder of the Company or with any persons or
organizations controlled by or affiliated with any of them;
(xiv) any partnership, joint venture, or other
similar contract, arrangement or agreement; or
(xv) any registration rights agreements, warrants,
warrant agreements or other rights to subscribe for securities, any
voting agreements, voting trusts, shareholder agreements or other
similar arrangements or any stock purchase or repurchase agreements or
stock restriction agreements.
(b) All material contracts, agreements, leases and instruments
to which the Company is a party or by which the Company is obligated are valid
and are in full force and effect and constitute legal, valid and binding
obligations of the Company and the other parties thereto, enforceable in
accordance with their respective terms. Neither the Company nor any other party
to any contract, agreement, lease or instrument of the Company is in default in
complying with any provisions thereof, and no condition or event or facts exists
which, with notice, lapse of time or both would constitute a default thereof on
the part of either of the
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Company or on the part of any other party thereto in any such case that could
have a material adverse effect on the properties, assets, financial condition or
prospects of either of the Company. SCHEDULE 3.15 indicates whether any of the
agreements, contracts, commitments or other instruments and documents described
therein requires consent or approval to be transferred to the Surviving
Corporation as a result of the transactions contemplated herein.
3.16 LITIGATION. SCHEDULE 3.16 hereto lists all currently pending and
threatened litigation and governmental or administrative proceedings or
investigations to which the Company is a party. Except for matters described in
SCHEDULE 3.16, there is no litigation or governmental or administrative
proceeding or investigation pending or threatened against the Company which may
have an adverse effect on the properties, assets, business, financial condition
or prospects of the Company or which would prevent or hinder the consummation of
the transactions contemplated by this Agreement.
3.17 COMPLIANCE WITH LAWS. The Company has not received notice of a
violation or alleged violation of applicable statutes, ordinances, orders, rules
and regulations promulgated by any federal, state, municipal or other
governmental authority, which violation or alleged violation would have a
material adverse effect on the business of the Company, and except as set forth
in SCHEDULE 3.17 hereto, the Company is currently in compliance in all material
respects with all such statutes, ordinances, orders, rules or regulations, and,
to the best knowledge of the Company and the Stockholders, there is no valid
basis for any claim that the Company is not in compliance with any such statute,
ordinance, order, rule or regulation.
3.18 INSURANCE. SCHEDULE 3.18 sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, Liability, and workers' compensation coverage and bond and surety
arrangements) to which the Seller has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years: (a) the name, address, and telephone number of the agent; (b) the name of
the insurer, the name of the policyholder, and the name of each covered insured;
(c) the policy number and the period of coverage; (d) the scope (including an
indication of whether the coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and (e) a description of any retroactive
premium adjustments or other loss-sharing arrangements. With respect to each
such insurance policy: (i) the policy is legal, valid, binding, enforceable, and
in full force and effect; (ii) the policy will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby, (iii) neither the
Seller nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (iv) no party to the policy has repudiated any provision thereof.
The Seller has been covered during the past five (5) years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the
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aforementioned period. SCHEDULE 3.18 describes any self-insurance arrangements
affecting the Seller.
3.19 WARRANTY AND RELATED MATTERS. There are no existing or threatened
in writing, product liability, warranty or other similar claims against the
Company alleging that any of its products or services are defective or fail to
meet any product or service warranties except as disclosed in SCHEDULE 3.19
hereto. The Company has not received notice of any statements, citations,
correspondence or decisions by any Governmental Entity stating that any product
manufactured, marketed or distributed at any time by the Company (the "Company
Products") is defective or unsafe or fails to meet any product warranty or any
standards promulgated by any such Governmental Entity. There have been no
recalls ordered by any such Governmental Entity with respect to any Company
Product. There is no (i) fact relating to any Company Product that may impose
upon the Company a duty to recall any Company Product or a duty to warn
customers of a defect in any Company Product, (ii) latent or overt design,
manufacturing or other defect in any Company Product, or (iii) liability for
warranty or other claim or return with respect to any Company Product except in
the ordinary course of business consistent with the past experience of the
Company for such kind of claims and liabilities.
3.20 FINDER'S FEES. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company or the Stockholders.
3.21 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 3.21 lists all material
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from Governmental Entities in order for
the Company to conduct its business. The Company has obtained all the Approvals,
which are valid and in full force and effect. Except as disclosed on SCHEDULE
3.21, none of the Approvals is subject to termination by their express terms as
a result of the execution of this Agreement by the Company or the consummation
of the Merger, and no further Approvals will be required in order to continue to
conduct the business currently conducted by the Company subsequent to the
Closing. Except as disclosed in SCHEDULE 3.21 or in any other schedule hereto,
the Company is neither subject to nor bound by any agreement, judgment, decree
or order which may materially and adversely affect its properties, assets,
business, financial condition or prospects.
3.22 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in
SCHEDULE 3.22 hereto, no Stockholder, officer, employee or director of the
Company and none of their respective parents, grandparents, spouses, children,
siblings or grandchildren owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor, supplier or customer of the Company
or any organization, person or entity with whom the Company is doing business.
3.23 EMPLOYEE BENEFIT PROGRAMS.
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(a) SCHEDULE 3.23 sets forth a list of every Employee Program
(as defined below) that has been maintained (as such term is further defined
below) by the Company at any time during the three-year period ending on the
date hereof.
(b) Each Employee Program which has been maintained by a
Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code, has received a favorable determination or approval
letter from the IRS regarding its qualification under such section and has, in
fact, been qualified under the applicable section of the Code from the effective
date of such Employee Program through and including the Closing (or, if earlier,
the date that all of such Employee Program's assets were distributed). No event
or omission has occurred which would cause any such Employee Program to lose
such qualification under the applicable Code section.
(c) Except as otherwise disclosed on SCHEDULE 3.23, there has
not been any failure of any party to comply with any laws applicable to or the
terms of any Employee Programs that have been maintained by the Company, except
for any failures to comply that, individually or in the aggregate, would not
have a material adverse effect on the properties, assets, business, financial
condition or prospects of the Company. With respect to any Employee Program now
or heretofore maintained by the Company, there has occurred no "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly (including without limitation
through any obligation of indemnification or contribution) in any taxes,
penalties or other liability to the Company or any Affiliate (as defined below).
No litigation, arbitration, or governmental administrative proceeding or
investigation or other proceeding (other than those relating to routine claims
for benefits) is pending or threatened with respect to any such Employee
Program.
(d) Neither the Company nor any Affiliate has ever maintained
any Employee Program subject to Title IV of ERISA.
(e) Except as otherwise disclosed on SCHEDULE 3.23, with
respect to each Employee Program maintained by the Company within the three
years preceding the date hereof, complete and correct copies of the following
documents (if applicable to such Employee Program) have previously been
delivered to the Parent: (i) all documents embodying or governing such Employee
Program, and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended to the date hereof;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Section 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS forms 5500, with
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all applicable schedules and accountants' opinions attached thereto; (iv) the
summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; (v)
any insurance policy (including any fiduciary liability insurance policy)
related to such Employee Program; and (vi) any documents evidencing any loan to
an Employee Program that is a leveraged employee stock ownership plan.
(f) Each Employee Program maintained by the Company as of the
date hereof is subject to amendment or termination by the Board of Directors of
the Company without any further liability or obligation on the part of the
Company to make further contributions to any trust maintained under any such
Employee Program following such termination and the Company has not made any
written or oral representations to the contrary to its employees.
(g) For purposes of this SECTION 3.23:
(i) "Employee Program" means (a) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but not
limited to, multiple employer welfare arrangements (within the meaning
of ERISA Section 3(40)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA; and (b) all stock
option plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in subsection (a) above. In
the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee
Program shall include a reference to such organization;
(ii) an entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or
their spouses, dependents, or beneficiaries);
(iii) an entity is an "Affiliate" of a Company for
purposes of this SECTION 3.23 if it would have ever been considered a
single employer with the Company under ERISA Section 4001(b) or part of
the same "controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(c) and
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
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3.24 ENVIRONMENTAL MATTERS.
(a) Except as used in connection with routine maintenance and
as set forth in SCHEDULE 3.24 hereto, (i) the Company has never generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste
(as defined below); (ii) to the best knowledge of the Company and the
Stockholders, no Hazardous Material (as defined below) has ever been or is
threatened to be spilled, released, or disposed of at any site presently or
formerly owned, operated, leased, or used by the Company, or has ever come to be
located in the soil or groundwater at any such site; (iii) to the best knowledge
of the Company and the Stockholders, no Hazardous Material has ever been
transported from any site presently or formerly owned, operated, leased, or used
by the Company for treatment, storage, or disposal at any other place; (iv) the
Company does not presently own, operate, lease, or use, nor has it previously
owned, or to the best knowledge of the Company and the Stockholders operated,
leased, or used any site on which underground storage tanks are or were located;
and (v) to the best knowledge of the Company, no lien has ever been imposed by
any Governmental Entity on any property, facility, machinery, or equipment
owned, operated, leased, or used by the Company in connection with the presence
of any Hazardous Material.
(b) Except as set forth in SCHEDULE 3.24 hereto, (i) the
Company has no liability under, nor has the Company ever violated in any
material respect, any Environmental Law (as defined below); (ii) any property
owned, operated, leased, or used by the Company and any facilities and
operations thereon are presently in compliance in all material respects with all
applicable Environmental Laws; (iii) the Company has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law (as defined
below); and (iv) the Company nor any Company Stockholder has any reason to
believe that any of the items enumerated in clause (iii) of this paragraph will
be forthcoming.
(c) Except as set forth in SCHEDULE 3.24 hereto, no site
owned, or to the best knowledge of the Company and the Stockholders, operated,
leased, or used by the Company contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls ("pcbs") or equipment containing pcbs,
or any urea formaldehyde foam insulation.
(d) For purposes of this SECTION 3.24, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant, or
contaminant, as defined or regulated under any Environmental Law or any other
substance which may pose a threat to the environment or to human health or
safety; (ii) "Hazardous Waste" shall mean and include any hazardous waste as
defined or regulated under any Environmental Law; (iii) "Environmental Law"
shall mean any
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environmental laws, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, existing as of the date hereof; and (iv) the
Company shall mean and include the Company, its predecessors and all other
entities for whose conduct the Company is or may be held responsible under any
Environmental Law.
3.25 LISTS OF CERTAIN EMPLOYEES AND SUPPLIERS.
(a) SCHEDULE 3.25 hereto contains a list of all current
directors and officers of the Company and a list of all managers, employees and
consultants of the Company who, individually, have received or are scheduled to
receive base salary from the Company during the current fiscal year of $20,000
or more. In each case such schedule includes the current job title and current
base salary of each such individual.
(b) SCHEDULE 3.25 sets forth a true and complete list of all
suppliers of the Company to whom the Company made payments aggregating $25,000
or more during the most recent complete fiscal year, showing, with respect to
each, the name, address and dollar volume involved.
3.26 EMPLOYEES; LABOR MATTERS. As of the date hereof, the Company
employed the number of full-time employees and part-time employees described on
SCHEDULE 3.26. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth in SCHEDULE 3.26, upon
termination of the employment of any of said employees, the Company will not by
reason of the Merger be liable to any of said employees for so-called "severance
pay" or any other payments. Except as set forth in SCHEDULE 3.26 attached
hereto, the Company has no policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment. To the best knowledge of the Company and the Stockgholders, the
Company is in compliance with all applicable laws and regulations respecting
labor, employment, fair employment practices, terms and conditions of
employment, and wages and hours. No charges of employment discrimination or
unfair labor practices have been brought against the Company, nor are there any
strikes, slowdowns, stoppages of work, or any other concerted interference with
normal operations existing, pending or threatened against or involving the
Company. There are no grievances, complaints or charges that have been filed
against the Company under any dispute resolution procedure (including, but not
limited to, any proceedings under any dispute resolution procedure under any
collective bargaining agreement). No collective bargaining agreements are in
effect or are currently being or are about to be negotiated by the Company. The
Company has not received written notice of pending or threatened changes with
respect to the senior management or key supervisory personnel of the Company.
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3.27 CUSTOMERS. SCHEDULE 3.27 sets forth any customer who accounted for
more than 5% of the sales of the Company for the most recent complete fiscal
year of the Company (collectively, the "Customers"). No Customer has given
notice to the Company of its intention to terminate, to cancel or otherwise
materially and adversely modify its relationship with the Company or to decrease
materially or limit its usage or purchase of the services or products of the
Company.
3.28 Y2K. The Company has taken all necessary action to assess,
evaluate and correct all of the hardware, software, embedded microchips and
other processing capabilities of computer and telecommunication systems it uses,
either directly or indirectly, , to ensure that such systems will be able to
function accurately and without interruption or ambiguity using date information
before, during and after January 1, 2000. To the best knowledge of the Company
and the Stockholders, computerized services provided by third parties to the
Company such as billing services and payroll services will be able to function
accurately and without interruption or ambiguity using date information before,
during and after January 1, 2000.
3.29 TAX-FREE REORGANIZATION. To the best knowledge of the Company and
the Stockholders, neither the Company nor any of the Stockholders has taken any
action which would violate any requirement, including but not limited to the
continuity-of-business-enterprise requirement of 26 C.F.R. Section 1.368-1(d),
for tax-free reorganization status under SECTION 368(A) of the Code with respect
to the Merger, and the Stockholders will use best efforts to satisfy the
tax-free reorganization requirements under Section 368(a) and other applicable
provisions of the Code with respect to the Merger.
