EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXX INTERACTIVE INC.,
XXXXXXXX WORLDWIDE, INC.,
CAPITOL MERGER SUB, LLC
AND
THE STOCKHOLDERS OF XXXXXXXX WORLDWIDE, INC.
DATED AS OF SEPTEMBER 8, 2004
TABLE OF CONTENTS
SECTION 1. - DEFINITIONS/INTERPRETATION...................................................... 1
1.1 Definitions...................................................................... 1
1.2 Interpretation................................................................... 14
SECTION 2. - THE MERGER...................................................................... 15
2.1 The Merger....................................................................... 15
2.2 Effects of the Merger............................................................ 15
2.3 Organizational Documents......................................................... 15
2.4 Conversion of Securities; Merger Consideration................................... 16
2.5 Exchange Deposit................................................................. 16
2.6 Stock Transfer Books of Xxxxxxxx; Full Satisfaction of Xxxxxxxx Shares........... 16
2.7 Adjustment Amount and Payment.................................................... 17
2.8 Adjustment Procedure............................................................. 18
SECTION 3. - THE CLOSING..................................................................... 19
3.1 Closing of the Merger............................................................ 19
3.2 Filing of Certificates of Merger................................................. 19
3.3 Closing Deliveries............................................................... 19
SECTION 4. - REPRESENTATIONS AND WARRANTIES OF XXXXXXXX...................................... 21
4.1 Organization and Good Standing................................................... 21
4.2 Authority; No Conflict........................................................... 22
4.3 Consents......................................................................... 23
4.4 Capitalization................................................................... 23
4.5 Financial Statements............................................................. 23
4.6 Books and Records................................................................ 24
4.7 Title to Properties; Encumbrances................................................ 24
4.8 Condition and Sufficiency of Assets.............................................. 25
4.9 Accounts Receivable.............................................................. 26
4.10 Pre-Closing Actions.............................................................. 26
4.11 No Undisclosed Liabilities....................................................... 27
4.12 Taxes............................................................................ 27
4.13 No Material Adverse Change....................................................... 29
4.14 Employee Benefits................................................................ 29
4.15 Compliance With Legal Requirements; Governmental Authorizations.................. 32
4.16 Legal Proceedings; Orders........................................................ 33
4.17 Absence of Certain Changes and Events............................................ 34
4.18 Contracts; No Defaults........................................................... 35
4.19 Insurance........................................................................ 38
4.20 Environmental Matters............................................................ 39
4.21 Employees........................................................................ 40
4.22 Labor Disputes; Compliance....................................................... 40
4.23 Intellectual Property............................................................ 41
4.24 Foreign Corrupt Practices Act; Export Control and Antiboycott Laws............... 43
4.25 Disclosure....................................................................... 44
4.26 Relationships with Related Persons............................................... 44
4.27 Brokers or Finders............................................................... 44
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4.28 Clients.......................................................................... 44
4.29 Suppliers and Vendors............................................................ 45
SECTION 5. - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.................................. 45
5.1 Authority; No Conflict........................................................... 45
5.2 Certain Proceedings.............................................................. 45
5.3 Brokers or Finders............................................................... 45
5.4 Ownership of Shares.............................................................. 45
5.5 No Further Right or Interest..................................................... 45
5.6 No Claims........................................................................ 46
5.7 Warranties relating to Acquisition of Xxxxxx Shares.............................. 46
5.8 Disclosure....................................................................... 48
SECTION 6. - REPRESENTATIONS AND WARRANTIES OF XXXXXX........................................ 48
6.1 Organization and Good Standing................................................... 48
6.2 Authority: No Conflict........................................................... 48
6.3 Certain Proceedings.............................................................. 49
6.4 Brokers or Finders............................................................... 49
6.5 SEC Filings...................................................................... 49
6.6 Xxxxxx Shares.................................................................... 49
6.7 Disclosure....................................................................... 49
6.8 Consents......................................................................... 50
SECTION 7. - ADDITIONAL AGREEMENTS........................................................... 50
7.1 Directors........................................................................ 50
7.2 Severance........................................................................ 50
7.3 Registration Statement on Form S-3............................................... 50
7.4 Tax Treatment.................................................................... 53
7.5 Customer and other Business Relationships........................................ 53
7.6 Retention of and Access to Records............................................... 53
7.7 Majority Stockholder Assets...................................................... 53
7.8 Employment Agreement Amendments.................................................. 54
7.9 Consents and Waivers............................................................. 54
7.10 Xxxxx Xxxxxxxx Consents.......................................................... 54
7.11 Further Actions; Power of Attorney............................................... 54
SECTION 8. - INDEMNIFICATION; REMEDIES....................................................... 55
8.1 Survival; Right to Indemnification not Affected by Knowledge..................... 55
8.2 Indemnification and Reimbursement by Stockholders................................ 55
8.3 Indemnification and Reimbursement by Xxxxxx...................................... 56
8.4 Time Limitations Related to Representations and Warranties....................... 57
8.5 Stockholders Threshold and Cap................................................... 57
8.6 Xxxxxx Threshold and Cap......................................................... 58
8.7 Claims Against the Stockholders.................................................. 58
8.8 Claims Against Xxxxxx............................................................ 59
8.9 Third Party Claims............................................................... 59
8.10 Indemnification in Case of Strict Liability or Indemnitee Negligence............. 61
8.11 Violation of Covenants........................................................... 61
SECTION 9. - MISCELLANEOUS................................................................... 61
9.1 Expenses......................................................................... 61
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9.2 Incorporation by Reference....................................................... 61
9.3 Public Announcements............................................................. 61
9.4 Notices.......................................................................... 62
9.5 Jurisdiction; Service of Process................................................. 63
9.6 Waiver; Remedies Cumulative; Stockholder Representative.......................... 63
9.7 Entire Agreement and Modification................................................ 64
9.8 Corresponding Schedules; Definitions............................................. 64
9.9 Assignments, Successors, and No Third Party Rights............................... 64
9.10 Severability..................................................................... 65
9.11 Construction..................................................................... 65
9.12 Time of Essence.................................................................. 65
9.13 Governing Law.................................................................... 65
9.14 Execution of Agreement........................................................... 65
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of September 8,
2004 is by and among XXXXXX INTERACTIVE INC., a Delaware corporation ("Xxxxxx"),
CAPITOL MERGER SUB, LLC, a Delaware limited liability company of which Xxxxxx is
the sole member ("Merger Sub"), XXXXXXXX WORLDWIDE, INC., a California
S-Corporation ("Xxxxxxxx"), Xxxx Xxxxx (solely for purposes of Section 2.7.4),
and all of the stockholders of Xxxxxxxx shown on the signature pages to this
Agreement ("Stockholders"). Each of the above contracting parties (except for
Xxxx Xxxxx who is executing this Agreement solely for purposes of Section 2.7.4)
may be referred to herein as a "Party," or all, collectively, as the "Parties."
WHEREAS, the respective Boards of Directors of Xxxxxx, Merger Sub, and
Xxxxxxxx each have determined that the transactions contemplated hereby,
including the Merger, are advisable and fair to, and in the best interests of,
their respective stockholders and members;
WHEREAS, Stockholders each have determined that this Agreement and the
transactions contemplated hereby, including the Merger, are advisable and fair,
and in their best interests; and
WHEREAS, Xxxxxx, Merger Sub, Xxxxxxxx and Stockholders intend that this
Agreement be treated as a plan of reorganization within the meaning of Section
368(a)(1)(A) of the Code and that the transactions contemplated by this
Agreement be undertaken pursuant to such plan.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Xxxxxx, Merger Sub, Xxxxxxxx and Stockholders hereby agree
as follows:
SECTION 1. - DEFINITIONS/INTERPRETATION
1.1 Definitions. The following terms shall have the following meanings
when used in this Agreement and unless otherwise indicated therein, in any
certificate or other document delivered pursuant hereto.
1.1.1. "Accounts Receivable" has the meaning given to it in
Section 4.9.
1.1.2. "Acquired Companies" means Xxxxxxxx and its Subsidiaries,
collectively.
1.1.3. "Adjustment Amount" has the meaning set forth in
Section 2.7.2.
1.1.4. "Agreement" has the meaning set forth in the first paragraph
of this Agreement.
1.1.5. "Ancillary Agreements" means the Escrow Agreement, the
Employment Agreement, the Employment Letters, the Non-competition Agreements,
the Lock-up Agreements, the Option Agreements, and the Stockholder Releases.
1.1.6. "Antiboycott Prohibitions" has the meaning set forth in
Section 4.24.3.
1.1.7. "Applicable Contract" means any Contract (a) under which any
Acquired Company has any rights, (b) under which any Acquired Company has any
obligation or liability, or (c) by which any Acquired Company or any of the
assets owned or used by it is bound.
1.1.8. "Bad Debt Reserve" has the meaning set forth in Section 4.9.
1.1.9. "Balance Sheet Adjustments" means adjustments that reflect
(unless already reflected in the Projected Closing Balance Sheet and the Closing
Balance Sheet), as applicable) (i) the acquisition by Xxxxxxxx of all of the
outstanding stock of Xxxxxxxx UK Ltd., (ii) collection by Xxxxxxxx of all
Stockholder notes receivable, (iii) all expenses associated with the repurchase
of all stock valuation rights and options, (iv) a Net Tax Liability of $200,000,
irrespective of any different actual liability, (v) accrual of all Liabilities
for accrued vacation and personal time carried over as described in Section
4.21.1(vii), (vi) accrual of Liabilities under all self insured health programs,
(vii) accrual of Liabilities under the Xxxxxxxx Senior Research Executive
Compensation Plan, the Xxxxxxxx Staff Incentive Plan, the Team Leader Incentive
Plan, Executive Nucleus Committee bonus arrangements, and U.K. bonus
arrangements related to periods prior the Closing Date, (viii) the Liability as
of the Closing Date that would be associated with termination of the interest
rate swap related to Xxxxxxxx'x obligations to Sun Trust Bank, and (ix) expenses
required to be accrued pursuant to Section 9.1 of this Agreement.