3.30 DISCLOSURE.
(a) This Agreement, including the Schedules hereto prepared by
the Company, together with the other information furnished to the Parent by the
Company and the Stockholders in connection herewith, does not contain an untrue
statement of material fact or omit to state a material fact necessary to make
the statements herein and therein, in light of the circumstances under which
they were made, not misleading. If, prior to the 90th day after the date of the
final prospectus of the Parent utilized in connection with the IPO, the Company
or the Stockholders become aware of any fact or circumstance which would affect
the accuracy of a representation or warranty of the Company or the Stockholders
in this Agreement, in any material respect, the Company and the Stockholders
shall immediately give notice of such fact or circumstance to the Parent.
However, subject to the provisions of SECTION 4.8, such notification shall not
relieve either the Company or the Stockholders of their respective obligations
under this Agreement, and subject to the provisions of SECTION 4.8, at the sole
option of the Parent, the truth and accuracy of any and all warranties and
representations of the Company, or on behalf of the Company and of the
Stockholders at the date of this Agreement and on the Closing Date and
immediately prior to at the Effective Time, shall be a precondition to the
consummation of this transaction.
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(b) The Company and the Stockholders acknowledge and agree (i)
that there exits no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that the
contemplated IPO of the Parent will occur at a particular price or within a
particular range of prices or occur at all; (ii) that neither the Parent, its
subsidiaries or any of their respective officers, directors, agents or
representatives nor any underwriter shall have any liability to the Company or
the Stockholders or any other person affiliated or associated with the Company
for any failure of the contemplated IPO to occur at a particular price or within
a particular range of prices or to occur at all; and (iii) that the decision of
the Stockholders to enter into this Agreement, or to vote in favor of or consent
to the Merger, has been or will be made independent of, and without reliance
upon, any statements, opinions or other communications, or due diligence
investigations which have been or will be made performed by any prospective
underwriter, relative to the Parent or the contemplated IPO.
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
4.1 MAKING OF COVENANTS AND AGREEMENTS. The Company and the
Stockholders covenant and agree as set forth in this SECTION 4.
4.2 CONDUCT OF BUSINESS. Between the date of this Agreement and the
earlier to occur of the Effective Time or the date this Agreement is terminated
pursuant to Section 9 below, the Stockholders will cause the Company to do and
the Company will do the following, unless the Parent shall otherwise consent in
writing:
(a) conduct its business only in the ordinary course
consistent with past practices, refrain from changing or introducing any method
of management or operations except in the ordinary course of business and in a
manner consistent with past practices and maintain levels of working capital
consistent with past practices;
(b) refrain from making any purchase, sale or disposition of
any asset or property other than in the ordinary course of business, from
purchasing or selling any capital asset costing more than $30,000 and from
mortgaging, pledging, subjecting to a lien or otherwise encumbering any of its
properties or assets;
(c) refrain from incurring or modifying any contingent
liability as a guarantor or otherwise with respect to the obligations of others,
and from incurring or modifying any other contingent or fixed obligations or
liabilities except in the ordinary course of business and in a manner consistent
with past practices;
(d) refrain from making any change in its incorporation
documents, by-laws or authorized or issued capital stock or from acquiring any
securities issued by any other business organization other than short-term
investments in the ordinary course of business;
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(e) refrain from declaring, setting aside or paying any
dividend, making any other distribution in respect of its capital stock, making
any direct or indirect redemption, purchase or other acquisition of its capital
stock, issuing, granting, awarding, selling, pledging, disposing of or
encumbering or authorizing the issuance, grant, award, sale, pledge, disposition
or encumbrance of any shares of, or securities convertible or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or entering into any
agreement or commitment with respect to any of the foregoing;
(f) refrain from making any change in the compensation payable
or to become payable to any of its officers, employees or agents, except for
scheduled increases in salary or wages in the ordinary course of business that
are consistent with past practices, or granting any severance or termination pay
to, or establishing, adopting or entering into any agreement or arrangement
providing for severance or termination pay to, or entering into or amending any
employment, or other agreement or arrangement with, any director, officer or
other employee of the Company or any Stockholder or establishing, adopting or
entering into or amending any collective bargaining, bonus, incentive, deferred
compensation, profit sharing, stock option or purchase, insurance, pension,
retirement or other employee benefit plan;
(g) refrain from making any change in its borrowing
arrangements or modifying, amending or terminating any of its contracts except
in the ordinary course of business, or waiving, releasing or assigning any
material rights or claims;
(h) use reasonable efforts to prevent any change with respect
to its management and supervisory personnel or banking arrangements;
(i) use reasonable efforts to keep intact its business
organization and to preserve the goodwill of and business relationships with all
suppliers, customers and others having business relations with it, and to
maintain its properties and facilities, including those held under leases, in as
good a working order and condition as on the date hereof, ordinary wear and tear
excepted;
(j) use reasonable efforts to have in effect and maintain at
all times all insurance of the kind, in the amount and with the insurers set
forth in SCHEDULE 3.18 or equivalent insurance with any substitute insurers
approved by Parent;
(k) refrain from changing accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivable) or from making any tax
election or settling or compromising any federal, state, local or foreign income
tax liability;
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(l) refrain from entering into any executory agreement,
commitment or undertaking to do any of the activities prohibited by the
foregoing provisions; and
(m) permit Parent and its authorized representatives
(including without limitation Parent's attorneys, accountants, and pension and
environmental consultants) to have full access to all of its properties, assets,
books, records, business files, executive personnel, tax returns, contracts and
documents and furnish to Parent and its authorized representatives such
financial and other information with respect to its business or properties as
Parent may from time to time reasonably request.
4.3 CONSENTS AND APPROVALS. The Company and each of the Stockholders
shall use their best efforts to obtain or cause to be obtained prior to the
Closing Date all necessary consents and approvals to the performance of the
obligations of the Company and the Stockholders under this Agreement, including,
without limitation, the consents and authorizations described in SCHEDULE 3.15,
and such other authorizations, waivers, approvals, consents and permits as set
forth in SCHEDULE 4.3 as may be necessary to transfer to Parent and/or to retain
in full force and effect without penalty subsequent to the Effective Time all
contracts, permits, licenses and franchises of or applicable to the businesses
of the Company.
4.4 ACTION BY WRITTEN CONSENT OF STOCKHOLDERS. On or prior to the date
hereof the Stockholders will execute and deliver a unanimous written consent in
lieu of a meeting in accordance with applicable law for the purpose of
authorizing the transactions contemplated hereby. The recommendation of the
Board of Directors will remain in effect at all times prior to the Effective
Time. The Stockholders hereby agree to vote all shares of capital stock of the
Company held of record by them or over which they exercise voting control in
favor of the Merger, this Agreement and the consummation of the transactions
contemplated hereby and shall not demand appraisal or dissenter's rights in
connection with the merger under the Connecticut Business Corporation Act.
4.5 EXCLUSIVE DEALING. Unless and until the earlier to occur of the
Effective Time or the termination of this Agreement pursuant to SECTION 9,
neither the Company nor any Stockholder shall, nor shall any of them permit any
director, officer, employee or agent of either of the Company to, directly or
indirectly, (i) take any action to solicit, initiate submission of or encourage,
proposals or offers from any person relating to any acquisition or purchase of
all or (other than in the ordinary course of business) a portion of the assets
of, or any equity interest in, the Company or any merger or business combination
with the Company (an "Acquisition Proposal"), (ii) participate in any
discussions or negotiations regarding an Acquisition Proposal with any person or
entity other than Parent and Newco and their representatives, or (iii) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do any of the foregoing.
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4.6 NO SALES OF CAPITAL STOCK. Between the date of this Agreement and
the Effective Time, none of the Stockholders shall sell, exchange, deliver,
assign, pledge, encumber or otherwise transfer or dispose of any Company Stock
owned beneficially or of record by such Stockholder, nor grant any right of any
kind to acquire, dispose of, vote or otherwise control in any manner such shares
of Company Stock; provided, however, that notwithstanding anything to the
contrary stated herein, any transferee, executor, heir, legal representative,
successor or assign of any Stockholder shall be bound by this Agreement.
4.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to the Parent of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of the Company or the Stockholders contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of any Stockholder or the Company to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. The delivery of any notice pursuant to
this SECTION 4.7 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, (ii) modify the
conditions set forth in SECTION 7 or elsewhere or (iii) limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
4.8 AMENDMENT OF SCHEDULES. The Company and the Stockholders agree
that, with respect to the representations and warranties contained in this
Agreement, the Company and the Stockholders shall have the continuing obligation
until the Closing Date to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described on the Schedules. Notwithstanding the foregoing sentence, no amendment
or supplement to a Schedule prepared by the Company or the Stockholders that
constitutes or reflects an event or occurrence that would be reasonably likely
to have a material adverse effect may be made unless the Parent consents to such
amendment or supplement.
4.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company
and the Stockholders shall furnish or cause to be furnished to the Parent and
its underwriters all of the information concerning the Company and the
Stockholders reasonably requested by the Parent and its underwriters for
inclusion in, and will cooperate with the Parent and its underwriters in the
preparation of, any Registration Statement required by the Securities and
Exchange Commission and any prospectus included therein (including audited and
unaudited financial statements, prepared in accordance with GAAP, and in form
otherwise reasonably requested by the Parent and its underwriters as suitable
for inclusion in the Registration Statement). The Company and the Stockholders
agree to promptly advise the Parent if at any time during the period in which a
prospectus relating to the IPO is required to be delivered under the Securities
Act, any information contained in the prospectus concerning the Company or the
Stockholders becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. Insofar as the
information requested relates solely to the Company or
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the Stockholders, each of the Company and the Stockholders jointly and severally
represents and warrants that the Registration Statement will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
4.10 FURTHER ASSURANCES. The Company and Stockholders hereto agree to
execute and deliver, or cause to be executed and delivered, such further
instruments or documents or take such other action as may be reasonably
necessary or convenient to carry out the transactions contemplated hereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND NEWCO.
5.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As of the date hereof,
the Parent and Newco hereby represent and warrant to the Stockholders and the
Company as set forth in this SECTION 5.
5.2 ORGANIZATION OF THE PARENT AND NEWCO. The Parent and Newco are
corporations duly organized, validly existing and in good standing under the
laws their respective state of incorporation with full corporate power and
authority to conduct their respective businesses in the manner as now conducted.
5.3 AUTHORITY. All necessary corporate action has been taken by the
Parent and Newco to authorize the execution, delivery and performance of this
Agreement and each agreement, document and instrument to be executed and
delivered by the Parent and/or Newco pursuant to this Agreement. This Agreement
and each agreement, document and instrument to be executed and delivered by the
Parent and/or Newco pursuant to this Agreement (to the extent it contains
obligations to be performed by the Parent and/or Newco) constitutes, or when
executed and delivered by the Parent and/or Newco will constitute, valid and
binding obligations of the Parent and/or Newco enforceable in accordance with
their respective terms.
5.4 NO CONFLICTS. The execution, delivery and performance by the Parent
and Newco of this Agreement and each such other agreement, document and
instrument: (i) does not and will not violate any provision of the Certificate
of Incorporation or bylaws of the Parent or Newco; and (ii) will not result in a
breach of, constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture or loan or credit agreement or
any other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award, whether written or oral, to which the Parent or Newco is a
party or by which the property of the Parent or Newco is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the assets of the Parent or
Newco, except where such breach, default, acceleration or right of termination
would not have a material adverse effect on the properties, assets, business,
financial condition or prospects of the Parent or Newco, and
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would not result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets of the
Parent or Newco.
5.5 PARENT STOCK. The Parent Stock to be delivered to the Stockholders
at the Closing, when delivered in accordance with the terms of this Agreement,
will constitute valid and legally issued shares of the Common Stock of the
Parent, fully paid and non-assessable. Such Parent Stock will constitute
restricted securities and will be subject to the lock-up provisions and other
transfer restrictions imposed under this Agreement and under applicable federal
and state securities laws as described in SECTION 9 below.
5.6 LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or threatened against the
Parent or Newco which may have an adverse effect on the properties, assets,
business, financial condition or prospects of the Parent or Newco or which would
prevent or hinder the consummation of the transactions contemplated by this
Agreement.
5.7 COMPLIANCE WITH LAWS. Neither the Parent nor Newco has received
notice of a violation or alleged violation of applicable statutes, ordinances,
orders, rules and regulations promulgated by any federal, state, municipal or
other governmental authority, which violation or alleged violation would have a
material adverse effect on the business of the Parent or Newco.
SECTION 6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT AND NEWCO.
6.1 INTRODUCTION. The obligations of the Parent (and its accountants
KPMG Peat Marwick LLP) and Newco to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment, prior to or at
the Closing, of the conditions set forth in this SECTION 6.
6.2 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the initial filing of
the registration statement with respect to the IPO, the Parent and Newco shall
have had sufficient opportunity to review the audited balance sheet of the
Company as of December 31, 1998 and the audited statements of income, cash flow
and stockholders' equity for the years ended December 31, 1998 and December 31,
1997 audited by the Parent's accounting firm in accordance with GAAP in
connection with the contemplated IPO, and the Parent shall be satisfied in all
respects with such financial information, and such information shall indicate
that the Company's gross revenues (which shall mean total aggregate sales less
returns, credits and other normal, customary adjustments to revenue) for the
year ended December 31, 1998 shall exceed $1,850,000, and the aggregate
stockholder's equity as of December 31, 1998 shall exceed $40,000.
6.3 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
results of operations, financial position or business of the Company shall have
occurred and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or
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not covered by insurance, since the Company Balance Sheet Date, which change,
loss or damage materially affects or impairs the ability of the Company to
conduct its business; and the Parent shall have received on the Closing Date a
certificate signed by the President of the Company and each of the Stockholders
to such effect.