1.1.10. "Beneficial" or "Beneficially," when used in the context of
ownership interests in any Person, shall have the meaning provided in Section
13(d) of the Exchange Act.
1.1.11. "Breach" means, with respect to a representation, warranty,
covenant, obligation, or other provision of this Agreement, any Ancillary
Agreement, or any other agreement or instrument delivered pursuant to this
Agreement, any inaccuracy in, breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision.
1.1.12. "Breaching Stockholder" has the meaning set forth in Section
8.7.
1.1.13. "Business Day" means any day other than (a) Saturday or
Sunday or (b) any other day on which banks in New York, New York are permitted
or required to be closed.
1.1.14. "Xxxxxx Road Flood" has the meaning set forth in Xxxxxxxx
Corresponding Schedule 4.8.
1.1.15. "California Corporation Law" means the California
Corporations Code.
1.1.16. "Cash Payment" has the meaning set forth in Section
2.4.2(b).
1.1.17. "Certificates of Merger" has the meaning set forth in
Section 3.2.
1.1.18. "Closing" has the meaning set forth in Section 3.1.
1.1.19. "Closing Agreement" shall mean a written and legally binding
agreement with a Governmental Body relating to Taxes, as used in Section 4.12.5.
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1.1.20. "Closing Balance Sheet" has the meaning set forth in Section
2.8.1.
1.1.21. "Closing Date" has the meaning set forth in Section 3.1.
1.1.22. "Code" means the Internal Revenue Code of 1986, as amended,
or any successor law.
1.1.23. "Competing Business" has the meaning set forth in Section
4.26.
1.1.24. "Confidentiality Agreement" means that certain
Confidentiality Agreement by and between Xxxxxx and Xxxxxxxx dated May 17, 2004,
as amended.
1.1.25. "Consent" means any approval, consent, ratification, waiver,
or other authorization (including any Governmental Authorization).
1.1.26. "Consulting Business" has the meaning set forth in Section
4.10.4.
1.1.27. "Consulting Business Agreement" means that certain agreement
between Xxxxxxxx and the Consulting Business dated July 30, 2004.
1.1.28. "Contemplated Transactions" means all of the transactions
specifically set forth in, or as contemplated and required by this Agreement.
1.1.29. "Contract" means any legally binding agreement, contract,
lease, license, consensual obligation, promise or undertaking (whether written
or oral).
1.1.30. "Contracted Employee" has the meaning set forth in Section
4.21.5.
1.1.31. "Damages" has the meaning set forth in Section 8.2.
1.1.32. "December 31, 2003 Balance Sheet" means the audited
consolidated balance sheet of the Acquired Companies as at December 31, 2003 and
attached hereto as Section 1.1.31 of the Xxxxxxxx Corresponding Schedules.
1.1.33. "December 31 Financial Statements" means the audited
consolidated balance sheets of the Acquired Companies as at December 31, 2001,
December 31, 2002 and also including the December 31, 2003 Balance Sheet, in
each case with the related audited consolidated statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended, the
notes thereto, and the report thereon of Xxxxx Xxxxxxxx LLP, independent
certified public accountants all as attached hereto as Section 1.1.33 of the
Xxxxxxxx Corresponding Schedules.
1.1.34. "Delay Right" has the meaning set forth in Section 7.3.2.
1.1.35. "Delaware Corporation Law" means the Delaware General
Corporation Law.
1.1.36. "Delaware LLC Law" means the Delaware Limited Liability
Company Act.
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1.1.37. "Disputed Issues" has the meaning set forth in Section
2.8.3.
1.1.38. "Effective Time" has the meaning set forth in Section 3.2.
1.1.39. "Employee Plan" means: (a) any Xxxxxxxx Plan and Xxxxxxxx
Other Benefit Obligation; and (b) any Plan and Other Benefit Obligation of which
any ERISA Affiliate is or was a Plan Sponsor, which is or was maintained by any
ERISA Affiliate, in which any such ERISA Affiliate participates or has
participated, or to which any such ERISA Affiliate contributes, has contributed
or has had an obligation to contribute, which Plan (i) provides benefits to any
current or former employee, officer, director or service provider of any
Acquired Company, or any dependents thereof, (ii) is subject to the funding
requirements of Code Section 412 and ERISA Section 302, or (iii) is a Plan to
which the requirements of Code Section 4980B apply.
1.1.40. "Employment Agreement" means that certain two-year
employment agreement dated as of the Closing Date between Xxxxxx and Xxxxxxx X.
Xxxxxxxx.
1.1.41. "Employment Letter(s)" means the letters dated as of the
Closing Date confirming the continuation of the employment of the Contracted
Employees who are not based in the UK by the Acquired Companies under the terms
of each respective letter, and acknowledging that Xxxxxx shall be bound by each
such employee's existing employment agreement, as modified by the applicable
letter, and that Xxxxxx shall be entitled to the rights and benefits thereunder.
1.1.42. "Encumbrance" means any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
1.1.43. "Environmental Claim" means any written: notice, allegation,
accusation, complaint, inquiry, claim, order, decree, or demand under any
Environmental Law.
1.1.44. "Environmental Law" means any Legal Requirement that relates
to the environment including the Comprehensive Environmental Response,
Compensation, and Liability Act, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act,
the Toxic Substances Control Act, the Occupational Safety and Health Act (all as
such acts are generally known and so defined), and the regulations promulgated
pursuant thereto, as all such laws and regulations have been amended or
supplemented, and all applicable transfer statutes.
1.1.45. "Environmental Permit" means all permits, licenses,
authorizations, variances, approvals and similar authorizations required by any
Environmental Law.
1.1.46. "ERISA" means the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
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1.1.47. "ERISA Affiliate" means, any other corporation or trade or
business controlled by, controlling or under common control with the Acquired
Company within the meaning of Code Section 414 or ERISA Section 4001(a)(14) or
Section 4001(b).
1.1.48. "Escrow Agent" has the meaning set forth in the Escrow
Agreement.
1.1.49. "Escrow Agreement" means that certain escrow agreement of
even date herewith among Xxxxxx, Xxxxxxxx and the Stockholders.
1.1.50. "Escrow Deposit" has the meaning set forth in Section 2.4.3.
1.1.51. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and regulations and rules issued pursuant to that Act.
1.1.52. "Exchange Agent" means American Stock Transfer and Trust
Company.
1.1.53. "Executive Nucleus Committee" means Xxxxxxxx'x executive
management committee, commonly called its Executive Nucleus Committee, comprised
of Xxxxxxx X. Xxxxxxxx, Xxx Xxxxxx, Xxxxx Xxxxxxxxxx, Xxxx Xxxxx, and Xxxxx
Xxxxxxx.
1.1.54. "Expatriate Issue" has the meaning set forth in Xxxxxxxx
Corresponding Schedule 4.12.
1.1.55. "FCPA" means the Foreign Corrupt Practices Act of 1977 (as
amended), and the regulations and rules issued pursuant to that Act.
1.1.56. "Financial Statements" means the December 31 Financial
Statements and the Interim Financial Statements.
1.1.57. "GAAP" means generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the
December 31 Financial Statements with respect to the calendar year 2003 were
prepared.
1.1.58. "Gold Payment Issue" has the meaning set forth in Xxxxxxxx
Corresponding Schedule 4.7.3.
1.1.59. "Governmental Authorization" means any Consent, license,
registration or permit issued, granted, given or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
1.1.60. "Governmental Body" means any:
(a) federal, state, local, municipal, foreign or other
government;
(b) governmental or quasi-governmental and legally empowered
authority of any nature (including any agency, branch, department, board,
commission, court, tribunal or other entity exercising governmental or
quasi-governmental powers);
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(c) body exercising and entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power; or
(d) applicably and duly authorized official, representative
or agent of any of the foregoing.
1.1.61. "Xxxxxx" has the meaning set forth in the first paragraph of
this Agreement.
1.1.62. "Xxxxxx Board" means the Board of Directors of Xxxxxx.
1.1.63. "Xxxxxx Closing Documents" has the meaning set forth in
Section 6.2.1.
1.1.64. "Xxxxxx Corresponding Exhibit" means an exhibit to this
Agreement provided by Xxxxxx that is numbered, captioned or named to correspond
to the number, caption or name of the section of this Agreement which refers to
that exhibit.
1.1.65. "Xxxxxx Corresponding Schedule" means a schedule to this
Agreement provided by Xxxxxx that is numbered, captioned or named to correspond
to the number, caption or name of the section of this Agreement which refers to
that schedule.
1.1.66. "Xxxxxx Indemnified Persons" has the meaning set forth in
Section 8.2.
1.1.67. "Xxxxxx SEC Documents" has the meaning set forth in Section
6.5.
1.1.68. "Xxxxxx Share(s)" has the meaning set forth in Section
2.4.2(a).
1.1.69. "HIPAA" means the Health Insurance Portability and
Accountability Act of 1996.
1.1.70. "Indemnified Person" has the meaning set forth in Section
8.9.1.
1.1.71. "Indemnifying Person" has the meaning set forth in Section
8.9.1.
1.1.72. "Independent Accountants" has the meaning set forth in
Section 2.8.3.
1.1.73. "Intellectual Property" means any and all intellectual
property as follows: all applicable United States and foreign (i) patents and
patent applications (including docketed patent disclosures awaiting filing,
reissues, divisions, continuations-in-part, extensions, and improvements
thereto), (ii) registered and unregistered: trademarks, service marks, trade
names, assumed fictional business names, trade dress, brand names, logos,
business and product names, slogans, and registrations and applications for
registration thereof, (iii) registered and unregistered copyrights and
registrations thereof, (iv) proprietary: technology, customer lists, inventions,
processes, methodologies, designs, know-how, trade secrets, confidential and
technical information or specifications, software and databases, (v) internet
web sites and internet domain names, (vi) Xxxxxxxx Software, and (vii) licenses
(whether the applicable Person is licensor or licensee) of any Intellectual
Property.