6.4 DUE DILIGENCE AND REGULATORY REVIEW. Prior to the initial filing of
the registration statement with respect to the IPO, the Parent shall have
completed to its satisfaction a due diligence investigation of the Company and
its prospects, business, assets, contracts, rights, liabilities and obligations,
including a review of the practices and procedures of the Company with respect
to compliance with contracts and federal, state and local laws and regulations
governing the operations of the Company. Such review shall be satisfactory in
all respects to the Parent, in its sole discretion.
6.5 OPINION OF COUNSEL. The Parent shall have received an opinion from
Xxxxxx & Xxxxxxx, P.C., counsel to the Company and the Stockholders, dated the
Closing Date, in form and substance satisfactory to the Parent, to the effect
that with respect to the Company:
(a) the Company has been duly organized and is validly
subsisting in good standing under the laws of the State of Connecticut.
(b) the authorized and outstanding capital stock of the
Company is as represented by the Stockholders in this Agreement and each share
of such stock has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
stockholder;
(c) to the knowledge of such counsel, the Company does not
have any outstanding options, warrants, calls, conversion rights or other
commitments of any kind to issue or sell any of its capital stock;
(d) this Agreement has been duly authorized, executed and
delivered by the Company and the Stockholders and constitutes a valid and
binding agreement of the Company and the Stockholders enforceable against them
in accordance with its terms except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement and other
similar laws relating to or affecting the rights of creditors and except (i) as
the same may be subject to the effect of general principles of equity and (ii)
that no opinion need be expressed as to the enforceability of indemnification
provisions included herein;
(e) except to the extent set forth on SCHEDULE 3.16, to the
knowledge of such counsel, there are no claims, actions, suits or proceedings
pending, or threatened against or affecting the Company, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality wherever located;
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(f) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
in connection with the execution, delivery or consummation of this Agreement by
any Stockholders or for the transfer to the Parent of the Company Stock;
(g) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's Certificate of
Incorporation or the bylaws of the Company or of any lease, instrument, license,
permit or any other agreement to which the Company is a party or by which the
Company or any Stockholder is bound; and
(h) any other matters incident to the matters set forth herein
as reasonably required by the Parent.
6.6 ADDITIONAL LIABILITIES AND OBLIGATIONS. The Stockholders shall have
delivered to the Parent a certificate dated the Closing Date, setting forth (i)
all liabilities and obligations of the Company arising since the Company Balance
Sheet Date and (ii) showing all material contracts and agreements, together with
copies thereof, entered into by the Company since the Company Balance Sheet
Date.
6.7 GOOD STANDING CERTIFICATES; CERTIFIED COPY OF THE CERTIFICATE OF
INCORPORATION. The Company shall have delivered to the Parent certificates,
dated as of a date no earlier than twenty days prior to the Closing Date, duly
issued by the Secretary of State and the Department of Revenue of the State of
Connecticut and of any other state in which the Company is authorized to do
business, showing that the Company is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
the Company for all periods prior to the dates of such certificates have been
filed and paid. The Company shall also have delivered to the Parent prior to the
Closing a recent copy of its Certificate of Incorporation and all amendments
thereto duly certified by the Secretary of State of Connecticut.
6.8 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of the Company and the Stockholders contained in SECTION 3 and
elsewhere in this Agreement shall be true and correct on and as of the Closing
Date, with the same effect as though made on and as of the Closing Date; the
Company and the Stockholders shall, on or before the Closing Date, have
performed and satisfied all agreements and conditions hereunder which by the
terms hereof are to be performed and satisfied by the Company or the
Stockholders on or before the Closing Date; and the Company and the Stockholders
shall have delivered to the Parent a certificate dated the Closing Date signed
by the Company's President and by each of the Stockholders to the foregoing
effect.
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6.9 APPROVALS AND CONSENTS. The Company and the Stockholders shall have
made all filings with and notifications of governmental authorities, regulatory
agencies and other entities required to be made by them in connection with the
execution and delivery of this Agreement, the performance of the transactions
contemplated hereby and the continued operation of the businesses of the Company
subsequent to the Effective Time, and the Company and the Parent shall have
received all required authorizations, waivers, consents and permits to permit
the consummation of the transactions contemplated by this Agreement, in form and
substance reasonably satisfactory to the Parent, from all third parties,
including, without limitation, approvals required under federal and state
securities laws and/or the securities and Exchange Commission, state "Blue Sky"
laws, other applicable governmental authorities and regulatory agencies,
lessors, lenders and contract parties, required in connection with the Merger or
the Company's permits, leases, licenses and franchises, to avoid a breach,
default, termination, acceleration or modification of any material agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award as a result of
the execution or performance of this Agreement, or otherwise in connection with
the execution and performance of this Agreement.
6.10 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any court,
administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions contemplated by this Agreement, and which would in the
reasonable judgment of the Parent or Newco make it inadvisable to consummate
such transactions, and no law or regulation shall be in effect and no court
order shall have been entered in any action or proceeding instituted by any
party which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
6.11 PROCEEDINGS SATISFACTORY TO NEWCO AND THE PARENT. All proceedings
to be taken by the Company and the Stockholders in connection with the
consummation of the Closing on the Closing Date and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transaction contemplated hereby reasonably
requested by Newco and the Parent shall be reasonably satisfactory in form and
substance to Newco and the Parent and their counsel.
6.12 EMPLOYMENT AGREEMENTS. Each of the Stockholders shall have
executed and delivered an individual employment agreement with Newco in the form
attached hereto as EXHIBIT 6.12(A) (for Xxxxx Xxxxx) and EXHIBIT 6.12(B) (for
Xxxx Xxxxxx).
6.13 EFFECTIVENESS OF REGISTRATION STATEMENT AND IPO CLOSING. The
Registration Statement prepared and filed in connection with the Parent's
contemplated IPO shall have been declared effective by the Securities and
Exchange Commission, and the Parent and its underwriters shall have successfully
closed the IPO. The intent of the parties hereto is to hold
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the Closing for the transactions contemplated hereby as described in SECTION 1.7
contemporaneously with the IPO closing.
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS.
7.1 INTRODUCTION. The obligations of the Company and the Stockholders
to consummate this Agreement and the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing Date, of the following
conditions (any one or more of which may be waived in whole or in part by the
Company and the Stockholders):
7.2 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of the Parent and Newco contained in SECTION 5 shall be true and
correct in all material respects on and as of the Closing Date, with the same
effect as though made on and as of the Closing Date; the Parent and Newco shall,
on or before the Closing Date, have performed and satisfied all agreements and
conditions hereunder which by the terms hereof are to be performed and satisfied
by the Parent and Newco on or before the Closing Date; and the Parent and Newco
shall have delivered to the Company a certificate signed by the President of the
Parent and of Newco and dated as of the Closing Date certifying to the foregoing
effect.
7.3 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any court,
administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions as contemplated by this Agreement, and which would in the
reasonable judgment of the Company make it inadvisable to consummate such
transactions, and no law or regulation shall be in effect and no court order
shall have been entered in any action or proceeding instituted by any party
which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
7.4 EMPLOYMENT AND OTHER AGREEMENTS. Newco shall have executed and
delivered an individual employment agreement with each of the Stockholders in
the forms attached hereto as EXHIBIT 6.12(A) (for Xxxxx Xxxxx), and EXHIBIT
6.12(B) (for Xxxx Xxxxxx).
7.5 EFFECTIVENESS OF REGISTRATION STATEMENT AND IPO CLOSING. The
Registration Statement prepared and filed in connection with the Parent's
contemplated IPO shall have been declared effective by the Securities and
Exchange Commission, and the Parent and its underwriters shall have successfully
closed the IPO. The intent of the parties hereto is to hold the Closing for the
transactions contemplated hereby as described in SECTION 1.7 contemporaneously
with or as promptly as practicable after the IPO closing.
SECTION 8 - PARENT STOCK - TRANSFER RESTRICTIONS.
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8.1 50% LOCK-UP. In addition to applicable federal and state securities
laws restricting the public sale of the Parent Stock to be issued to the
Stockholders hereunder as set forth in SECTION 8.2 below, the Stockholders
hereby irrevocably agree that for a period of two years after the Closing Date,
they will not (i) offer, pledge, sell or otherwise transfer directly or
indirectly, more than 50% of the shares of Parent Stock received hereunder (as
adjusted for any stock splits, recapitalizations, mergers or similar events), or
(ii) enter into any agreement that transfers, in whole or in part, any of the
economic consequences of ownership of more than 50% of the shares of Parent
Stock received hereunder (as adjusted for any stock splits, recapitalizations,
mergers or similar events). The Stockholders agree that the foregoing shall be
binding upon the Stockholders' successors, assigns, heirs, and personal
representatives.
8.2 UNREGISTERED STOCK; INVESTMENT INTENT. The Stockholders acknowledge
and agree that the shares of Parent Stock to be delivered to the Stockholders
pursuant to this Agreement have not been and will not be registered under the
Securities Act of 1933, as amended (the "Act") and therefore may not be resold
without compliance with the Act. The Stockholders represent and warrant that the
Parent Stock to be acquired by Stockholders pursuant to this Agreement is being
acquired solely for their own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution. The Stockholders covenant, warrant and represent
that none of the shares of Parent Stock issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the Securities and Exchange
Commission and applicable state securities laws.
8.3 ABLE TO BEAR RISK; SOPHISTICATED INVESTORS; INFORMATION. The
Stockholders represent and warrant that they are able to bear the economic risk
of an investment in Parent Stock acquired pursuant to this Agreement and can
afford to sustain a total loss of such investment. They further represent and
warrant that they (i) fully understand the nature, scope and duration of the
limitations on transfer contained in this Agreement and (ii) have such knowledge
and experience in financial and business matters that they are capable of
evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect their own interests in connection with the acquisition
of the Parent Stock. The Stockholders represent and warrant that they have had
an adequate opportunity to ask questions and receive answers from the officers
of the Parent concerning any and all matters relating to the acquisition of
Parent Stock as contemplated by this Agreement including, without limitation,
the background and experience of the officers and directors of the Parent, the
plans for the operations of the business of the Parent, and any plans for
additional acquisitions and the like. The Stockholders have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
8.4 RESTRICTIVE LEGENDS. The certificates evidencing the Parent Stock
to be received by the Stockholders hereunder will bear legends substantially in
the form set forth below and
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containing such other information as the Parent may deem appropriate. References
in such legend to "THE COMPANY" shall refer to the Parent.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY
STATE SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
UNDER THE 1933 ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS, UNLESS,
IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO
THE COMPANY) OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH REGISTRATION
IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE FURTHERMORE SUBJECT TO
THE LOCK-UP PROVISIONS CONTAINED IN SECTION 8.1 OF THAT CERTAIN
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION DATED AS OF
___________, 1999, A COPY OF WHICH MAY BE OBTAINED BY CONTACTING THE
SECRETARY OF THE COMPANY.
In addition, such certificates shall also bear such other legends as
counsel for the Parent reasonably determines are required under the applicable
laws of any state.
SECTION 9. TERMINATION OF AGREEMENT; EFFECT OF TERMINATION.
9.1 TERMINATION. This Agreement may be terminated any time prior to the
Closing Date solely by:
(a) mutual consent of the boards of directors of the Parent
and the Company;
(B) either the Stockholders and the Company, on the one hand,
or by the Parent and Newco, on the other hand, if
(i) the transactions contemplated by this
Agreement to take place at the Closing shall
not have been consummated by June 30, 1999,
unless the failure of such transactions to
be consummated is due to the willful failure
of the party seeking to terminate this
Agreement to perform any of its obligations
under this Agreement to the extent required
to be performed by it prior to or on the
Closing Date; or
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(ii) if a material breach or default shall
be made by the other party in the observance
of or in the due and timely performance of
any of the covenants or agreements contained
herein, and the curing of such default shall
not have been made on or before the Closing
Date
9.2 LIABILITIES IN THE EVENT OF TERMINATION. The termination of this
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this Agreement
including, but not limited to, legal and audit costs and out of pocket expenses.
SECTION 10. NON-COMPETITION.
For a period of two (2) years from and after the Closing Date, the
Stockholders will not (i) engage directly or indirectly in any business that the
Company conducts as of the Closing Date in the United States; (except that
ownership of less than 2% of the outstanding stock of any competing publicly
traded corporation shall not constitute a violation of this covenant not to
compete) or (ii) solicit, directly or indirectly, any customers, clients,
accounts, officers, employees, agents or representatives of the Company, Newco
or the Parent. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section is invalid or unenforceable,
the parties hereto agree that the court making the determination of invalidity
or unenforceability shall have the power to reduce the scope, duration, or area
of the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
SECTION 11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
11.1 THE STOCKHOLDERS. The Stockholders recognize and acknowledge that
they have had in the past, currently have and in the future may have access to
certain confidential information relating to the Company, the Parent and Newco,
including, but not limited to, operational policies, customer lists, and pricing
and cost policies, that are valuable, special and unique assets of the Company,
the Parent and Newco. The Stockholders agree that they will not use or disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the Parent and Newco who need to know such information in
connection with the transactions contemplated hereby, who have been informed of
the confidential nature of such information and who have agreed to keep such
information confidential as provided hereby, and (b) following the Closing, such
information may be disclosed by the Stockholders as is required in the course of
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performing his or her duties for the Parent or the Surviving Corporation unless
(i) such information becomes known to the public generally through no breach by
the Stockholders of this covenant, (ii) disclosure is required by law or the
order of any governmental authority under color of law or is necessary in order
to secure a consent or approval to consummate the transactions contemplated
hereby, provided, that prior to disclosing any information pursuant to this
clause (ii), the Stockholders shall give prior written notice thereof to the
Parent and provide the Parent with the opportunity to contest such disclosure,
or (iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party and the same prior disclosure set forth immediately above is given. In the
event of a breach or threatened breach by the Stockholders of the provisions of
this section, the Parent shall be entitled to an injunction restraining the
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the Parent from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event that the transactions
contemplated herein are not consummated, the Stockholders shall return to the
Parent within a reasonable time all documents containing confidential
information about the Parent.
11.2 THE PARENT AND NEWCO. The Parent and Newco recognize and
acknowledge that they had in the past and currently have access to certain
confidential information relating to the Company, such as operational policies,
customer lists, and pricing and cost policies, that are valuable, special and
unique assets of the Company. The Parent and Newco agree that, prior to the
Closing, or if the transactions contemplated by this Agreement are not
consummated, they will not use or disclose such confidential information to
their own benefit except in furtherance of the transactions contemplated by this
Agreement or disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to the Stockholders and to authorized representatives of the Company
or the Parent or Newco who need to know such information in connection with the
transactions contemplated hereby, who have been informed of the confidential
nature of such information and who have agreed to keep such information
confidential as provided hereby, unless (i) such information becomes known to
the public generally through no breach by the Parent or Newco of this covenant,
(ii) disclosure is required by law or the order of any governmental authority
under color of law or is necessary in order to secure a consent or approval to
consummate the transactions contemplated hereby, provided, that prior to
disclosing any information pursuant to this clause (ii), the Parent and Newco
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party and the same prior disclosure set forth immediately
above is given. In the event of a breach or threatened breach by the Parent or
Newco of the provisions of this Section, the Company and the Stockholders shall
be entitled to an injunction restraining the Parent and Newco from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting the Company and the Stockholders from pursuing any
other available remedy for
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such breach or threatened breach, including the recovery of damages. In the
event that the transactions contemplated herein are not consummated, the Parent
and Newco shall return to the Company within a reasonable time all documents
containing confidential information about the Company.
11.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in SECTIONS 11.1 and 11.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
11.4 SURVIVAL. The obligations of the parties under this ARTICLE 11
shall survive notwithstanding either the termination of this Agreement or the
consummation of the transactions contemplated herein on the Closing Date.
SECTION 12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders, jointly and
severally on behalf of themselves and their respective successors, executors,
administrators, estates, heirs and permitted assigns, agree subsequent to the
Effective Time to indemnify and hold harmless the Parent, the Surviving
Corporation and their respective officers, directors, employees and agents
(individually, a "Parent Indemnified Party" and collectively, the "Parent
Indemnified Parties") from and against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, fines, penalties, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys,
accountants and consultants) of any kind or nature whatsoever (whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) sustained, suffered or
incurred by or made against any Parent Indemnified Party (a "Loss" or "Losses"),
arising out of, based upon or in connection with:
(a) any breach of any representation or warranty made by the
Company or the Stockholders in this Agreement or in any schedule, exhibit,
certificate, agreement or other instrument delivered under or in connection with
this Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such
representations or warranties (collectively, "Parent Representation and Warranty
Claims");
(b) any breach of any covenant or agreement made by the
Company or any Stockholder in this Agreement or in any schedule, exhibit,
certificate, agreement or other instrument delivered under or in connection with
this Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such covenant or
agreement; or
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(c) with respect to taxes of the Company incurred with respect
to any Pre-Closing Tax Period (as defined below) to the extent such liability
exceeds the amounts accrued therefor and disclosed to the Parent in SCHEDULE 3.7
hereto (it being understood that such Schedule shall be updated as of the
Closing to reflect tax accruals as of such date consistent with the Company's
past practices); the term "Pre-Closing Tax Period" shall mean all taxable
periods ending on or before the Closing Date and the portion (ending on the
Closing Date) of any taxable period that includes (but does not end on) the
Closing Date.
Claims under clauses (a) through (c) of this SECTION 12.1 are hereinafter
collectively referred to as "Parent Indemnifiable Claims". The rights of Parent
Indemnified Parties to recover indemnification in respect of any occurrence
referred to in clauses (b) and (c) of this SECTION 12.1 shall not be limited by
the fact that such occurrence may not constitute an inaccuracy in or breach of
any representation or warranty referred to in clause (a) of this SECTION 12.1.
12.2 LIMITATIONS ON INDEMNIFICATION BY THE COMPANY STOCKHOLDERS.
Notwithstanding the provisions of SECTION 12.1, the Company Stockholders shall
not be obligated to indemnify Parent Indemnified Parties except to the extent
the cumulative amount of Losses to such Parent Indemnifiable Parties exceeds Ten
Thousand Dollars ($10,000) (the "Parent threshold") whereupon the full amount of
such Losses shall be recoverable in accordance with the terms hereof.
12.3 NOTICE; DEFENSE OF CLAIMS.
Promptly after receipt by a Parent Indemnified Party of notice of any
claim, liability or expense to which the indemnification obligations hereunder
would apply, the Parent Indemnified Party shall give notice thereof in writing
to the Stockholders, but the omission to so notify the Stockholders promptly
will not relieve the Stockholders from any liability except to the extent that
the Stockholders shall have been prejudiced as a result of the failure or delay
in giving such notice. Such notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted. If within twenty (20) days after receiving such
notice the Stockholders give written notice to the Parent Indemnified Party
stating that (i) it would be liable under the provisions hereof for indemnity in
the amount of such claim if such claim were successful and (ii) that it disputes
and intends to defend against such claim, liability or expense at its own cost
and expense, then counsel for the defense shall be selected by the Stockholders
(subject to the consent of the Parent Indemnified Party which consent may not be
unreasonably withheld) and the Parent Indemnified Party shall not be required to
make any payment with respect to such claim, liability or expense as long as the
Stockholders are conducting a good faith and diligent defense at their own
expense; provided, however, that the assumption of defense of any such matters
by the Stockholders shall relate solely to the claim, liability or expense that
is subject or potentially subject to indemnification. The Stockholders
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shall have the right, with the consent of the Parent Indemnified Party, which
consent shall not be unreasonably withheld, to settle any Parent Indemnified
Claims by third parties which are susceptible to being settled provided its
obligation to indemnify the Parent Indemnified Party therefor will be fully
satisfied. The Stockholders shall keep the Parent Indemnified Party apprised of
the status of the claim, liability or expense and any resulting suit, proceeding
or enforcement action, shall furnish the Parent Indemnified Party with all
documents and information that the Parent Indemnified Party shall reasonably
request and shall consult with the Parent Indemnified Party prior to acting on
major matters, including settlement discussions. Notwithstanding anything herein
stated, the Parent Indemnified Party shall at all times have the right to fully
participate in such defense at its own expense directly or through counsel;
provided, however, if the named parties to the action or proceeding include both
the Stockholders and the Parent Indemnified Party and representation of both
parties by the same counsel would be inappropriate under applicable standards of
professional conduct, the expense of separate counsel for the Parent Indemnified
Party shall be paid by the Stockholders. If no such notice of intent to dispute
and defend is given by the Stockholders, or if such diligent good faith defense
is not being or ceases to be conducted, the Parent Indemnified Party shall, at
the expense of the Stockholders, undertake the defense of (with counsel selected
by the Parent Indemnified Party), and shall have the right to compromise or
settle (exercising reasonable business judgment), such claim, liability or
expense. If such claim, liability or expense is one that by its nature cannot be
defended solely by the Stockholders, then the Parent Indemnified Party shall
make available all information and assistance that the Stockholders may
reasonably request and shall cooperate with the Stockholders in such defense.
SECTION 13. MISCELLANEOUS.
13.1 LAW GOVERNING. This Agreement shall be construed under and
governed by the internal laws of the State of Connecticut without regard to its
conflict of laws provisions.
13.2 NOTICES. Any notice, request, demand other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given (i) if delivered or sent by facsimile transmission, upon receipt, or (ii)
if sent by registered or certified mail upon the sooner of receipt or the
expiration of three days after deposit in United States Post Office facilities
properly addressed with postage prepaid. all notices will be sent to the
addresses set forth below or to such other address as such party may designate
by notice to each other party hereunder:
TO PARENT OR NEWCO:
InSite Internet, Inc.
0000 Xxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
ATTN: Xxxx X. Xxxxx, President and Chief Executive Officer
Phone: 000-000-0000
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Fax: 000-000-0000
with a copy to:
Xxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
TO THE COMPANY:
Caravela Software, Inc. dba Connix
0 Xxx Xxxx
Xxxxxxxxxxx, XX 00000
ATTN: Xxxxx Xxxxx & Xxxx Xxxxxx
Phone:
Fax:
with a copy to:
Xxxxxx & Xxxxxxx, P.C.
00 Xxx Xxxxxx
Xxx Xxxxx, XX 00000
ATTN: Xxxxx X. Xxxxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
TO THE STOCKHOLDERS:
Same as Company above
With a copy to:
Same as Company above
Any notice given hereunder may be given on behalf of any party by its counsel or
other authorized representative.
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13.3 ENTIRE AGREEMENT. This Agreement, including any schedules, annexes
and/or exhibits referred to herein and the other writings specifically
identified herein or contemplated hereby or delivered in connection with the
transactions contemplated hereby, is complete, reflects the entire agreement of
the parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings.
13.4 ASSIGNABILITY. This Agreement may not be assigned or delegated by
any party hereto without the prior written consent of all parties hereto. No
Stockholder may assign his, her or its rights or delegate his, her or its
obligations hereunder without the prior written consent of the Parent. This
Agreement and the obligations of the parties hereunder shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors, executors, administrators, estates, heirs and permitted
assigns, and no others.
13.5 ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S FEES. Each party
hereto agrees that any dispute regarding this Agreement shall be submitted to
arbitration to and shall be resolved in accordance with the rules of the
JAMS/Endispute for expedited cases then in effect. The arbitrator(s) shall be
mutually selected by the parties or in the event the parties cannot mutually
agree, then appointed by JAMS/Endispute. Any arbitration shall be held within a
thirty (30) mile radius of New Haven, Connecticut and the arbitrator(s) shall
apply Connecticut law. Judgment upon any award rendered by the arbitrator(s)
shall be final and may be entered in any court of competent jurisdiction.
Notwithstanding the foregoing, the Parent and Newco shall have the absolute
right to obtain equitable remedies in any state court of competent jurisdiction
in the State of Connecticut or in any United States District Court in the State
of Connecticut. Each party irrevocably submits to and accepts the exclusive
jurisdiction of each of such courts and waives any objection (including any
objection to venue or any objection based upon the grounds of forum non
conveniens) which might be asserted against the bringing of any such action,
suit or other legal proceeding in such courts. The court and/or arbitrator(s)
shall award costs and expenses (including reasonable attorney's fees) to the
prevailing party and/or parties in any litigation or arbitration.
13.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
13.7 CERTAIN DEFINITIONS. for purposes of this Agreement, the term:
(a) "Affiliate" of a person shall mean 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;
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(b) "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
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise; and
(c) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization.
13.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
13.9 AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by the Parent, Newco, the
Company and the Stockholders, or, in the case of a waiver, the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, or any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
13.10 SURVIVAL OF WARRANTIES. All representations, warranties,
agreements, covenants and obligations herein or in any schedule or certificate
delivered by any party incident to the transactions contemplated hereby are
material and may be relied upon by the party receiving the same and shall
survive for a period ending two (2) years after the Closing Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date set forth above by their duly authorized representatives.
INSITE INTERNET, INC.
ATTEST:
/S/ XXXXXXX X. XXXXXXX By:/S/ XXXX X. XXXXX
---------------------------- -----------------------------------
Assistant Secretary Xxxx X. Xxxxx, President
and Chief Executive Officer
INSITE INTERNET V
ACQUISITION CO., INC.
ATTEST:
/S/ XXXXXXX X. XXXXXXX By: /S/ XXXX X. XXXXX
---------------------------- -----------------------------------
Assistant Secretary Xxxx X. Xxxxx, President
and Chief Executive Officer
CARAVELA SOFTWARE, INC.
dba CONNIX
ATTEST:
/S/ XXXXX XXXXX By:/S/ XXXX X. XXXXXX
---------------------------- -----------------------------------
Xxxxx Xxxxx, Secretary Xxxx X. Xxxxxx, President
WITNESS:
/S/ XXXX XXX /S/ XXXXX XXXXX
---------------------------- --------------------------------------
Xxxxx Xxxxx
WITNESS
/S/ XXXX XXX /S/ XXXX X. XXXXXX
---------------------------- --------------------------------------
Xxxx Xxxxxx
XXXXX INSITE DOCS MERGER AGREEMENT CONNIX.DOC
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EXHIBIT 1.3
BOARD OF DIRECTORS/OFFICERS
INSITE INTERNET V ACQUISITION CO., INC.
BOARD OF DIRECTORS
Xxxx Xxxxx
Xxxxx Xxxxxx
OFFICERS
Xxxx Xxxxx - President & Treasurer
Xxxxx Xxxxxx -Secretary
Xxxxxxx X. Xxxxxxx - Assistant Secretary
Upon the filing of the Merger Certificate to effect the Merger of the Company
into Newco at the Closing, the Board of Directors of Newco will execute a
consent vote electing Xxxxx Xxxxx as Chief Executive Officer and Xxxx Xxxxxx as
President of the Surviving Corporation.
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EXHIBIT 1.6
ESCROW AGREEMENT
This ESCROW AGREEMENT is entered into as of the ____ day of _______,
1999 by and among: Caravela Software, Inc. d/b/a Connix, a Connecticut
corporation (the "Company"); Xxxxx Xxxxx and Xxxx Xxxxxx the stockholders of the
Company (collectively, the "Stockholders"); InSite Internet V Acquisition Co.,
Inc., a Connecticut corporation ("Newco"); InSite Internet, Inc., a Delaware
corporation ("InSite"); and Xxxxx & Xxxxxxx, LLP, a Rhode Island limited
liability partnership as escrow agent (the "Escrow Agent").