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1.1.74. "Intellectual Property Assets" means (i) the name of each
Acquired Company, (ii) all registered trademarks, service marks and
applications, (iii) all patents and patent applications, (iv) all registered
copyrights in both published works and unpublished works, and (v) all registered
or recorded rights in internet web sites and internet domain names.
1.1.75. "Interim Adjustment Amount" has the meaning set forth in
Section 2.7.1.
1.1.76. "Interim Balance Sheet" means the unaudited consolidated
balance sheet of the Acquired Companies as at June 30, 2004 and set forth in
Section 1.1.77 of the Xxxxxxxx Corresponding Schedules.
1.1.77. "Interim Financial Statements" means the Interim Balance
Sheet and the related unaudited consolidated statements of income for the six
(6) months ended June 30, 2004 and attached hereto as Section 1.1.77 of the
Xxxxxxxx Corresponding Schedules.
1.1.78. "IRS" means the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
1.1.79. "Knowledge" means, with respect to any Party, (i) the actual
knowledge of such Party if such Party is a natural person, (ii) the actual
knowledge of such Party's Knowledge Persons if such Party is not a natural
person, and (iii) knowledge that could reasonably be expected to be discovered
through inquiry by such natural person or Knowledge Persons, as applicable.
References to the Knowledge of Xxxxxxxx include the Knowledge of all of the
Acquired Companies.
1.1.80. "Knowledge Persons" means (i) with respect to any of the
Acquired Companies, as applicable, the Executive Nucleus Committee, (ii) with
respect to Xxxxxx, the CEO, COO, CFO, and the Senior VP of Business Development
and Internet Services, and (iii) with respect any trust that is a Party, the
trustee of such trust.
1.1.81. "Legal Requirement" means any applicable federal, state,
local, municipal, foreign, international, multinational or other constitution,
law, ordinance, principle of common law, code, regulation, statute or treaty.
1.1.82. "Liability" means with respect to any Person, any liability
or obligation of such Person of any kind, character or description, whether
known or unknown, absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise, and whether or not the same is required under GAAP to be accrued on
the financial statements of such Person.
1.1.83. "Lock-up Agreements" means those certain lock-up agreements
dated as of the Closing Date between Xxxxxx, on the one hand, and each of the
Stockholders, respectively, on the other hand.
1.1.84. "Material Adverse Effect" means any circumstance, change or
effect that (individually or when taken together with all other circumstances,
changes, or effects that
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have occurred prior to the date of determination of the occurrence of the
Material Adverse Effect) has materially and adversely affected or could
reasonably be expected to materially and adversely effect (i) the condition
(financial or otherwise), results of operations, and/or assets (including
intangible assets) of the Acquired Companies in each case taken as a whole, or
(ii) the ability of the Acquired Companies to effect the Closing, to perform any
of the Acquired Companies' material obligations under this Agreement or the
Xxxxxxxx Closing Documents, or to otherwise consummate the Contemplated
Transactions; provided, however, that any changes, circumstances or effects
resulting from or relating to (A) any changes in economic, regulatory, or
political conditions generally or in the economic, legal or regulatory
conditions that affect in general the businesses in which such Person is
engaged, (B) the financial or securities markets or economy generally, (C) this
Agreement or the transactions contemplated by this Agreement, or (D) the effect
of public announcement and/or action or events arising out of the transactions
contemplated hereby, including any effect on employees, distributors, or
customers or others of such Person including, but not limited to, the
resignation of any of such Person's employees, clients, customers, potential
clients and customers, Representatives, agents or distributors in response to
the public announcement and/or actions or events arising out of the transactions
contemplated by this Agreement, shall be excluded directly, along with the
consequences thereof, as having, causing or otherwise contributing to a Material
Adverse Effect with respect to such Person.
1.1.85. "Material Contract" means (i) any Applicable Contract which
involves payments or receipts by any Acquired Company of at least $250,000 over
the term of such Applicable Contract, including contracts evidencing
indebtedness for borrowed money, and (ii) current and legally binding
commitments and agreements to enter into any of the foregoing.
1.1.86. "Merger" has the meaning set forth in Section 2.1.
1.1.87. "Merger Consideration" means the sum of the Escrow Deposit
(as paid pursuant to the Escrow Agreement), the Stock Consideration, and the
Cash Payment, as adjusted by both the Interim Adjustment Amount and the
Adjustment Amount.
1.1.88. "Merger Sub" has the meaning set forth in the first
paragraph of this Agreement.
1.1.89. "Merger Sub Board" means the Board of Managers of Merger
Sub.
1.1.90. "Multiemployer Plan" has the meaning given in ERISA
Section 3(37)(A).
1.1.91. "Net Tax Liability" means the deferred and any other tax
liability arising from termination of Xxxxxxxx'x status as an S Corporation
(e.g. cash to accrual adjustment) net of the value of tax benefits associated
with the Acquired Companies' U.K. net operating losses and amortization of
purchased intangibles in the U. K..
1.1.92. "Non-competition Agreement" means that certain
non-competition agreement dated as of the Closing Date between Xxxxxx, on the
one hand, and certain of the Stockholders, respectively, on the other hand,
pursuant to which (i) Xxxxxx will pay $500,000 in the aggregate to such
Stockholders in consideration of their agreements contained therein and (ii)
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such Stockholders have directed Xxxxxx to pay such amount to each of them in
proportion to their relative respective ownership of Xxxxxxxx Shares.
1.1.93. "Option Agreements" means those certain option agreements
delivered at the Closing by Xxxxxx in favor of each of Xxx Xxxxxx, Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxxxx, and additional persons in the option pool established
by Xxxxxx within which Xxxxxxxx shall designate the recipients prior to the
Closing.
1.1.94. "Order" means any final and binding award, decision,
injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made,
or rendered by any court, administrative agency, or other Governmental Body or
by any arbitrator with the authority and jurisdiction to so act.
1.1.95. "Ordinary Course of Business" means an action taken by a
Person will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically authorized
by the parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
1.1.96. "Organizational Documents" means all or any of the following
as applicable:
(a) the articles or certificate of incorporation and the
bylaws of a corporation;
(b) the partnership agreement and any statement of
partnership of a general partnership;
(c) the limited partnership agreement and the certificate of
limited partnership of a limited partnership;
(d) the operating or limited liability company agreement and
the articles of organization of a limited liability company;
(e) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and
(f) any amendment to any of the foregoing.
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1.1.97. "Other Benefit Obligation" means any obligation,
arrangement, or customary practice, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
current or former employees, officers, directors or service providers, other
than any obligation, arrangement, or practice that is a Plan. Other Benefit
Obligations include consulting agreements under which the compensation paid does
not depend upon the amount of service rendered, sabbatical policies, severance
policies, fringe benefits within the meaning of Code Section 132 or Code Section
6039D, other bonus, incentive compensation, deferred compensation, profit
sharing, stock-option, stock appreciation right, stock bonus, stock purchase,
employee-stock ownership, savings, change-in-control, supplemental-employment,
layoff, salary continuation, retirement, pension, health, life insurance,
disability, accident, group insurance, vacation, holiday, sick-leave or welfare
plan and any other employee compensation or benefit plan, agreement, policy,
practice, commitment, Contract or understanding (whether effective or
terminated, written or unwritten).
1.1.98. "Owner" has the meaning set forth within the definition of
Subsidiary in Section 1.1.122 below.
1.1.99. "Part(ies)" has the meaning set forth in the first paragraph
of this Agreement.
1.1.100. "PAYE Issue" has the meaning set forth in Xxxxxxxx
Corresponding Schedule 4.7.3.
1.1.101. "PBGC" means the Pension Benefit Guaranty Corporation, or
any successor thereto.
1.1.102. "Pension Plan" has the meaning given in ERISA Section
3(2)(A), without regard to ERISA Section 4.
1.1.103. "Person" means an individual, partnership, corporation,
business trust, limited liability company, limited liability partnership, joint
stock company, trust, unincorporated association, joint venture or other entity
or a Governmental Body.
1.1.104. "Plan" has the meaning given in ERISA Section 3(3), without
regard to ERISA Section 4.
1.1.105. "Plan Sponsor" has the meaning given in ERISA Section
3(16)(B).
1.1.106. "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative, or
investigative) commenced, brought, conducted, or heard by or before any
Governmental Body or arbitrator.
1.1.107. "Projected Closing Balance Sheet" means a consolidated
balance sheet prepared by Xxxxxxxx and delivered to Xxxxxx at least one Business
Day prior to the Closing Date which reflects Xxxxxxxx'x reasonable projection of
the Closing Balance Sheet and which, to the extent practical, shall be prepared
according to GAAP, applied on a basis consistent with the policies and practices
used to create the December 31, 2003 Balance Sheet; provided, however
10
that the Projected Closing Balance Sheet will, among other items, reflect the
Balance Sheet Adjustments even if not in accordance with GAAP.
1.1.108. "Proportionate Share" has the meaning set forth in
Section 8.7.
1.1.109. "Qualified Plan" means any Plan that meets, purports to
meet, or was ever intended to meet, the requirements of Code Section 401(a).
1.1.110. "Registration Statement" has the meaning set forth in
Section 7.3.1.
1.1.111. "Related Person" means with respect to a particular
individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who permanently resides with such
individual, and (b) "Material Interest" means direct or indirect Beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting
11
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
1.1.112. "Representative" means with respect to a particular Person,
any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
1.1.113. "S Corporation" has the meaning set forth in Section
1361(a)(1) of the Code.
1.1.114. "SEC" means the Securities and Exchange Commission.
1.1.115. "Securities Act" means the Securities Act of 1933, as
amended or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
1.1.116. "Starting Amount" has the meaning set forth in Section
2.7.1.
1.1.117. "Stock Consideration" has the meaning set forth in Section
2.4.2(a).
1.1.118. "Stockholder Closing Documents" has the meaning set forth
in Section 5.1.
1.1.119. "Stockholder Release" means the release delivered by each
Stockholder on the Closing Date pursuant to which each such Stockholder releases
Xxxxxx and Xxxxxxxx from certain Liabilities described therein.
1.1.120. "Stockholder Representative" means Xxxxxxx X. Xxxxxxxx, or
should he so designate or be unable to serve due to death or disability, Xxx
Xxxxxx.
1.1.121. "Stockholder(s)" has the meaning set forth in the first
paragraph of this Agreement.
1.1.122. "Subsidiary" means with respect to any Person (the
"Owner"), any corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries.
1.1.123. "Surviving Entity" has the meaning set forth in Section
2.1.
1.1.124. "Suspension Right" has the meaning set forth in Section
7.3.2.
1.1.125. "Tax" or "Taxes" means any tax (including any income tax,
capital gains tax, value-added tax, sales tax, property tax, gift tax, or estate
tax), levy, assessment, tariff, duty (including any customs duty), deficiency,
or other fee, and any related charge or amount (including any fine, penalty,
interest, or addition to tax), imposed, assessed, or collected by or under the
authority of any Governmental Body.
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1.1.126. "Tax Return" means any return (including any information
return), report, schedule, or notice required to be filed with or submitted to,
any Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
1.1.127. "Tax Ruling" means a written ruling of a Governmental Body
relating to Taxes.
1.1.128. "Tax Supporting Document" means any report, statement,
schedule, notice, form, or other document or information, other than a Tax
Return, filed with or submitted to, or required to be filed with or submitted
to, any Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
1.1.129. "Thin Capitalization Issue" has the meaning set forth in
Xxxxxxxx Corresponding Schedule 4.7.3.
1.1.130. "Third Party" means a Person that is not a Party to this
Agreement, including in each case such party's respective Representatives,
shareholders, subsidiaries, controlling Persons, officers, agents, employees,
affiliates, and others.
1.1.131. "Third-Party Claim" means any claim against any Indemnified
Person by a Third Party, whether or not involving a Proceeding.
1.1.132. "Threatened" means any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing) with
respect to a claim, Proceeding, or dispute (as applicable), or any other event
has occurred or any other circumstances exist, that would reasonably lead a
prudent Person to conclude that such a claim, Proceeding, or dispute is
reasonably likely to or will be asserted, commenced, taken, or otherwise pursued
in the future.
1.1.133. "U.K." means the United Kingdom of Great Britain and
Northern Ireland.
1.1.134. "U.K. Matter" has the meaning set forth in Xxxxxxxx
Corresponding Schedule 4.7.3
1.1.135. "U.K. Property" means the real property owned by Xxxxxxxx
Europe Ltd. set out in Xxxxxxxx Corresponding Schedule Section 4.7.1.
1.1.136. "Unbilled Receivables" has the meaning set forth in Section
4.9.
1.1.137. "VEBA" means a voluntary employees' beneficiary association
under Code Section 501(c)(9).
1.1.138. "Virginia Lawsuit" has the meaning set forth in Xxxxxxxx
Corresponding Schedule 4.16.1.
1.1.139. "WARN Act" has the meaning set forth in Section 4.21.4.
13
1.1.140. "Welfare Plan" has the meaning given in Section 3(1) of
ERISA.
1.1.141. "Xxxxxxxx" has the meaning set forth in the first paragraph
of this Agreement.
1.1.142. "Xxxxxxxx Board" means the Board of Directors of Xxxxxxxx.
1.1.143. "Xxxxxxxx Closing Documents" has the meaning set forth in
Section 4.2.
1.1.144. "Xxxxxxxx Corresponding Exhibit" means an exhibit to this
Agreement provided by Xxxxxxxx that is numbered, captioned or named to
correspond to the number, caption or name of the section of this Agreement which
refers to that exhibit.
1.1.145. "Xxxxxxxx Corresponding Schedule" means a schedule to this
Agreement provided by Xxxxxxxx that is numbered, captioned or named to
correspond to the number, caption or name of the section of this Agreement which
refers to that schedule.
1.1.146. "Xxxxxxxx Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by an Acquired Company to provide benefits
to any current or former employee, officer, director or service provider of an
Acquired Company or any ERISA Affiliate, or the dependents thereof.
1.1.147. "Xxxxxxxx Plan" means any Plan of which an Acquired Company
is or was a Plan Sponsor, or to which an Acquired Company otherwise contributes,
has contributed or has had an obligation to contribute, in the last six (6)
years, which is maintained by an Acquired Company, in which an Acquired Company
otherwise participates or has participated within the last six (6) years or for
which an Acquired Company has liability or potential liability pursuant to a
contract.
1.1.148. "Xxxxxxxx Share(s)" has the meaning given in Sections 2.4.2
and 4.4.
1.1.149. "Xxxxxxxx Software" means all of the computer software
(including firmware and other software embedded in hardware devices) currently
owned, used, or licensed by any Acquired Company (other than "off-the-shelf",
non-customized third-party software licensed to an Acquired Company for internal
use on a non-exclusive basis).
1.1.150. "Xxxxxxxx Tangible Net Worth" means, at a given point in
time, the total value of Xxxxxxxx'x stockholders' equity in accordance with GAAP
less goodwill, covenants not to compete, and deferred loan costs, all net of
amortization.
1.2 Interpretation.
1.2.1. Applicability of Definitions. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such terms.
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1.2.2. References to Made Available. The phrase "made available" in
this Agreement shall mean that the information referred to has been actually
delivered to the Party (or its advisors) to whom such information is to be made
available, or (i) with respect to items made available as referenced in Section
4.14.2 those items which were made available in the designated document due
diligence room in Reston, Virginia and are listed in Xxxxxxxx Corresponding
Schedule 4.14.2, and (ii) with respect to other information, information made
available in the designated document due diligence room in Reston, Virginia.
1.2.3. References to Other Materials. Any agreement, instrument or
statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time, amended, qualified or supplemented, including (in the case of agreements
and instruments) by legally binding waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and all attachments
thereto and instruments incorporated therein.
1.2.4. References to Persons. References to a Person are also to its
permitted successors and assigns.
1.2.5. Use of Certain Words. The words "hereof," "herein" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
SECTION 2. - THE MERGER
2.1 The Merger. At the Effective Time, upon the terms and subject to the
conditions of this Agreement and in accordance with the Delaware LLC Law and the
California Corporation Law, as applicable, Xxxxxxxx shall be merged with and
into Merger Sub (the "Merger"). Following the Merger, Merger Sub shall continue
as the surviving entity (the "Surviving Entity") and the separate corporate
existence of Xxxxxxxx shall cease.
2.2 Effects of the Merger. The Merger shall have the effects set forth in
the Delaware LLC Law and the California Corporation Law, as applicable. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the rights, powers, privileges, immunities, properties, franchises,
Liabilities, obligations, debts, and duties of Merger Sub shall remain vested in
Merger Sub as the Surviving Entity, and all rights, powers, privileges,
immunities, properties, franchises, Liabilities, obligations, debts, and duties
of Xxxxxxxx shall become the rights, powers, privileges, immunities, properties,
franchises Liabilities, obligations, debts, and duties of the Surviving Entity.
2.3 Organizational Documents. The Certificate of Formation and Operating
Agreement of Merger Sub in effect immediately prior to the Effective Time shall
be the Organizational Documents of the Surviving Entity unless and until amended
in accordance with such Organizational Documents and the Delaware LLC Law.
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2.4 Conversion of Securities; Merger Consideration. At the Effective Time,
by virtue of the Merger and without any action on the part of any of the Parties
hereto or any holder of any securities of Merger Sub or Xxxxxxxx:
2.4.1. Each share of Xxxxxxxx common stock, par value $1.00 per
share, issued and outstanding immediately prior to the Effective Time that is
held in the treasury of Xxxxxxxx shall automatically be cancelled and shall
cease to exist, and no consideration shall be delivered or deliverable in
exchange therefor.
2.4.2. The number of shares of Xxxxxxxx common stock, par value
$1.00, issued and outstanding (but not shares of Xxxxxxxx common stock to be
cancelled pursuant to Section 2.4.1) immediately prior to the Effective Time
(individually, a "Xxxxxxxx Share" and collectively, the "Xxxxxxxx Shares") is
shown on Xxxxxxxx Corresponding Schedule 2.4.2. Each Xxxxxxxx Share shall be
cancelled and each Stockholder shall be entitled to receive for each Xxxxxxxx
Share surrendered to Xxxxxx pursuant to Section 3.3.2(a):
(a) the number of validly issued, fully paid and
non-assessable shares of Xxxxxx common stock, par value $.001, (each, a "Xxxxxx
Share") set forth opposite such Stockholder's name on the Xxxxxxxx Corresponding
Schedule 2.4.2 (the "Stock Consideration"); and
(b) a cash payment equal to the dollar amount set forth
opposite such Stockholder's name on the Xxxxxxxx Corresponding Schedule 2.4.2,
which shall be paid by wire transfer pursuant to written wire transfer
instructions attached hereto as part of Xxxxxxxx Corresponding Schedule 2.4.2
(the "Cash Payment").
2.4.3. As additional consideration for the Xxxxxxxx Shares, Xxxxxx
shall deposit $5,000,000 (the "Escrow Deposit") with the Escrow Agent. The
Escrow Deposit shall be released and otherwise governed pursuant to the terms of
the Escrow Agreement.
2.4.4. The Adjustment Amount shall be paid by Xxxxxx to Stockholders
or Stockholders to Xxxxxx, as the case may be, in accordance with Section 2.7.2.
2.5 Exchange Deposit. Prior to the Effective Time, Xxxxxx shall deposit,
or cause to be deposited, with the Exchange Agent, in trust for the benefit of
holders of Xxxxxxxx Shares, certificates representing the Stock Consideration.
2.6 Stock Transfer Books of Xxxxxxxx; Full Satisfaction of Xxxxxxxx
Shares.
2.6.1. The stock transfer books of Xxxxxxxx shall be closed
immediately upon the Effective Time and there shall be no further registration
of transfers of Xxxxxxxx Shares thereafter on the records of Xxxxxxxx.