WHEREAS, the Company, the Stockholders, Newco and InSite are parties to
an Agreement and Plan of Merger and Reorganization dated as of the date hereof
(the "Merger Agreement"), relating to the merger of the Company with and into
Newco; and
WHEREAS, pursuant to the Merger Agreement, the Stockholders will deliver
the number of shares of common stock of InSite, par value $.01 per share,
identified on SCHEDULE 1 hereto (the "Escrow Shares") into escrow to be held by
an Escrow Agent on behalf of the Stockholders as provided under the Merger
Agreement; and
WHEREAS, the parties hereto wish to specify the terms and conditions on
which the Escrow Shares, together with all income thereon, will be held,
invested and disbursed; and
WHEREAS, the Escrow Agent has expressed its willingness to act as escrow
agent hereunder.
NOW, THEREFORE, in consideration of the mutual undertakings and
covenants contained in this Escrow Agreement and of the mutual benefits to be
derived therefrom, the parties hereto agree as follows:
1. APPOINTMENT AND OBLIGATION OF ESCROW AGENT. The Stockholders, the
Company, Newco and InSite hereby appoint the Escrow Agent to receive, hold and
dispose of the Escrow Shares pursuant to the terms and conditions of this Escrow
Agreement, and the Escrow Agent hereby accepts such appointment on the terms and
conditions hereto. The use of the term "Escrow Agent" is solely for purposes of
identification and does not indicate or imply that the Escrow Agent has any
agency or other fiduciary obligations to any person or entity except for the
limited obligations of the Escrow Agreement pursuant hereto.
2. DEPOSIT OF ESCROW SHARES.
(a) The Stockholders hereby agree to deliver the Escrow Shares to
the Escrow Agent at the closing of the transactions contemplated by the Merger
Agreement, accompanied by an
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executed stock power or powers endorsed in blank. The Escrow Agent hereby agrees
to hold the Escrow Shares upon receipt in accordance with this Agreement. The
Escrow Shares do not form a part of the capital or debt of Escrow Agent and are
not subject to the claims of its creditors or depositors but are set apart and
held for the exclusive benefit of the parties.
(b) The Escrow Shares shall be used by the Escrow Agent solely for
the purposes of satisfying the indemnity obligations of the Stockholders under
Section 12 of the Merger Agreement. The Escrow Shares shall not be available to,
and shall not be used by, the Escrow Agent to set off any obligations of InSite
or Newco owing to the Escrow Agent in any capacity.
3. CASH DIVIDENDS AND VOTING RIGHTS. Until the Escrow Shares are
delivered by the Escrow Agent in accordance with the terms hereof, the
Stockholders are entitled to exercise all voting rights with respect to the
Escrow Shares and to receive for their own use cash and other dividends and
distributions on the Escrow Shares.
4. RELEASE OF ESCROW SHARES. The Escrow Agent shall release the Escrow
Shares as follows:
(a) If, at any time, InSite or Newco believes it is entitled to
receive a full or partial distribution of the Escrow Shares to satisfy the
indemnity obligations of the Stockholders to InSite and Newco and their
respective officers, directors, employees and agents under SECTION 12 of the
Merger Agreement, InSite or Newco shall give the Escrow Agent written notice of
the same (the "Claims Notice"), which Claims Notice shall describe the nature
and extent of the claim and shall approximate the number of Escrow Shares to be
distributed, determined in accordance with SECTION 4(B) hereof. Upon receipt of
any Claims Notice, the Escrow Agent shall promptly forward a copy of such notice
to the Stockholders. If the Stockholders object to the distribution proposed in
the Claims Notice, the Stockholders shall give written notice of such objection
to the Escrow Agent within thirty (30) days following receipt of the Claims
Notice (the "Objection Notice"). If the Escrow Agent does not receive an
Objection Notice within such thirty (30) day period, the Escrow Agent shall
distribute to InSite the Escrow Shares having a value, as determined in
accordance with SECTION 4(C) hereof, equal to the amount specified in the Claims
Notice. If the Escrow Agent receives an Objection Notice within such thirty (30)
day period, the Escrow Agent shall continue to hold the Escrow Shares pursuant
to the terms of this Agreement, subject to the Claims Notice until the Escrow
Agent receives (i) a joint written instruction from the Stockholders and InSite
and Newco regarding disposition of the Escrow Shares subject to the Claims
Notice and Objection Notice, or (ii) a certified copy of a final, non-appealable
decision of a court of competent jurisdiction regarding disposition of the
Escrow Shares subject to the Claims Notice and Objection Notice. Notwithstanding
the foregoing sentence, the Escrow Agent may exercise its rights under SECTION 9
of this Agreement at any time in the event of a dispute between the parties
regarding release of the Escrow Shares. Upon release of the Escrow Shares in
good faith pursuant to this Agreement, the Escrow Agent shall be fully released
and discharged from all obligations under this Agreement.
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(b) For purposes of distribution by the Escrow Agent of all or any
portion of the Escrow Shares pursuant to paragraph (a) of this SECTION 4, the
number of Escrow Shares to be delivered shall be determined based on the
"closing sales price" (as hereinafter defined) of InSite Common Stock for the 5
consecutive trading days immediately preceding the "date of determination" (as
hereinafter defined).
(i) For purposes hereof, "closing sales
price" shall mean (a) the average of the closing sales price, or, in case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices, in either case on the principal national securities
exchange on which the InSite Common Stock is listed or admitted to trading for
such 5 day period, or (b) if not listed or admitted to trading on any national
securities exchange, the closing sales price as reported by The Nasdaq Stock
Market, Inc., or, if such firm at the time is not engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business as selected by InSite's Board of Directors, for such 5 day period, or
(c) if not listed or admitted to trading on any national securities exchange or
reported by Nasdaq or any similar firm, the net book value of the Escrow Shares
as determined by management of InSite as of the end of the most recent fiscal
quarter immediately preceding the last day of such 5 day period.
(ii) For purposes hereof, "date of determination"
shall be the earlier of: (i) if no Objection Notice is received by the Escrow
Agent from the Stockholders within the 30 day period following delivery of the
Claims Notice to the Stockholders, the sooner to occur of 12:01 AM on the day
following the last day of such 30 day period or 12:01 AM on the day following
the date that the parties deliver joint written instructions to the Escrow Agent
as to the release of Escrow Shares subject to the claim described in the Claims
Notice; or (ii) if an Objection Notice is received by the Escrow Agent from the
Stockholders, 12:01 AM on the day following the date that the parties deliver
joint written instructions to the Escrow Agent as to the release of Escrow
Shares subject to the Claims Notice or 12:01 AM on the day following the date
that a certified copy of a final, non-appealable decision of a court of
competent jurisdiction regarding disposition of the Escrow Shares subject to the
Claims Notice is received by the Escrow Agent.
(c) On the date which is one (1) year after the closing date of
the transactions contemplated by the Merger Agreement (the "Escrow Termination
Date"), the Escrow Agent shall deliver to the Stockholders the remaining Escrow
Shares, unless the Escrow Agent shall have been notified in writing by InSite,
Newco or the Stockholders that a Claims Notice is pending and has not been
resolved as described in paragraph (b)(i) or (ii) of this SECTION 4. If the
Escrow Agent has been advised that a Claims Notice is pending on the Escrow
Termination Date and has not been resolved as aforesaid, the Escrow Agent shall
deliver the remaining Escrow Shares to the parties in accordance with the
resolution of the Claims Notice, as provided in SECTION 4(B). InSite and Newco
agree that if a Claims Notice is pending on the Escrow Termination Date, InSite
and Newco will release to the Stockholders the balance of the Escrow
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Shares, if any, which would likely be unnecessary to cover the amount of the
claim described in the Claims Notice, less a reasonable "buffer amount" which
shall not be more than twice the amount valued as provided herein using the
Escrow Termination Date as the "date of determination." For example, if a
$25,000 claim is pending on the Escrow Termination Date, InSite and Newco would
have the right to direct the Escrow Agent to retain up to $50,000 in Escrow
Shares (valued as provided in Section 4(b) above using the Escrow Termination
Date as the "date of determination" for such purposes.
5. EXCULPATION OF ESCROW AGENT. The Escrow Agent shall have no duties or
responsibilities except for those set forth herein (and required by applicable
law), which the parties agree are ministerial in nature. If in doubt as to its
duties and responsibilities hereunder, the Escrow Agent may consult with counsel
of its choice and shall be protected in any action taken or omitted in good
faith in connection with the written advice or opinion of such counsel. The
Escrow Agent shall not be deemed to have any knowledge of or responsibility for
the terms of any other agreement or instrument including the Merger Agreement.
The Escrow Agent makes no representation as to the validity, value, genuineness
or collectibility of any security, document or instrument held by or delivered
to it. Except for the Escrow Agent's own fraud, bad faith, willful misconduct or
gross negligence: (a) the Escrow Agent shall have no liability of any kind
whatsoever for the performance of any duties imposed upon the Escrow Agent under
this Escrow Agreement or for any action or failure to act taken in good faith by
the Escrow Agent hereunder; (b) the Escrow Agent shall not be responsible for
the acts or omissions of any other parties hereto; (c) the Escrow Agent shall
not be liable to anyone for damages, losses or expenses arising out of this
Escrow Agreement; and (d) the Escrow Agent may rely and/or act upon any
instrument or document believed by the Escrow Agent in good faith to be genuine
and to be executed and delivered by the proper person or party, and may assume
in good faith the authenticity, validity and effectiveness thereof and shall not
be obligated to make any investigation or determination as to the truth and
accuracy of any information contained therein. The Escrow Agent shall not be
liable for any error of judgment, or for any act done or step taken or omitted
by it in good faith or for any mistake of fact or law, or for anything which it
may do or refrain from doing in connection herewith, except its own bad faith,
willful misconduct or gross negligence. In the event of any dispute between
InSite/Newco or the Stockholders, InSite/Newco and the Stockholders shall pay,
on demand, the reasonable attorneys' fees and other reasonable costs and
expenses incurred by the Escrow Agent solely in its capacity as Escrow Agent
hereunder; InSite, Newco and the Stockholders shall be jointly and severally
liable for such fees, costs and expenses but, as between themselves, such fees,
costs and expenses shall be paid by the party losing such dispute or as
determined by the court or other party resolving such dispute.
6. INDEMNIFICATION; EXPENSES. In consideration of its acceptance of the
appointment as the Escrow Agent, InSite, Newco and the Stockholders, jointly and
severally, agree to indemnify and hold the Escrow Agent harmless as to any
liability reasonably incurred by it to any person, firm or corporation by reason
of its having accepted the same or in carrying out in good faith any
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of the terms hereof, and to reimburse Escrow Agent for all its reasonable
expenses, including, among other things, counsel fees and court costs, incurred
by reason of its position hereunder or actions taken pursuant hereto. The Escrow
Agent has no intention of charging any "fee" for its services as Escrow Agent
hereunder, and does not contemplate incurring any significant expenses in the
absence of any dispute between the parties with regard to release of the Escrow
Shares.
7. SUCCESSOR ESCROW AGENT.
(a) The Escrow Agent (and any successor escrow agent) may at any
time resign as such by delivering the Escrow Shares to any successor escrow
agent jointly designated in writing by InSite, Newco and the Stockholders, or to
any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The resignation of the Escrow Agent shall take
effect on the earlier of the appointment of a successor escrow agent or the day
which is thirty (30) days after the date of delivery of the Escrow Agent's
written notice of resignation to the other parties hereto. In the event that a
successor escrow agent has not been appointed at the expiration of such thirty
(30) day period, the Escrow Agent's sole responsibility hereunder shall be the
safekeeping of the Escrow Shares and to deliver all or any portion thereof as
may be specified in a written agreement signed by all the other parties to this
Agreement or as any court of competent jurisdiction may order.
(b) If the Escrow Agent receives a written notice signed by
InSite, Newco and the Stockholders stating that they have selected another
escrow agent, the Escrow Agent shall deliver the Escrow Shares to the successor
escrow agent named in the aforesaid notice within ten (10) days.
8. ENTIRE AGREEMENT; MODIFICATION. With the exception of the Merger
Agreement and agreements, schedules and exhibits thereto, this Escrow Agreement
contains the entire agreement, and supersedes all prior agreements and
undertakings, oral or written, between the parties hereto with respect to the
subject matter hereof. No modification of this Escrow Agreement shall be valid
unless the same is in writing and is signed by InSite, Newco, the Stockholders
and the Escrow Agent.
9. INCONSISTENT CLAIMS. In the event that the Escrow Agent should at any
time be confronted with inconsistent claims or demands by the parties hereto,
the Escrow Agent shall have the right to interplead said parties in any court of
competent jurisdiction in Rhode Island, and request that such court determine
such respective rights of the parties with respect to this Escrow Agreement, and
upon doing so, the Escrow Agent automatically shall be released from any
obligations or liability as consequence of any such claims or demands.
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10. STOCKHOLDERS' ACKNOWLEDGMENT OF ATTORNEY/CLIENT RELATIONSHIP BETWEEN
INSITE, NEWCO AND THE ESCROW AGENT. The Stockholders acknowledge and agree that
the Escrow Agent has acted and will continue to act as counsel to InSite and
Newco in connection with the negotiation and execution of the Merger Agreement.
In that connection and as a condition to the Escrow Agent's and InSite's and
Newco's agreement to enter into this Agreement, the Stockholders waive any right
to seek disqualification of the Escrow Agent from serving as counsel to InSite
and Newco by virtue of this Agreement or any dispute hereunder.