2.6.2. After the Effective Time, and upon payment, delivery or
deposit of the full Merger Consideration, as applicable, pursuant to the terms
hereof, holders of the Xxxxxxxx Shares shall have no further rights with respect
to such Xxxxxxxx Shares, and the Merger Consideration shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to the
Xxxxxxxx Shares. A holder of any certificates for Xxxxxxxx Shares that are not
16
surrendered pursuant to Section 3.3.2(a) shall not be entitled, until such
surrender, to be paid (a) dividends or other distributions, declared or made
with respect to Xxxxxx Shares, or (b) any Merger Consideration that otherwise
would have been payable upon surrender of any such certificate pursuant to
Section 3.3.2(a).
2.7 Adjustment Amount and Payment.
2.7.1. The "Interim Adjustment Amount" (which may be a positive or
negative number) will be equal to the amount determined by subtracting the
Xxxxxxxx Tangible Net Worth, as shown on the Projected Closing Balance Sheet,
from $2,502,000 (the "Starting Amount"). If the Interim Adjustment Amount
is positive, an adjustment equal to fifty percent of such amount shall be
subtracted from each of the Cash Payment and the dollar equivalent of Stock
Consideration to be delivered on the Closing Date. If the Interim Adjustment
Amount is negative, 50% of such amount (as a positive sum) shall be added to
each of the Cash Payment and the dollar equivalent of Stock Consideration to be
delivered on the Closing Date.
2.7.2. The "Adjustment Amount" (which may be a positive or negative
number) will be equal to the amount determined by subtracting (i) the Interim
Adjustment Amount from (ii) the Starting Amount minus the Xxxxxxxx Tangible Net
Worth as shown on the Closing Balance Sheet prepared in accordance with the
provisions of Section 2.8. If the Adjustment Amount is positive, the Adjustment
Amount shall be paid by the Stockholders in cash to Xxxxxx. If the Adjustment
Amount is negative, the Adjustment Amount (as a positive sum) shall be paid by
Xxxxxx in cash to the Stockholders in accordance with their respective
proportionate interests therein.
2.7.3. If the Adjustment Amount is to be paid by Xxxxxx to the
Stockholders, then the Adjustment Amount shall be paid by wire transfer to the
Stockholders pursuant to the wire transfer instructions set forth in Xxxxxxxx
Corresponding Schedule 2.4.2, or if any such payment to a Stockholder is less
than $10,000, by Xxxxxx'x check delivered to the address for the applicable
Stockholder set forth in Xxxxxxxx Corresponding Exhibit 9.4. If the Adjustment
Amount is to be paid by the Stockholders to Xxxxxx, then the Adjustment Amount
shall be paid by wire transfer to Xxxxxx pursuant to wire transfer instructions
set forth in Xxxxxx Corresponding Schedule 2.7.3, or if such payment to Xxxxxx
is less than $10,000, by the Stockholder's check delivered to the address for
Xxxxxx referenced in Section 9.4.
2.7.4. All payments under this Section 2.7 shall be made together
with simple interest at the rate of four percent (4%) per annum, which interest
shall begin accruing on the Closing Date and end on the date that the payment is
made. Within five (5) Business Days after the Closing Balance Sheet becomes
binding on the Parties pursuant to Section 2.8, the Stockholders or Xxxxxx, as
the case may be, shall make the payment provided for in this Section 2.7. Xxxx
Xxxxx agrees to use reasonable efforts to coordinate payment by the Stockholders
of any Adjustment Amount due to Xxxxxx.
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2.8 Adjustment Procedure.
2.8.1. The Stockholder Representative shall cause to be prepared a
consolidated balance sheet of the Acquired Companies as of the Closing Date (the
"Closing Balance Sheet"). The Closing Balance Sheet shall be prepared according
to GAAP, applied on a basis consistent with the policies and practices used to
create the December 31, 2003 Balance Sheet; provided, however that the Balance
Sheet Adjustments as finally established will be reflected in Closing Balance
Sheet even if not in accordance with GAAP. The Closing Balance Sheet shall be
delivered by the Stockholder Representative to Xxxxxx within forty-five (45)
days following the Closing Date. The Stockholder Representative may use the
services of Xxxx Xxxxx and others who may be employed by Xxxxxx, without
compensation to Xxxxxx, to effect and/or fulfill any of his obligations under
this Section 2.8.
2.8.2. If Xxxxxx, within forty-five (45) days following delivery of
the Closing Balance Sheet by the Stockholder Representative, has not given the
Stockholder Representative written notice of objection as to any amounts set
forth on the Closing Balance Sheet (which notice shall state the basis of the
Xxxxxx' objection), then the Closing Balance Sheet as delivered by the
Stockholder Representative shall be final, binding and conclusive on the Parties
and be used in computing the Adjustment Amount. During such forty-five (45)
days, the Stockholder Representative shall furnish or cause to be furnished to
Xxxxxx (which Xxxxxx may provide to PricewaterhouseCoopers), such work papers
and other documents and information relating to the Closing Balance Sheet as
they may reasonably request from or that are available to the Stockholder
Representative and Xxxxxxxx, and their accountants (including Xxxxx Xxxxxxxx
LLP) or other agents.
2.8.3. If Xxxxxx duly gives the Stockholder Representative notice of
objection, and if Xxxxxx and the Stockholder Representative fail to resolve all
such issues within forty-five (45) days of the Stockholder Representative's
receipt of Xxxxxx' objection notice, then the Stockholder Representative and
Xxxxxx shall submit the issues remaining in dispute (the "Disputed Issues"),
which issues may include issues raised by any Party after receipt of the
objection notice, to Deloitte & Touche, which shall act in this regard fully
independently (the "Independent Accountants") for resolution applying the
principles, policies and practices set forth in Section 2.7 and 2.8, as
applicable. The Independent Accountants shall resolve the disputed issues as
quickly as reasonably possible, but in any event within thirty (30) days after
submission by the Parties. If issues are submitted to the Independent
Accountants for resolution, then:
(a) the Stockholder Representative (on behalf of all
Stockholders for all purposes and obligations under this Section 2.8.3) and
Xxxxxx shall execute any agreement(s) required by the Independent Accountants to
accept their engagement pursuant to this Section 2.8.3;
(b) the Stockholder Representative and Xxxxxx shall promptly
furnish or cause to be furnished to the Independent Accountants such work papers
and other documents and information relating to the disputed issues as the
Independent Accountants may reasonably request and that are available to that
Party or its accountants or other agents, and shall
18
be afforded the opportunity to present to the Independent Accountants, with a
copy to the other Party, any written material relating to the disputed issues;
(c) the determination by the Independent Accountants, as set
forth in a notice to be delivered by the Independent Accountants to both the
Stockholder Representative and Xxxxxx, shall be final, binding and conclusive on
the Parties and shall be used to prepare the final Closing Balance Sheet, which
shall become binding on the Parties as of the date of the determination notice
sent by the Independent Accountants; and
(d) fees and costs of the Independent Accountants for such
determination shall be paid (i) if any payment is due with respect to the
Disputed Issues, by the Party from whom the payment is due, and (ii) if no
payment is due, by the Party who raised the Disputed Issues.
SECTION 3. - THE CLOSING
3.1 Closing of the Merger. The closing of the Merger (the "Closing") will
take place on September 8, 2004 (the "Closing Date"), at the offices of Xxxxxx
Beach LLP, 00 Xxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000, unless another time, date
or place is agreed to in writing by the Parties hereto.
3.2 Filing of Certificates of Merger. The Parties shall cause the Merger
to be consummated by filing a certificate of merger complying with the
California Corporation Law with the Secretary of State of the State of
California and a certificate of merger complying with the Delaware LLC Law with
the Secretary of State of the State of Delaware (the "Certificates of Merger"),
as soon as practicable on or after the Closing Date. The Merger shall become
effective at 12:01 a.m. New York time on September 9, 2004, or on such later day
on which such filing occurs (the "Effective Time").
3.3 Closing Deliveries. At the Closing:
3.3.1. Xxxxxx will deliver:
(a) to the Exchange Agent, Stockholders and Xxxxxxxx, written
instructions to the Exchange Agent to pay the Stock Consideration to
Stockholders;
(b) to the Stockholders, the Cash Payment;
(c) to the Escrow Agent, Stockholders and Xxxxxxxx, the Escrow
Agreement executed by Xxxxxx;
(d) to the Escrow Agent, the Escrow Deposit;
(e) to Xxxxxxx X. Xxxxxxxx, an employment letter executed
by Xxxxxx;
(f) to each applicable employee, an Employment Letter executed
by Xxxxxx;
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(g) to the respective parties thereto, the Option Agreements
each executed by Xxxxxx;
(h) to the applicable Stockholders, the Non-competition
Agreement executed by Xxxxxx;
(i) to Xxxxxxxx, a copy of the Amended and Restated
Certificate of Incorporation of Xxxxxx and the Articles of Organization of
Merger Sub, each certified as of a recent date by the jurisdiction of its
formation, as in effect immediately prior to the Effective Time;
(j) to Xxxxxxxx, a certificate of the Secretary of Xxxxxx, in
form and substance satisfactory to counsel for Xxxxxxxx and Stockholders,
certifying as of the Closing Date (i) that the Xxxxxx Amended and Restated
Certificate of Incorporation described in Section 3.3.1(i) is unchanged and
remains a true and complete copy thereof as then in effect, (ii) that attached
thereto is a true and complete copy of the Bylaws of Xxxxxx as then in effect,
(iii) that attached thereto are true and correct copies of resolutions duly and
validly adopted by the Xxxxxx Board authorizing the execution and delivery of
the Xxxxxx Closing Documents and the consummation of the transactions
contemplated hereby and thereby, and (iv) the incumbency of officers of Xxxxxx
named in such resolutions as authorized to execute and deliver this Agreement
and the applicable Ancillary Agreements on behalf of Xxxxxx acting for itself
and as sole member of Merger Sub; and
(k) to Xxxxxxxx, a certificate of the sole member of Merger
Sub, in form and substance satisfactory to counsel for Xxxxxxxx and
Stockholders, certifying as of the Closing Date that (i) the Merger Sub Articles
of Organization described in Section 3.3.1(i) is unchanged and remains a true
and complete copy thereof as then in effect, (ii) attached thereto is a true and
complete copy of the Operating Agreement of Merger Sub as then in effect, and
(iii) attached thereto are true and correct copies of resolutions duly and
validly adopted by the sole member of Merger Sub authorizing the execution and
delivery of this Agreement and the Ancillary Agreements (to which Merger Sub is
a Party) and the consummation of the transactions contemplated hereby and
thereby.
3.3.2. Stockholders will deliver to Xxxxxx:
(a) all of the certificates that formerly evidenced all of the
Xxxxxxxx Shares that were issued and outstanding immediately prior to the
Effective Time and executed stock powers with respect thereto;
(b) the Escrow Agreement executed by Stockholders;
(c) the Lock-up Agreements executed by Stockholders;
(d) the employment letter executed by Xxxxxxx X. Xxxxxxxx;
(e) the Employment Letters executed by Xxx Xxxxxx, Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxxxx, and Xxxx Xxxxx, respectively;
20
(f) the Non-competition Agreement executed by the applicable
Stockholders;
(g) the Stockholder Release executed by each of the
Stockholders; and
(h) the Consulting Business Agreement.
3.3.3. Xxxxxxxx will deliver or cause to be delivered to Xxxxxx:
(a) the Escrow Agreement executed by Xxxxxxxx;
(b) the resignations of the members of the boards of directors
of each of the Acquired Companies;
(c) to Xxxxxx, a copy of the Amended and Restated Certificate
of Incorporation of Xxxxxxxx certified as of a recent date by the jurisdiction
of its formation, as in effect immediately prior to the Effective Time;
(d) to Xxxxxx, a certificate of the Secretary of Xxxxxxxx, in
form and substance satisfactory to counsel for Xxxxxx, certifying as of the
Closing Date (i) that the Xxxxxxxx Amended and Restated Certificate of
Incorporation described in Section 3.3.3(c) is unchanged and remains a true and
complete copy thereof as then in effect, (ii) that attached thereto is a true
and complete copy of the Bylaws of Xxxxxxxx as then in effect, (iii) that
attached thereto are true and correct copies of resolutions duly and validly
adopted by the Xxxxxxxx Board and Xxxxxxxx Stockholders authorizing the
execution and delivery of the Xxxxxxxx Closing Documents and the consummation of
the transactions contemplated hereby and thereby, and (iv) the incumbency of
officers of Xxxxxxxx named in such resolutions as authorized to execute and
deliver this Agreement and the Ancillary Agreements on behalf of Xxxxxxxx.
SECTION 4. - REPRESENTATIONS AND WARRANTIES OF XXXXXXXX
Xxxxxxxx hereby represents and warrants to Xxxxxx and Merger Sub as
follows:
4.1 Organization and Good Standing. The Xxxxxxxx Corresponding Schedule
contains a complete and accurate list for each Acquired Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business as a foreign company, and its capitalization (including the identity
of each stockholder and the number of shares held by each). Each Acquired
Company is duly organized, validly existing, and in good standing under the laws
of its jurisdiction of organization, with full power and authority to conduct
its business as it is now being conducted, to own or use in the manner in which
its material assets are currently owned and used, and to perform all its
material obligations under Applicable Contracts. Except as set forth in Xxxxxxxx
Corresponding Schedule 4.15.2, each Acquired Company is duly qualified to do
business as a foreign company and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification. No Acquired Company is in default under or in
violation of any material provision of its Organizational Documents. None of the
Acquired Companies has conducted any business under or otherwise used, for any
purpose or in any jurisdiction any
21
fictitious name, assumed name, trade name, other than the names listed in the
Xxxxxxxx Corresponding Schedule within the past five (5) years.
4.2 Authority; No Conflict. Upon the execution and delivery by Xxxxxxxx of
this Agreement, the Ancillary Agreements to which Xxxxxxxx is a Party, the
Xxxxxxxx Corresponding Schedules, the Xxxxxxxx Corresponding Exhibits and any
other document or agreement to be executed and/or delivered by Xxxxxxxx under
this Agreement (collectively, the "Xxxxxxxx Closing Documents"), each of the
Xxxxxxxx Closing Documents will constitute the legal, valid, and binding
obligation of Xxxxxxxx, enforceable against Xxxxxxxx in accordance with their
respective terms. Xxxxxxxx has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the Xxxxxxxx
Closing Documents to which it is a Party and to perform its obligations under
this Agreement and Xxxxxxxx Closing Documents to which it is a Party. Except as
set forth in the Xxxxxxxx Corresponding Schedule, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(a) contravene, conflict with, or result in a violation of (i)
any provision of the Organizational Documents of the Acquired Companies, or (ii)
any resolution adopted or action taken by the board of directors or the
stockholders (or members, as applicable) of any Acquired Company;
(b) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company, or any of the
assets owned or used by any Acquired Company, may be subject;
(c) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Acquired Company or that otherwise relates to
the business of, or any of the assets owned or used by, any Acquired Company;
(d) cause Xxxxxx or any Acquired Company to become subject to,
or to become liable for the payment of, any Tax, except for Taxes (i) resulting
from the change from the cash method of accounting to the accrual method of
accounting caused by the termination of Xxxxxxxx'x status as an S Corporation,
and (ii) on a post-Closing basis, taxes as a C Corporation, (iii) any sales tax
that might result from the Merger, including "bulk-item" tax or other similar
Tax, and (iv) any state tax resulting from the Merger due to a "deemed asset
sale" or similar state tax concept;
(e) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
payment under, or to cancel, terminate, or modify, any Applicable Contract
required to be set forth on the Xxxxxxxx Corresponding Schedule to Section
4.18.1 but excluding any Applicable Contracts required to be set forth pursuant
to Sections 4.18.1(e) and (f); or
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(f) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by any Acquired Company.
4.3 Consents. Except as set forth in the Xxxxxxxx Corresponding Schedule,
no Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.4 Capitalization. The authorized equity securities of Xxxxxxxx consist
of 2,000,000 shares of common stock, par value $1.00, of which 346,442 shares
are issued and outstanding and constitute the "Xxxxxxxx Shares". The Xxxxxxxx
Corresponding Schedule contains a complete and accurate list for each Acquired
Company (other than Xxxxxxxx) of its authorized equity securities and the number
of equity securities issued and outstanding. With the exception of the Xxxxxxxx
Shares (which are owned by Stockholders), all of the outstanding equity
securities and other securities of each Acquired Company are owned of record and
Beneficially by one or more of the Acquired Companies, free and clear of all
Encumbrances except Encumbrances set forth in Xxxxxxxx Corresponding Schedule
4.4. No legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of any Acquired Company except as set
forth in the Xxxxxxxx Corresponding Schedule. All of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Applicable Contracts relating
to the sale, registration, voting, transfer, purchase, redemption, retirement,
or other acquisition of any equity securities or other securities of any
Acquired Company. None of the outstanding equity securities or other securities
of any Acquired Company was issued in violation of the Securities Act or any
other Legal Requirement. Except as set forth in the Xxxxxxxx Corresponding
Schedule, no Acquired Company has any outstanding subscriptions, options,
warrants, calls, exchange rights, convertible securities or other Contracts
outstanding or in effect giving any Person the right to acquire any shares of
equity securities or other securities of an Acquired Company. No Person has
preemptive rights to acquire any equity securities of any Acquired Company. No
Acquired Company owns, or has any Contract to acquire, any equity securities or
other securities of any Person (other than Acquired Companies) or any direct or
indirect equity or ownership interest in any other business except as set forth
in the Xxxxxxxx Corresponding Schedule.
4.5 Financial Statements. The December 31 Financial Statements fairly
present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Acquired Companies as at the
respective dates of and for the periods referred to in the December 31 Financial
Statements. Although the Interim Financial Statements are not prepared with the
same degree of diligence that is undertaken in connection with year-end audited
statements such statements are prepared to the best Knowledge of the acquired
Companies, and the Interim Financial Statements fairly present in all material
respects the results of operations, changes in stockholders' equity, and cash
flow of the Acquired Companies as at the respective dates of and for the periods
referred to in the Interim Financial Statements, all in accordance with GAAP,
subject however, to normal recurring year-end adjustments (the effect of which
will not, individually or in the aggregate, result in a Material Adverse Effect)
and the absence of notes (that, if presented, would not differ materially from
those included in the December 31, 2003 Balance Sheet) except as set forth the
Xxxxxxxx Corresponding Schedule. The Closing Balance Sheet fairly presents the
consolidated financial condition of the Acquired Companies as at the
23
Closing Date, all in accordance with GAAP except for the Balance Sheet
Adjustments. The December 31 Financial Statements and the Closing Balance Sheet
reflect the consistent application of GAAP throughout the periods involved,
except as disclosed in the notes to the December 31 Financial Statements and
except for the Balance Sheet Adjustments. No financial statements of any Person
other than the Acquired Companies are required by GAAP to be included in the
consolidated financial statements of Xxxxxxxx. The Financial Statements have
been prepared from and are in accordance with the accounting records of the
Acquired Companies. Xxxxxxxx has not received any letters from Xxxxxxxx'x
auditors to the Xxxxxxxx Board or audit committee thereof during the year ending
December 31, 2002 and thereafter.
4.6 Books and Records. The books of account, minute books, stock record
books, and other material records of the Acquired Companies are complete and
correct in all material respects, and have been maintained in accordance with
reasonable sound business practices, including the maintenance of a reasonably
adequate system of internal accounting controls. The minute books of the
Acquired Companies contain accurate and complete records, in all material
respects, of all meetings held of, and corporate action taken by, the
stockholders, the boards of directors, and committees of the boards of directors
of the Acquired Companies, and no meeting of any such stockholders, board of
directors, or committee has been held, and no other corporate action has been
taken, for which minutes or other evidence of action, if applicable, have not
been prepared and are not contained in such minute books. At the Closing, all of
those minute books and stock records will be in the possession of the Surviving
Entity.