11. NOTICES. Any notices to be given hereunder shall be sufficiently
given if in writing and delivered personally, sent by telecopy (answerback
received), sent by recognized overnight courier, or mailed by registered or
certified mail, return receipt requested, postage prepaid, to the following
addresses or to such other address as the parties may from time to time
designate in writing delivered in accordance with this SECTION 11:
(a) To the Stockholders at:
Xxxxx Xxxxx
Xxxx Xxxxxx
C/o Caravela Software, Inc. dba Connix
0 Xxx Xxxx
Xxxxxxxxxxx, XX 00000
with a copy to:
Xxxxxx & Xxxxxxx, P.C.
00 Xxx Xxxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
(b) To InSite and Newco at:
InSite Internet, Inc.
0000 Xxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxx, President & CEO
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to the Escrow Agent:
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(c) To the Escrow Agent at:
Xxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Partner
Phone: (000) 000-0000
Fax: (000) 000-0000
Any notices to be given hereunder shall be deemed received (a) on the date
delivered, if delivered personally, (b) on the date sent, if sent by telecopy,
(c) on the first business day after the date such notice was sent, if sent by
overnight courier, or (d) on the third business day after the date such notice
was sent, if sent by registered or certified mail, PROVIDED THAT no such notice
or other communication shall be deemed given to the Escrow Agent until the same
is received by the Escrow Agent.
12. BINDING EFFECT. This Escrow Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Stockholders and InSite, Newco may not assign their
respective obligations hereunder without the prior written consent of the other
parties. Any assignment in contravention of this provision shall be void. No
assignment shall release the Stockholders or InSite, Newco from any obligation
or liability under this Escrow Agreement.
13. GOVERNING LAW. This Escrow Agreement shall be construed in accordance
with and governed by the laws of the State of Rhode Island.
14. DEFINED TERMS. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Merger Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date first above written.
INSITE INTERNET, INC.
ATTEST:
By:
--------------------------------- --------------------------------
, Assistant Secretary Xxxx X. Xxxxx, President
and Chief Executive Officer
INSITE INTERNET V
ACQUISITION CO., INC.
ATTEST:
By:
--------------------------------- -------------------------------
, Assistant Secretary Xxxx X. Xxxxx, President
and Chief Executive Officer
CARAVELA SOFTWARE, INC.
d/b/a CONNIX
ATTEST:
By:
--------------------------------- --------------------------------
, Secretary ____________, President
WITNESS:
--------------------------------- -----------------------------------
Xxxxx Xxxxx
WITNESS:
--------------------------------- -----------------------------------
Xxxx Xxxxxx
ATTEST: XXXXX & XXXXXXX.XXX
By:
--------------------------------- --------------------------------
Xxxxxxx X. Xxxxxxx, Partner
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SCHEDULE 1
[TBD -- the number of shares of InSite stock with a value equal to $100,000
based on the public offering price of InSite stock in the IPO allocated pro rata
among the Stockholders]
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EXHIBIT 6.12(A)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this
_____ day of _____________, 1999, by and between, InSite Internet V Acquisition
Co., Inc., a Connecticut corporation (the "Company") and wholly-owned subsidiary
of InSite Internet, Inc., a Delaware corporation (the "Parent") and Xxxxx Xxxxx,
an individual with a mailing address at 00 Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxx
00000 ("Employee").
INTRODUCTION
Employee is a principal and employee of Caravela Software, Inc. d/b/a
Connix (the "Founding Company") and possesses skills and knowledge advantageous
to the Company.
The Parent intends to undertake an initial public offering of its common
stock (the "IPO") and in connection therewith contemplates filing a registration
statement with the Securities and Exchange Commission. Contemporaneously with
and conditioned upon the successful closing of the IPO (the "Effective Date"),
(i) the Parent, the Founding Company and the Company intend to effect a merger
of the Founding Company into the Company in accordance with that certain
Agreement and Plan of Merger and Reorganization dated as of [______________],
1999 by and among the Parent, the Company, the Founding Company, and the
stockholders of the Founding Company (the "Merger Agreement") and (ii) effective
on the Effective Date, the Company desires to employ Employee and Employee
desires to accept such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises hereinbelow set
forth, the parties hereby agree as follows:
1. EMPLOYMENT; DUTIES. Subject to the terms and conditions set
forth herein, the Company hereby employs Employee during the Employment Period
(as defined below), and Employee hereby accepts such employment. Employee agrees
to be a full-time employee of the Company and devote his full and exclusive
time, energy, skill and best efforts to the business of the Company and to the
fulfillment of Employee's duties hereunder. Employee's duties include, but are
not limited to, (i) serving as Chief Executive Officer of the Company; (ii)
sales of the Company's and its affiliates products and services; (iii) assisting
in the internal growth of the Company's business; and (iv) other duties assigned
to Employee by the Company from time to time consistent with Employee's
position.
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2. EMPLOYMENT PERIOD. The term of this Agreement (the "Employment
Period") shall commence on the Effective Date and shall terminate three (3)
years thereafter, unless terminated earlier pursuant to SECTION 4 or SECTION 5
below.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. During the Employment Period, the Company agrees
to pay Employee at the rate of $70,000 per year ("Base Salary"). Employee's
salary shall be subject to customary withholdings and be payable to Employee on
the regularly occurring pay period established by the Company.
3.2 HEALTH BENEFITS. During the Employment Period, the
Company shall provide Employee with individual and/or family health care
coverage, as provided by health care provider(s) selected by the Company from
time to time.
3.3 SALES/EBITDA BONUS. During the Employment Period,
Employee shall be paid a bonus at the end of each fiscal year equal to the sum
of (i) 2.5% of the Company's increase in "annual sales" and (ii) 10% of the
Company's increase in "EBITDA" (i.e., earnings before interest, taxes,
depreciation and amortization). Such bonus (if any) shall be payable at the
discretion of the Company in either (A) cash or (B) common stock, options or
other awards from the Parent's incentive stock plan, subject to applicable
securities law and tax withholding payments by Employee. The calculation for
such bonus shall (x) be based on the unconsolidated financial statements of the
Company as certified by the Company's certified public accountants; (y) be
subject to allocation of overhead provisions from time to time reasonably
adopted by the Company, the Parent and its subsidiaries, including but not
limited to salaries, administrative expenses, equipment and other costs of the
Parent which arguably provide benefits to all of the Parent's operating
subsidiaries including the Company but excluding expenses which do not have a
reasonably direct impact on the Company such as specific costs of a particular
new acquisition; and (z) include only "organic" sales and earnings (i.e. only
such earnings and sales generated from the Company's currently existing
business) and shall exclude, without limitation, any earnings or sales generated
by way of merger, acquisition or other similar event.
3.4 RETIREMENT PLAN. During the Employment Period, Employee
shall be entitled to participate in any 401(k) or similar plan adopted by the
Company for the benefit of its employees. The Company reserves the right to
modify, terminate or withdraw any such plan (if so adopted) at any time in its
sole discretion. It is the intention of the Parent to adopt a new 401(k) plan
for all affiliates after the Effective Date and, to the extent legally
permissible, to credit Employee for his years of service earned or utilize his
service commencement date under the Founding Company's existing 401(k) plan in
connection with transitioning Employee to such new plan.
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3.5 INCENTIVE BONUS. Employee will be paid an incentive
bonus equal to 2.0% (subject to the percentage reduction specified in the third
sentence of this Section 3.5) of the total purchase price for each company that
Employee introduces to the Parent and is subsequently acquired by the Parent,
payable at the Company's discretion in either (i) cash or (ii) common stock,
stock options or other awards from the Parent's incentive stock option plan,
subject to applicable securities law and tax withholding payments by Employee.
Employee will be required to submit any referral in writing for acknowledgment
by the Parent prior to any negotiations between the Parent and the referral.
Employee acknowledges that other persons or entities, (including other
employees, officers, and directors of the Company and its affiliates), have been
or may be offered a similar "incentive bonus" and that any incentive bonus which
Employee may be entitled to hereunder is subject to a percentage reduction to
the extent that other persons or entities participated in or were responsible
for the referral. Any dispute regarding apportionment of an incentive bonus
shall be resolved by binding arbitration in accordance with SECTION 13 hereof.
In no event shall the Company or the Parent pay more than 2% in total incentive
bonuses for any single acquisition transaction.
3.6 VACATION. Employee may take up to four (4) weeks
paid vacation each year during the Employment Period.
4. TERMINATION BY THE COMPANY FOR CAUSE. Upon written notice to
Employee, the Company may terminate this Agreement for cause if any of the
following events shall occur: (i) any breach of this Agreement by Employee; (ii)
the commission of a felony by Employee; (iii) the commission of an act by
Employee involving fraud, theft or dishonesty; (iv) material breach by the
Founding Company or its stockholders of their representations, warranties and
covenants and/or obligations under the Merger Agreement which breach remains
uncured for a period of thirty (30) days following notice to Employee; (v) the
appropriation of a material business opportunity of the Company or its
affiliates, provided, however, that such appropriation shall not be grounds for
a "for cause" termination if Employee has previously discussed the opportunity
with the President and CEO of the Parent and, prior to pursuing the opportunity,
has received a letter or other written authorization from the Parent (which
shall be provided in the Parent's sole discretion) advising Employee that the
Parent, the Company and/or its affiliates do not intend to pursue the
opportunity and permitting Employee to pursue the opportunity subject to the
continuing ability of Employee to devote his full time and best efforts to the
performance of his duties hereunder; or (vi) the Company's bona fide decision to
terminate its business and liquidate its assets. In the event of a termination
pursuant to this SECTION 4, all obligations of the Company under this Agreement
shall cease; provided, however, all benefits hereunder through the date of
termination due and payable to Employee would be paid by the Company subject to
its rights to set-off against such payments in the event of a termination
pursuant to subsections 4(i) through 4(v) above.
5. TERMINATION WITHOUT CAUSE.
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5.1 BY EMPLOYER. The Company may terminate this Agreement at
any time without cause upon thirty (30) days written notice to Employee. In such
event, the Company shall pay Employee during regular payroll periods (less
customary withholding taxes) the Base Salary for up to the greater of twelve
(12) months or the remainder of the Employment Period All other obligations of
the Company shall cease on the date of termination; provided, however, that all
benefits earned through the date of termination but not yet paid would be paid
by the Company.
5.2 BY EMPLOYEE. Employee may terminate this Agreement at
any time upon thirty (30) days prior written notice to the Company. In such
case, Employee shall not be eligible for any severance payments or other
benefits after the date of termination; provided, however, that all benefits
earned through the date of termination but not yet paid would be paid by the
Company..
5.3 MERGER AGREEMENT. Absent a breach of the Merger
Agreement, termination by either the Company or Employee pursuant to this
SECTION 5 shall not be deemed a breach of the Merger Agreement, nor will it
affect either party's obligations thereunder.
6. CONFIDENTIALITY AND NON-DISCLOSURE. Employee recognizes and
acknowledges that he has had in the past, currently has and in the future may
have access to certain confidential information relating to the Company and its
affiliates, including, but not limited to, operational policies, financial
information, marketing information, personnel information, trade secrets,
customer information (including customer lists), and pricing and cost policies,
that are valuable, special and unique assets of the Company (collectively,
"Confidential Information"). Employee agrees that he will not use or disclose
such Confidential Information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except as is required in the
course of performing his duties hereunder unless (i) such information becomes
known to the public generally through no breach by Employee of this covenant or
(ii) disclosure is required by law or any governmental authority or is required
in connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant to this clause (ii),
Employee shall give prior written notice thereof to the Company and provide the
Company with the opportunity to contest such disclosure. Employee agrees that,
both during the Employment Period and after the termination of this Agreement,
Employee will hold in a fiduciary capacity for the benefit of the Company, and
shall not directly or indirectly use or disclose, except as authorized by the
Company in connection with the performance of Employee's duties, any
Confidential Information, that Employee may have or may acquire (whether or not
developed or compiled by Employee and whether or not Employee has been
authorized to have access to such Confidential Information) during the term of
this Agreement. The covenants contained in this SECTION 6 shall survive for the
Employment Period and for a period of two (2) years thereafter; provided,
however, that with respect to those items of Confidential Information which
constitute trade secrets under applicable law, Employee's obligations of
confidentiality and non-disclosure as set forth in this SECTION 6 shall continue
to
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survive after the applicable period above to the greatest extent permitted by
applicable law. These rights of the Company are in addition to those rights the
Company has under the common law or applicable statutes for the protection of
trade secrets.
7. NON-COMPETITION. Employee expressly covenants and agrees that
for the Employment Period and for a period of two (2) years thereafter, he shall
not, directly or indirectly, seek, obtain or accept a "Competitive Position" in
the "Restricted Territory" with a "Competitor" of the Company (as such terms are
hereafter defined). For purposes of this Agreement, a "Competitor" of the
Company means any business, individual, partnership, joint venture, association,
firm, corporation or other entity engaged primarily in the business of selling
internet access service or which has substantial operations in any related
telecommunications business which the Company and its affiliates may engage in
from time to time during the term of this covenant; the "Restricted Territory"
means the New England states, New York, New Jersey, Ohio and Pennsylvania, and
each other state of the United States of America in which the Company or any of
its affiliates has at least 20 customers or conducts operations; a "Competitive
Position" means any employment with any Competitor of the Company whereby
Employee will use or is likely to use any Confidential Information, or whereby
Employee has duties for such Competitor that are the same or substantially
similar to those actually performed by Employee pursuant to the terms hereof.