4.7 Title to Properties; Encumbrances.
4.7.1. The Xxxxxxxx Corresponding Schedule contains a complete and
accurate list of all real property, leaseholds, or other interests in real
property owned by any Acquired Company. Xxxxxxxx has delivered or made available
to Xxxxxx copies of the deeds and other instruments (as recorded) by which the
Acquired Companies acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts, and surveys in the possession of
Xxxxxxxx or the Acquired Companies and relating to such property or interests.
4.7.2. Except as set forth in the Xxxxxxxx Corresponding Schedule,
the Acquired Companies own all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to own,
including all properties and assets located in the facilities owned or operated
by the Acquired Companies and reflected as owned in the books and records of the
Acquired Companies or reflected in the Closing Balance Sheet (except for assets
held under capitalized or operating leases disclosed in the Xxxxxxxx
Corresponding Schedule).
4.7.3. Except as set forth in the Xxxxxxxx Corresponding Schedule,
all properties and assets reflected in the Closing Balance Sheet are free and
clear of all Encumbrances except for liens for current taxes not yet due or
which are disclosed in the Xxxxxxxx Corresponding Schedule and are being
contested in good faith and for which there are adequate reserves reflected in
the Closing Balance Sheet.
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4.7.4. Except as set forth in the Xxxxxxxx Corresponding Schedule,
the U.K. Property is the only real property owned by any Acquired Company and
the relevant Acquired Company is the sole legal and beneficial owner of the U.K.
Property.
4.7.5. Except as set forth in the Xxxxxxxx Corresponding Schedule,
the UK Property is not subject to any lease, tenancy, license or other right of
occupation in favor of a third party and there is no outstanding mortgage or
charge on the whole or any part of the U.K. Property.
4.7.6. Xxxxxxxx has not received, and so far as the relevant
Acquired Company is aware it has not received, any written notice alleging that
the UK Property does not enjoy such rights and easements as are necessary for
the use and enjoyment of it for the operation of the business currently
conducted there (the "Current Use").
4.7.7. So far as the relevant Acquired Company is aware the UK
Property is not affected by any of the following matters:
(a) any dispute, claim or complaint which materially affects
the use of the UK Property for the Current Use; or
(b) any notice or requirement made by any statutory authority
for acquisition, clearance, demolition or closing which materially affects the
UK Property or the Current Use and which remains outstanding
4.7.8. So far as the relevant Acquired Company is aware, it has not
received written notice alleging breach of any restrictions, conditions,
covenants or consents materially affecting the UK Property which remains
outstanding.
4.8 Condition and Sufficiency of Assets.
(a) Except as set forth in the Xxxxxxxx Corresponding
Schedule, to the Knowledge of Xxxxxxxx, the buildings, facilities, furniture,
fixtures, and equipment owned or leased by the Acquired Companies are in good
operating condition and repair (reasonable wear and tear excepted), and in the
case of owned properties, are structurally sound.
(b) Except as set forth in the Xxxxxxxx Corresponding
Schedule, to the Knowledge of Xxxxxxxx, none of such buildings, facilities,
furniture, fixtures, or equipment is in need of maintenance or repairs, except
for ordinary, routine maintenance and repairs that are not material in nature or
cost and maintenance and repairs that are the obligation of a Person that is not
an Acquired Company.
(c) The buildings, structures, furniture, fixtures, and
equipment owned or leased by the Acquired Companies are generally and reasonably
sufficient for the conduct of the Acquired Companies' businesses after the
Closing in substantially the same manner as currently conducted.
(d) Liabilities related to the Xxxxxx Road Flood for property
damage, including costs to remediate the cause of the Xxxxxx Road Flood if
incurred by Xxxxxx in connection with third party claims, Orders, Proceedings,
or after a determination (if any) by
25
Xxxxxx that such remediation is reasonably necessary in order to avoid
reasonably likely health, safety, or employee, third party, or governmental
liability claims, liability issues or claims related to the Xxxxxx Road Flood,
will not exceed $25,000, and there are no non-property damage Liabilities
related to the Xxxxxx Road Flood related to the period prior to the Closing
Date.
4.9 Accounts Receivable. All accounts receivable of the Acquired Companies
that are reflected on the Closing Balance Sheet (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
The Accounts Receivable and unbilled receivables reflected in the Closing
Balance Sheet (the "Unbilled Receivables") are current and collectible net of
the $100,000 bad debt reserve (the "Bad Debt Reserve") and net of any related
billed but unearned liability reflected in the Closing Balance Sheet. Subject to
the Bad Debt Reserve, the Accounts Receivable and the Unbilled Receivables
either have been or will be collected in full, without any set-off, within two
(2) years after the Closing Date. The Xxxxxxxx Corresponding Schedule sets forth
a list of the accounts receivable and unbilled receivables of the Acquired
Companies as of a date within seven (7) days of the Closing Date.
4.10 Pre-Closing Actions.
4.10.1. Xxxxxxxx has (and has provided evidence of the same to
Xxxxxx) acquired all of the outstanding stock of Xxxxxxxx UK Limited.
4.10.2. Xxxxxxxx has repurchased and otherwise satisfied all stock
valuation rights granted by any of the Acquired Companies (including rights
granted under Xxxxxxxx'x "Stock Appreciation Rights Plan" (a/k/a the "Stock
Valuation Rights Plan")) and options to purchase the Acquired Companies' capital
stock granted by any of the Acquired Companies, including (A) the options to
purchase up to 14,029 shares of Xxxxxxxx that Xxxxxxxx granted in March of 2004,
(B) the value of up to 1,005 shares of Xxxxxxxx to executives of Xxxxxxxx'x
European Subsidiaries, and (C) any other options granted under the "Xxxxxxxx
Worldwide, Inc. Stock Option Plan for Executives (1995)".
4.10.3. All guarantees and indemnity agreements made by Xxxxxxxx of
any Liabilities of the Xxxxxxx X. Xxxxxxxx Family, LLC and WB&H Investments,
L.P. have been satisfied in full and terminated.
4.10.4. Xxxxxxxx has conveyed all equity interests in Xxxxxxxx
Worldwide Consulting, LLC (the "Consulting Business") including its wholly owned
subsidiary, Xxxxxxxx Worldwide Australasia, Pty Limited to Xxxxxxx X. Xxxxxxxx,
Xxxxxxx Xxxxx and Xxxxxxx X. Xxxxxxxx pursuant to resolutions of the Xxxxxxxx
Board of Directors adopted on July 30, 2004 and the Consulting Business
Agreement. All Liabilities of the Consulting Business, and all assets and
Liabilities of Xxxxxxxx Worldwide Australasia, Pty Limited, if any, related to
periods through and including the date of transfer are reflected in the Closing
Balance Sheet.
4.10.5. Except as described in the Xxxxxxxx Corresponding Schedule,
the Acquired Companies have no further obligations, whether existing or
contingent, to providers of
26
online data collection services, including any agreements to use any such
provider's data collection services on an exclusive basis.
4.10.6. Xxx Xxxxxx and Xxxxx Xxxxxxxxxx have acknowledged in writing
that (i) all unvested rights in restricted stock granted to them (including
under Restricted Stock Agreements dated on or about August 15, 2003) have
terminated or redeemed, (ii) they have no existing or contingent future rights
under stock subscription agreements (including the Stock Subscription Agreements
dated on or about June 30, 1995), and (iii) the Sales Rights Agreement among
Decima Research d/b/a The Xxxxxxxx Group on the one hand, and Xxxxxxx X.
Xxxxxxxx (as Trustee of Xxxxxxxx Family Trust), Xxx Xxxxxx and Xxxxx Xxxxxxxxxx,
on the other hand has terminated and there are no remaining rights or
obligations related thereto. Before or as of the Closing Date, Xxx Xxxxxx and
Xxxxx Xxxxxxxxxx have paid all amounts owing to Xxxxxxxx under the promissory
notes issued by them to Xxxxxxxx in connection with restricted stock grants.
4.10.7. All Stockholder notes in favor of the Acquired Companies
have been or as of the Closing Date will be paid in full.
4.10.8. The Answer Group, Inc. has been dissolved and the Acquired
Companies are in the process of dissolving Xxxxxxxx Worldwide Australasia, Pty
Limited and Xxxxxxxx Worldwide Asia, Pte., Ltd. Such dissolutions will not
create any Liabilities for the Acquired Companies beyond those included or
reserved for in the Closing Balance Sheet.
4.11 No Undisclosed Liabilities. Except as set forth in the Xxxxxxxx
Corresponding Schedule, the Acquired Companies have no Liabilities except for
Liabilities reflected in, or for which adequate reserves are reflected in, the
Closing Balance Sheet.
4.12 Taxes.
4.12.1. Except as set forth in the Xxxxxxxx Corresponding Schedule,
no Acquired Company is, or within the five-year period preceding the Closing
Date has been, an S Corporation. None of the Acquired Companies has been a
member of any affiliated group of corporations (other than a group of which
Xxxxxxxx is the common parent) which has filed a combined, consolidated, or
unitary income Tax Return with any Governmental Body except as provided in the
Xxxxxxxx Corresponding Schedule. None of the Acquired Companies is liable for
the Taxes of any Person (other than another Acquired Company) under Treasury
Regulation Section 1.1502-6 or any similar provision of any applicable Legal
Requirement, as a transferee or successor, by Contract, or otherwise. No
Stockholder is a foreign person within the meaning of 1445(f)(3) of the Code.
4.12.2.
(a) Except as set forth in the Xxxxxxxx Corresponding
Schedule, the Acquired Companies have filed or caused to be filed (on a timely
basis for the last six years) all Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements. None of the
Acquired Companies has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.