Nothing contained in this SECTION 7 is intended to prevent Employee from
investing in stock or other securities listed on a national securities exchange
or actively traded on the over the counter market or any corporation engaged,
wholly or partly, in the sale of telecommunications products or services;
provided, however, that Employee and members of his immediate family shall not,
directly or indirectly, hold more than a total of two percent (2%) of all issued
and outstanding stock or other securities of any such corporation.
Notwithstanding anything to the contrary herein, in the event that Employee is
terminated for cause or voluntarily terminates his employment with the Company
during the first 12 months of the Employment Period, the "Restricted Territory"
shall mean each state of the United States for purposes of this non-competition
provision.
8. NON-SOLICITATION.
8.1 NON-SOLICITATION OF CUSTOMERS. Employee agrees that he
will not take any customer lists of the Company after leaving his employ and
that he will, for the Employment Period and for a period of two (2) years
thereafter, refrain from soliciting or attempting to solicit directly or by
assisting others, any business from any of the Company's customers, including
actively sought prospective customers, with whom Employee had "material contact"
during the employment for purposes of providing products or services.
8.2 NON-SOLICITATION OF EMPLOYEES. Employee agrees that he
will, for the Employment Period and for a period of two (2) years thereafter,
refrain from recruiting or hiring, or attempting to recruit or hire, directly or
by assisting others, any other employee of the Company who is employed by the
Company or any successor or affiliate of the Company.
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9. TOLLING OF PERIOD OF RESTRAINT. Employee hereby expressly
acknowledges and agrees that in the event the enforceability of any of the terms
of this Agreement shall be challenged in court and Employee is not enjoined from
breaching any of the restraints set forth in SECTION 6 through SECTION 9, then
if a court of competent jurisdiction finds that the challenged restraint is
enforceable, the time period of the restraint shall be deemed tolled upon the
filing of the lawsuit challenging the enforceability of the restraint until the
dispute is finally resolved and all periods of appeal have expired.
10. ACKNOWLEDGEMENTS. Employee hereby acknowledges and agrees that
the restrictions contained in SECTION 6 through SECTION 9 are fair and
reasonable and necessary for the protection of the legitimate business interests
of the Company. Employee acknowledges that in the event Employee's employment
with the Company terminates for any reason, Employee will be able to earn a
livelihood without violating the restrictions contained in SECTION 6 through
SECTION 9 and that Employee's ability to earn a livelihood without violating
such restrictions is a material condition to Employee's employment and continued
employment with the Company. Employee expressly agrees that the character,
duration and geographical scope of the covenants contained in this SECTION 6
through SECTION 9 are reasonable in light of the circumstances as they exist at
the date upon which this Agreement has been executed including the substantial
payments made by the Company and Employee in consideration of the Merger
Agreement. However, should a determination nonetheless be made by a court of
competent jurisdiction at a later date that the character, duration or
geographical scope of the covenants contained herein are unreasonable in light
of the circumstances as they then exist, then it is the intention of both
Employee and the Company that these covenants shall be construed by the court in
such a manner as to impose only those restrictions on the conduct of Employee
which are reasonable in light of the circumstances as they then exist and
necessary to assure the Company of the intended benefit of these covenants.
11. RIGHTS TO MATERIALS; WORK FOR HIRE. All records, files,
memoranda, reports, price lists, customer lists, drawings, plans, sketches,
documents and the like (together with all copies thereof) relating to the
business of the Company, which Employee shall use or prepare or come in contact
with in the course of, or as a result of, his employment shall, as between the
parties hereto, remain the sole property of the Company. Upon the termination of
Employment or upon the prior demand of the Company, Employee shall immediately
return all such materials and shall not thereafter cause removal thereof from
the premises of the Company. Employee agrees to disclose and assign to the
Company as its exclusive property, all ideas, writings, inventions, discoveries,
improvements and technical or business innovations made or conceived by
Employee, whether or not patentable or copyrightable, either solely or jointly
with others during the Employment Period and for a period of six (6) months
thereafter whether or not made or conceived during regular hours of work or
otherwise, which relate to the business of providing internet access service or
to any related telecommunications business which the Company and its affiliates
may engage in from time to time during the term of the Employment Period .
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Employee agrees to execute any and all documents hereafter requested by the
Company necessary to further effectuate the foregoing.
12. REMEDIES. Without limiting the Company's right to claim
damages, Employee acknowledges that the Company will be irreparably harmed by a
breach of any provision of this Agreement and Employee agrees that the Company
shall be entitled to injunctive relief in the event of such breach.
13. GOVERNING LAW; ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S
FEES. This Agreement is made and entered into in and shall be governed by and
interpreted in accordance with the laws of, the State of Connecticut. The
Company and Employee agree that any dispute regarding this Agreement shall be
submitted to arbitration to and shall be resolved in accordance with the rules
of the JAMS/Endispute for expedited cases then in effect. The arbitrator(s)
shall be mutually selected by the parties or in the event the parties cannot
mutually agree, then appointed by JAMS/Endispute. Any arbitration shall be held
within a thirty (30) mile radius of New Haven, Connecticut and the arbitrator(s)
shall apply Connecticut law. Judgment upon any award rendered by the
arbitrator(s) shall be final and may be entered in any court of competent
jurisdiction. Notwithstanding the foregoing, the Company shall have the absolute
right to obtain equitable remedies in any state court of competent jurisdiction
in the State of Connecticut or in any United States District Court in the State
of Connecticut. By his execution and delivery of this agreement, Employee
irrevocably submits to and accepts the exclusive jurisdiction of each of such
courts and waives any objection (including any objection to venue or any
objection based upon the grounds of forum non conveniens) which might be
asserted against the bringing of any such action, suit or other legal proceeding
in such courts. The court and/or arbitrator(s) shall award costs and expenses
(including reasonable attorney's fees) to the prevailing party in any litigation
or arbitration.
14. MISCELLANEOUS.
14.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
14.2. NOTICES. All notices, requests, demands and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been given if delivered by hand,
sent by generally recognized overnight courier service, telex or telecopy, or
mail,
(a) to the Company care of: With a copy to:
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InSite Internet., Inc. Xxxxx & Xxxxxxx, LLP
0000 Xxxxx Xxxxxx 000 Xxxxx Xxxx Xxxxxxxx
Xxxxxx Xxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, CEO Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
(b) to the Employee at: With a copy to:
Xxxxx Xxxxx Xxxxxx & Xxxxxxx, P.C.
00 Xxxxxxx Xxxx 00 Xxx Xxxxxx
Xxxxxxx, XX 00000 Xxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
14.3 ASSIGNMENT. The Company may assign this Agreement to
(i) any entity controlling, controlled by or under common control with the
Company or (ii) to any purchaser of the Company's assets provided that such
purchaser agrees to assume the Company's obligations hereunder.
14.4. SEVERABILITY. If any term or provision of this
Agreement, or the application thereof to any person or under any circumstance,
shall to any extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such terms to the persons or under
circumstances other than those as to which it is invalid or unenforceable, shall
be considered severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
The invalid or unenforceable provisions shall, to the extent permitted by law,
be deemed amended and given such interpretation as to achieve the economic
intent of this Agreement.
14.5. WAIVER. The failure of any party to insist in any one
instance or more upon strict performance of any of the terms and conditions
hereof, or to exercise any right or privilege herein conferred, shall not be
construed as a waiver of such terms, conditions, rights or privileges, but same
shall continue to remain in full force and effect. Any waiver by any party of
any violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing waiver of
such provision, or waiver of any other violation of, breach of or default under
any other provision of this Agreement.
14.6. RIGHT OF SETOFF. Notwithstanding anything to the
contrary set forth herein, and in addition to any and all remedies at law or in
equity which the Company may have, the Company shall have the absolute and
unconditional right to setoff its payment obligations
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hereunder against the amount of any claims for indemnification it may have
against Employee under the Merger Agreement.
14.7. TITLES; GENDER. Section and subsection titles are for
convenience of reference only and are not to be considered in the interpretation
or construction of any of the provisions hereof. All pronouns or any variations
thereof contained in this Agreement refer to the masculine, feminine or neuter
as the identity of the person may require.
14.8 SURVIVAL. SECTION 6 through SECTION 14 hereof shall
survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
ATTEST: INSITE INTERNET V ACQUISITION Co., Inc.
By:
------------------------------- ----------------------------------
Xxxx X. Xxxxx, President
WITNESS: EMPLOYEE:
------------------------------- ----------------------------------
Xxxxx Xxxxx
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EXHIBIT 6.12(B)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this
_____ day of _____________, 1999, by and between, InSite Internet V Acquisition
Co., Inc., a Connecticut corporation (the "Company") and wholly-owned subsidiary
of InSite Internet, Inc., a Delaware corporation (the "Parent") and Xxxx Xxxxxx,
an individual with a mailing address at 00 Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx
00000 ("Employee").
INTRODUCTION
Employee is a principal and employee of Caravela Software, Inc. d/b/a
Connix (the "Founding Company") and possesses skills and knowledge advantageous
to the Company.
The Parent intends to undertake an initial public offering of its common
stock (the "IPO") and in connection therewith contemplates filing a registration
statement with the Securities and Exchange Commission. Contemporaneously with
and conditioned upon the successful closing of the IPO (the "Effective Date"),
(i) the Parent, the Founding Company and the Company intend to effect a merger
of the Founding Company into the Company in accordance with that certain
Agreement and Plan of Merger and Reorganization dated as of [______________],
1999 by and among the Parent, the Company, the Founding Company, and the
stockholders of the Founding Company (the "Merger Agreement") and (ii) effective
on the Effective Date, the Company desires to employ Employee and Employee
desires to accept such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises hereinbelow set
forth, the parties hereby agree as follows:
1. EMPLOYMENT; DUTIES. Subject to the terms and conditions set
forth herein, the Company hereby employs Employee during the Employment Period
(as defined below), and Employee hereby accepts such employment. Employee agrees
to be a full-time employee of the Company and devote his full and exclusive
time, energy, skill and best efforts to the business of the Company and to the
fulfillment of Employee's duties hereunder. Employee's duties include, but are
not limited to, (i) serving as President of the Company; (ii) sales of the
Company's and its affiliates products and services; (iii) assisting in the
internal growth of the Company's business; and (iv) other duties assigned to
Employee by the Company from time to time consistent with Employee's position.
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2. EMPLOYMENT PERIOD. The term of this Agreement (the "Employment
Period") shall commence on the Effective Date and shall terminate three (3)
years thereafter, unless terminated earlier pursuant to SECTION 4 or SECTION 5
below.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. During the Employment Period, the Company agrees
to pay Employee at the rate of $70,000 per year ("Base Salary"). Employee's
salary shall be subject to customary withholdings and be payable to Employee on
the regularly occurring pay period established by the Company.
3.2 HEALTH BENEFITS. During the Employment Period, the
Company shall provide Employee with individual and/or family health care
coverage, as provided by health care provider(s) selected by the Company from
time to time.
3.3 SALES/EBITDA BONUS. During the Employment Period,
Employee shall be paid a bonus at the end of each fiscal year equal to the sum
of (i) 2.5% of the Company's increase in "annual sales" and (ii) 10% of the
Company's increase in "EBITDA" (i.e., earnings before interest, taxes,
depreciation and amortization). Such bonus (if any) shall be payable at the
discretion of the Company in either (A) cash or (B) common stock, options or
other awards from the Parent's incentive stock plan, subject to applicable
securities law and tax withholding payments by Employee. The calculation for
such bonus shall (x) be based on the unconsolidated financial statements of the
Company as certified by the Company's certified public accountants; (y) be
subject to allocation of overhead provisions from time to time reasonably
adopted by the Company, the Parent and its subsidiaries, including but not
limited to salaries, administrative expenses, equipment and other costs of the
Parent which arguably provide benefits to all of the Parent's operating
subsidiaries including the Company but excluding expenses which do not have a
reasonably direct impact on the Company such as specific costs of a particular
new acquisition; and (z) include only "organic" sales and earnings (i.e. only
such earnings and sales generated from the Company's currently existing
business) and shall exclude, without limitation, any earnings or sales generated
by way of merger, acquisition or other similar event.
3.4 RETIREMENT PLAN. During the Employment Period, Employee
shall be entitled to participate in any 401(k) or similar plan adopted by the
Company for the benefit of its employees. The Company reserves the right to
modify, terminate or withdraw any such plan (if so adopted) at any time in its
sole discretion. It is the intention of the Parent to adopt a new 401(k) plan
for all affiliates after the Effective Date and, to the extent legally
permissible, to credit Employee for his years of service earned or utilize his
service commencement date under the Founding Company's existing 401(k) plan in
connection with transitioning Employee to such new plan.
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3.5 INCENTIVE BONUS. Employee will be paid an incentive
bonus equal to 2.0% (subject to the percentage reduction specified in the third
sentence of this Section 3.5) of the total purchase price for each company that
Employee introduces to the Parent and is subsequently acquired by the Parent,
payable at the Company's discretion in either (i) cash or (ii) common stock,
stock options or other awards from the Parent's incentive stock option plan,
subject to applicable securities law and tax withholding payments by Employee.
Employee will be required to submit any referral in writing for acknowledgment
by the Parent prior to any negotiations between the Parent and the referral.
Employee acknowledges that other persons or entities, (including other
employees, officers, and directors of the Company and its affiliates), have been
or may be offered a similar "incentive bonus" and that any incentive bonus which
Employee may be entitled to hereunder is subject to a percentage reduction to
the extent that other persons or entities participated in or were responsible
for the referral. Any dispute regarding apportionment of an incentive bonus
shall be resolved by binding arbitration in accordance with SECTION 13 hereof.
In no event shall the Company or the Parent pay more than 2% in total incentive
bonuses for any single acquisition transaction.
3.6 VACATION. Employee may take up to four (4) weeks paid
vacation each year during the Employment Period.
4. TERMINATION BY THE COMPANY FOR CAUSE. Upon written notice to
Employee, the Company may terminate this Agreement for cause if any of the
following events shall occur: (i) any breach of this Agreement by Employee; (ii)
the commission of a felony by Employee; (iii) the commission of an act by
Employee involving fraud, theft or dishonesty; (iv) material breach by the
Founding Company or its stockholders of their representations, warranties and
covenants and/or obligations under the Merger Agreement which breach remains
uncured for a period of thirty (30) days following notice to Employee; (v) the
appropriation of a material business opportunity of the Company or its
affiliates, provided, however, that such appropriation shall not be grounds for
a "for cause" termination if Employee has previously discussed the opportunity
with the President and CEO of the Parent and, prior to pursuing the opportunity,
has received a letter or other written authorization from the Parent (which
shall be provided in the Parent's sole discretion) advising Employee that the
Parent, the Company and/or its affiliates do not intend to pursue the
opportunity and permitting Employee to pursue the opportunity subject to the
continuing ability of Employee to devote his full time and best efforts to the
performance of his duties hereunder; or (vi) the Company's bona fide decision to
terminate its business and liquidate its assets. In the event of a termination
pursuant to this SECTION 4, all obligations of the Company under this Agreement
shall cease; provided, however, all benefits hereunder through the date of
termination due and payable to Employee would be paid by the Company subject to
its rights to set-off against such payments in the event of a termination
pursuant to subsections 4(i) through 4(v) above.
5. TERMINATION WITHOUT CAUSE.
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5.1 BY EMPLOYER. The Company may terminate this Agreement at
any time without cause upon thirty (30) days written notice to Employee. In such
event, the Company shall pay Employee during regular payroll periods (less
customary withholding taxes) the Base Salary for up to the greater of twelve
(12) months or the remainder of the Employment Period All other obligations of
the Company shall cease on the date of termination; provided, however, that all
benefits earned through the date of termination but not yet paid would be paid
by the Company.
5.2 BY EMPLOYEE. Employee may terminate this Agreement at
any time upon thirty (30) days prior written notice to the Company. In such
case, Employee shall not be eligible for any severance payments or other
benefits after the date of termination; provided, however, that all benefits
earned through the date of termination but not yet paid would be paid by the
Company.
5.3 MERGER AGREEMENT. Absent a breach of the Merger
Agreement, termination by either the Company or Employee pursuant to this
SECTION 5 shall not be deemed a breach of the Merger Agreement, nor will it
affect either party's obligations thereunder.
6. CONFIDENTIALITY AND NON-DISCLOSURE. Employee recognizes and
acknowledges that he has had in the past, currently has and in the future may
have access to certain confidential information relating to the Company and its
affiliates, including, but not limited to, operational policies, financial
information, marketing information, personnel information, trade secrets,
customer information (including customer lists), and pricing and cost policies,
that are valuable, special and unique assets of the Company (collectively,
"Confidential Information"). Employee agrees that he will not use or disclose
such Confidential Information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except as is required in the
course of performing his duties hereunder unless (i) such information becomes
known to the public generally through no breach by Employee of this covenant or
(ii) disclosure is required by law or any governmental authority or is required
in connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant to this clause (ii),
Employee shall give prior written notice thereof to the Company and provide the
Company with the opportunity to contest such disclosure. Employee agrees that,
both during the Employment Period and after the termination of this Agreement,
Employee will hold in a fiduciary capacity for the benefit of the Company, and
shall not directly or indirectly use or disclose, except as authorized by the
Company in connection with the performance of Employee's duties, any
Confidential Information, that Employee may have or may acquire (whether or not
developed or compiled by Employee and whether or not Employee has been
authorized to have access to such Confidential Information) during the term of
this Agreement. The covenants contained in this SECTION 6 shall survive for the
Employment Period and for a period of two (2) years thereafter; provided,
however, that with respect to those items of Confidential Information which
constitute trade secrets under applicable law, Employee's obligations of
confidentiality and non-disclosure as set forth in this SECTION 6 shall continue
to
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survive after the applicable period above to the greatest extent permitted by
applicable law. These rights of the Company are in addition to those rights the
Company has under the common law or applicable statutes for the protection of
trade secrets.
7. NON-COMPETITION. Employee expressly covenants and agrees that
for the Employment Period and for a period of two (2) years thereafter, he shall
not, directly or indirectly, seek, obtain or accept a "Competitive Position" in
the "Restricted Territory" with a "Competitor" of the Company (as such terms are
hereafter defined). For purposes of this Agreement, a "Competitor" of the
Company means any business, individual, partnership, joint venture, association,
firm, corporation or other entity engaged primarily in the business of selling
internet access service or which has substantial operations in any related
telecommunications business which the Company and its affiliates may engage in
from time to time during the term of this covenant; the "Restricted Territory"
means the New England states, New York, New Jersey, Ohio and Pennsylvania, and
each other state of the United States of America in which the Company or any of
its affiliates has at least 20 customers or conducts operations; a "Competitive
Position" means any employment with any Competitor of the Company whereby
Employee will use or is likely to use any Confidential Information, or whereby
Employee has duties for such Competitor that are the same or substantially
similar to those actually performed by Employee pursuant to the terms hereof.
Nothing contained in this SECTION 7 is intended to prevent Employee from
investing in stock or other securities listed on a national securities exchange
or actively traded on the over the counter market or any corporation engaged,
wholly or partly, in the sale of telecommunications products or services;
provided, however, that Employee and members of his immediate family shall not,
directly or indirectly, hold more than a total of two percent (2%) of all issued
and outstanding stock or other securities of any such corporation.
Notwithstanding anything to the contrary herein, in the event that Employee is
terminated for cause or voluntarily terminates his employment with the Company
during the first 12 months of the Employment Period, the "Restricted Territory"
shall mean each state of the United States for purposes of this non-competition
provision.
8. NON-SOLICITATION.
8.1 NON-SOLICITATION OF CUSTOMERS. Employee agrees that he
will not take any customer lists of the Company after leaving his employ and
that he will, for the Employment Period and for a period of two (2) years
thereafter, refrain from soliciting or attempting to solicit directly or by
assisting others, any business from any of the Company's customers, including
actively sought prospective customers, with whom Employee had "material contact"
during the employment for purposes of providing products or services.
8.2 NON-SOLICITATION OF EMPLOYEES. Employee agrees that he
will, for the Employment Period and for a period of two (2) years thereafter,
refrain from recruiting or hiring, or attempting to recruit or hire, directly or
by assisting others, any other employee of the Company who is employed by the
Company or any successor or affiliate of the Company.
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9. TOLLING OF PERIOD OF RESTRAINT. Employee hereby expressly
acknowledges and agrees that in the event the enforceability of any of the terms
of this Agreement shall be challenged in court and Employee is not enjoined from
breaching any of the restraints set forth in SECTION 6 through SECTION 9, then
if a court of competent jurisdiction finds that the challenged restraint is
enforceable, the time period of the restraint shall be deemed tolled upon the
filing of the lawsuit challenging the enforceability of the restraint until the
dispute is finally resolved and all periods of appeal have expired.
10. ACKNOWLEDGEMENTS. Employee hereby acknowledges and agrees that
the restrictions contained in SECTION 6 through SECTION 9 are fair and
reasonable and necessary for the protection of the legitimate business interests
of the Company. Employee acknowledges that in the event Employee's employment
with the Company terminates for any reason, Employee will be able to earn a
livelihood without violating the restrictions contained in SECTION 6 through
SECTION 9 and that Employee's ability to earn a livelihood without violating
such restrictions is a material condition to Employee's employment and continued
employment with the Company. Employee expressly agrees that the character,
duration and geographical scope of the covenants contained in this SECTION 6
through SECTION 9 are reasonable in light of the circumstances as they exist at
the date upon which this Agreement has been executed including the substantial
payments made by the Company and Employee in consideration of the Merger
Agreement. However, should a determination nonetheless be made by a court of
competent jurisdiction at a later date that the character, duration or
geographical scope of the covenants contained herein are unreasonable in light
of the circumstances as they then exist, then it is the intention of both
Employee and the Company that these covenants shall be construed by the court in
such a manner as to impose only those restrictions on the conduct of Employee
which are reasonable in light of the circumstances as they then exist and
necessary to assure the Company of the intended benefit of these covenants.
11. RIGHTS TO MATERIALS; WORK FOR HIRE. All records, files,
memoranda, reports, price lists, customer lists, drawings, plans, sketches,
documents and the like (together with all copies thereof) relating to the
business of the Company, which Employee shall use or prepare or come in contact
with in the course of, or as a result of, his employment shall, as between the
parties hereto, remain the sole property of the Company. Upon the termination of
Employment or upon the prior demand of the Company, Employee shall immediately
return all such materials and shall not thereafter cause removal thereof from
the premises of the Company. Employee agrees to disclose and assign to the
Company as its exclusive property, all ideas, writings, inventions, discoveries,
improvements and technical or business innovations made or conceived by
Employee, whether or not patentable or copyrightable, either solely or jointly
with others during the Employment Period and for a period of six (6) months
thereafter whether or not made or conceived during regular hours of work or
otherwise, which relate to the business of providing internet access service or
to any related telecommunications business which the Company and its affiliates
may engage in from time to time during the term of the Employment Period .
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Employee agrees to execute any and all documents hereafter requested by the
Company necessary to further effectuate the foregoing.
12. REMEDIES. Without limiting the Company's right to claim
damages, Employee acknowledges that the Company will be irreparably harmed by a
breach of any provision of this Agreement and Employee agrees that the Company
shall be entitled to injunctive relief in the event of such breach.
13. GOVERNING LAW; ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S
FEES. This Agreement is made and entered into in and shall be governed by and
interpreted in accordance with the laws of, the State of Connecticut. The
Company and Employee agree that any dispute regarding this Agreement shall be
submitted to arbitration to and shall be resolved in accordance with the rules
of the JAMS/Endispute for expedited cases then in effect. The arbitrator(s)
shall be mutually selected by the parties or in the event the parties cannot
mutually agree, then appointed by JAMS/Endispute. Any arbitration shall be held
within a thirty (30) mile radius of New Haven, Connecticut and the arbitrator(s)
shall apply Connecticut law. Judgment upon any award rendered by the
arbitrator(s) shall be final and may be entered in any court of competent
jurisdiction. Notwithstanding the foregoing, the Company shall have the absolute
right to obtain equitable remedies in any state court of competent jurisdiction
in the State of Connecticut or in any United States District Court in the State
of Connecticut. By his execution and delivery of this agreement, Employee
irrevocably submits to and accepts the exclusive jurisdiction of each of such
courts and waives any objection (including any objection to venue or any
objection based upon the grounds of forum non conveniens) which might be
asserted against the bringing of any such action, suit or other legal proceeding
in such courts. The court and/or arbitrator(s) shall award costs and expenses
(including reasonable attorney's fees) to the prevailing party in any litigation
or arbitration.
14. MISCELLANEOUS.
14.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
14.2. NOTICES. All notices, requests, demands and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been given if delivered by hand,
sent by generally recognized overnight courier service, telex or telecopy, or
mail,
(a) to the Company care of: With a copy to:
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InSite Internet., Inc. Xxxxx & Xxxxxxx, LLP
0000 Xxxxx Xxxxxx 000 Xxxxx Xxxx Xxxxxxxx
Xxxxxx Xxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, CEO Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
(b) to the Employee at: With a copy to:
Xxxx Xxxxxx Xxxxxx & Xxxxxxx, P.C.
00 Xxxx Xxxx 00 Xxx Xxxxxx
Xxxxxxxxxx, XX 00000 Xxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
14.3 ASSIGNMENT. The Company may assign this Agreement to
(i) any entity controlling, controlled by or under common control with the
Company or (ii) to any purchaser of the Company's assets provided that such
purchaser agrees to assume the Company's obligations hereunder.
14.4. SEVERABILITY. If any term or provision of this
Agreement, or the application thereof to any person or under any circumstance,
shall to any extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such terms to the persons or under
circumstances other than those as to which it is invalid or unenforceable, shall
be considered severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
The invalid or unenforceable provisions shall, to the extent permitted by law,
be deemed amended and given such interpretation as to achieve the economic
intent of this Agreement.
14.5. WAIVER. The failure of any party to insist in any one
instance or more upon strict performance of any of the terms and conditions
hereof, or to exercise any right or privilege herein conferred, shall not be
construed as a waiver of such terms, conditions, rights or privileges, but same
shall continue to remain in full force and effect. Any waiver by any party of
any violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing waiver of
such provision, or waiver of any other violation of, breach of or default under
any other provision of this Agreement.
14.6. RIGHT OF SETOFF. Notwithstanding anything to the
contrary set forth herein, and in addition to any and all remedies at law or in
equity which the Company may have, the Company shall have the absolute and
unconditional right to setoff its payment obligations
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hereunder against the amount of any claims for indemnification it may have
against Employee under the Merger Agreement.
14.7. TITLES; GENDER. Section and subsection titles are for
convenience of reference only and are not to be considered in the interpretation
or construction of any of the provisions hereof. All pronouns or any variations
thereof contained in this Agreement refer to the masculine, feminine or neuter
as the identity of the person may require.
14.8 SURVIVAL. SECTION 6 through SECTION 14 hereof shall
survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
ATTEST: INSITE INTERNET V ACQUISITION Co., Inc.
By:
------------------------------- ----------------------------------
Xxxx X. Xxxxx, President
WITNESS: EMPLOYEE:
------------------------------- ----------------------------------
Xxxx Xxxxxx
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