27
(b) All Tax Returns filed by (or that include on a
consolidated basis) any Acquired Company are true, correct, and complete, and
all material Tax Supporting Documents filed by any Acquired Company are true,
correct, and complete in all material respects. The Acquired Companies have paid
all Taxes due and owing and have paid, or made provision for the payment of and
accounted for in the Closing Balance Sheet, all Taxes that have become due
pursuant to filed Tax Returns or otherwise, including pursuant to any assessment
received by any Acquired Company, except (i) such Taxes, if any, as are listed
in the Xxxxxxxx Corresponding Schedule and that are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Closing Balance Sheet, and (ii) Taxes, if any, arising
as a result of the Merger. All Taxes that any Acquired Company is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.
4.12.3. No United States federal and state, or U.K., income Tax
Returns ("Material Returns") of any Acquired Company for taxable years prior to
Xxxxxxxx'x fiscal year 2000 remain subject to audit or open. The Xxxxxxxx
Corresponding Schedule contains a complete and accurate list of all audits of
Material Returns audited by the IRS or other relevant Governmental Body for
Xxxxxxxx'x taxable year 2000 and thereafter, including a reasonably detailed
description of the nature and outcome of any such audit, all adjustments to any
and all Material Returns filed by any Acquired Company or any group of
corporations including any Acquired Company for such taxable years, and the
resulting deficiencies (if any) proposed by the IRS or other relevant
Governmental Body. All deficiencies proposed as a result of such audits have
been paid or settled, or, as described in the Xxxxxxxx Corresponding Schedule,
are being contested in good faith by appropriate proceedings and a reserve
adequate to cover such amounts has been established in the Closing Balance
Sheet. Except as set forth in the Xxxxxxxx Corresponding Schedule, no Tax Return
of any Acquired Company is under audit or examination by the IRS or other
Governmental Body, and no written or unwritten notice of such an audit or
examination has been received by any Acquired Company and, Xxxxxxxx has no
Knowledge of any Threatened audits, investigations or claims for or relating to
Taxes, and there are no matters under discussion between an Acquired Company and
the IRS or other Governmental Body with respect to Taxes. Except as set forth in
the Xxxxxxxx Corresponding Schedule, no issues relating to Taxes were raised in
writing by the IRS or other Governmental Body during any presently pending audit
or examination, and no issues relating to Taxes were raised in writing by the
IRS or other Governmental Body in any completed audit or examination that can
reasonably be expected to recur in a later taxable period. There exists no
proposed Tax assessment against any Acquired Company except as disclosed in the
Xxxxxxxx Corresponding Schedule and for which an adequate reserve has been
established in the Closing Balance Sheet. To the Knowledge of Xxxxxxxx, except
as described in the Xxxxxxxx Corresponding Schedule, no administrative or
judicial Tax proceedings are pending before the IRS or other Governmental Body
with respect to any of the Acquired Companies. Except as described in the
Xxxxxxxx Corresponding Schedule, no Acquired Company has given or been requested
to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations relating to
the payment of Taxes of any Acquired Company or for which any Acquired Company
may be liable. No Encumbrance for Taxes exists with respect to any assets or
properties of any Acquired Company except for statutory liens for Taxes not yet
due and except as recorded as a liability or reserved for in the Closing Balance
Sheet.
28
4.12.4. The charges, accruals, and reserves with respect to Taxes
(excluding Taxes, if any, arising as a result of the Merger) in the Closing
Balance Sheet are adequate (determined in accordance with GAAP) and are at least
equal to the Acquired Companies' liability for Taxes on a consolidated basis,
respectively with the exception of matters accounted for as part of the Balance
Sheet Adjustments. Among others, such charges, accruals, and reserves are
adequate to cover all Taxes and other Liabilities related to the tax periods
ending on or prior to the Closing Date, if any, that are payable in connection
with (a) the Thin Capitalization Issue, (b) the PAYE Issue, (c) the Gold Payment
Issue, (d) the U.K. Matter, and (e) the Expatriate Issue.
4.12.5. There is no tax allocation or sharing agreement that will
require any payment by any Acquired Company after the Closing Date, except with
respect to the UK Matter. No Acquired Company is a party to any agreement,
Contract or arrangement that could result separately or in the aggregate, in the
payment of an "excess parachute payment" within the meaning of Section 280G of
the Code. Except for any adjustments required by or as a result of the Merger,
no Acquired Company is required to include in income any adjustment pursuant to
Section 481 of the Code by reason of a voluntary change in accounting method
initiated by any of the Acquired Companies, and the IRS has not proposed any
such change in accounting method. No Acquired Company has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii). No
Acquired Company has received or been the subject of a Tax Ruling or a request
for Tax Ruling and no Acquired Company has entered into a Closing Agreement with
any Governmental Body that would have a continuing effect after the Closing
Date. Except as set forth in the Xxxxxxxx Corresponding Schedule, no power of
attorney currently in force has been granted by any of the Acquired Companies
concerning any Taxes or Tax Return. No Acquired Company will be required to
include any item of income in taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any installment sale made
on or prior to the Closing Date, except as set forth and described in the
Xxxxxxxx Corresponding Schedule. No Acquired Company will be required to include
any item of income in its taxable income as a result of net operating loss
carryforward deductions taken prior to the Closing. Each Acquired Company that
is or has been an S Corporation properly maintained, and except for the merger
into Merger Sub contemplated hereby has not taken, and its stockholders have not
taken, any action that causes it not to be eligible for treatment as an S
Corporation.
4.13 No Material Adverse Change. Except as set forth in the Xxxxxxxx
Corresponding Schedule, since the date of the December 31, 2003 Balance Sheet,
there has not been a Material Adverse Effect and no event has occurred or
circumstance exists that could reasonably be expected to result in such a
Material Adverse Effect.
4.14 Employee Benefits.
4.14.1. The Xxxxxxxx Corresponding Schedule contains a complete and
accurate list of all ERISA Affiliates of each Acquired Company. Neither any of
the Acquired Companies nor any ERISA Affiliate has at any time sponsored,
maintained, contributed to, or been obligated to contribute to any Multiemployer
Plan, VEBA, or any Plan subject to Title IV of ERISA or Code Section 412. The
Acquired Companies have no Liability for post-retirement benefits other than
pensions, made in accordance with Financial Accounting Statement 106 of the
29
Financial Accounting Standards Board, regardless of whether any Acquired Company
is required by this Statement to disclose such information, as of a date not
more than one (1) year prior to the date of this Agreement. The Acquired
Companies have no collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both pension and
welfare benefits) by the Acquired Companies or by ERISA Affiliates on behalf of
current or retired employees of any Acquired Company.
4.14.2. Xxxxxxxx has made available to Xxxxxx all of the items
listed on Xxxxxxxx Corresponding Schedule 4.14.2, except for confidential
agreements specifically referenced and described therein, which listed items
include:
(a) all documents that set forth the terms of each currently
effective Employee Plan and any related trust, including (i) all plan
descriptions and summary plan descriptions of any such currently effective
Employee Plan for which the Acquired Companies are required to prepare, file,
and distribute plan descriptions and summary plan descriptions, and (ii) all
summaries and descriptions furnished to participants and beneficiaries for which
a plan description or summary plan description is not required;
(b) a description of all policies of the Acquired Companies
in, or with continuing, effect on the Closing Date related to (i) vacation, sick
time, personal time, and the like (including in each case policy with respect to
carry-overs from year to year), (ii) paid disability, and (iii) severance;
(c) a written description of any currently effective Employee
Plan that is not otherwise in writing;
(d) all currently effective insurance policies purchased by or
to provide benefits under any currently effective Employee Plan;
(e) all currently effective Contracts with third party
administrators, actuaries, investment managers, consultants, and other
independent contractors that relate to any currently effective Employee Plan;
(f) the Form 5500 filed in each of the most recent three (3)
plan years with respect to each Employee Plan which is required to file Form
5500 for any such year, including all schedules thereto and the opinions (if
applicable) of independent accountants;
(g) all notices related to an Employee Plan that were given by
any Acquired Company, any ERISA Affiliate, or any Employee Plan, to the IRS, the
PBGC, the Department of Labor, any participant, or beneficiary, pursuant to
statute, within the three (3) years preceding the date of this Agreement,
including notices that are expressly mentioned elsewhere in this Section 4.14;
30
(h) all notices related to an Employee Plan that were given by
the IRS, the PBGC, the Department of Labor or the Secretary of Health and Human
Services to any Acquired Company, any ERISA Affiliate, or any Employee Plan
within the three (3) years preceding the date of this Agreement;
(i) any correspondence between the IRS, the PBGC, the
Department of Labor or the Secretary of Health and Human Services and any
Acquired Company, any ERISA Affiliate or any Employee Plan regarding any
Employee Plan within the three (3) years preceding the date of this Agreement;
and
(j) with respect to each currently effective Qualified Plan,
the most recent determination letter issued by the IRS or, if an initial
determination has been applied for but not received, a copy of the application.
4.14.3. The Acquired Companies have performed in all material
respects all of their obligations under all Employee Plans. The Closing Balance
Sheet reflects all obligations and liabilities under such Employee Plans that
have accrued but are not due. Except as set forth in the Xxxxxxxx Corresponding
Schedule, no statement, either written or oral, has been made by any Acquired
Company or any employee, officer, director or agent thereof to any Person with
regard to any Employee Plan that was not in accordance with the Employee Plan,
and that could have an adverse economic consequence to any Acquired Company or
to Xxxxxx. Except as set forth in the Xxxxxxxx Corresponding Schedule, the
Acquired Companies, with respect to all Employee Plans, are, and each Employee
Plan is, in material compliance with ERISA, the Code, HIPAA and other applicable
Legal Requirements, (and the regulations and rulings promulgated under each such
Legal Requirement), including the provisions of such Legal Requirements
expressly mentioned in this Section 4.14. Each Employee Plan has been operated
in accordance with its terms in all material respects. No non-exempt transaction
prohibited by ERISA Section 406 and no non-exempt "prohibited transaction" under
Code Section 4975(c) has occurred with respect to any Employee Plan. No event or
circumstance has occurred, including the failure to perform a required act, that
would subject an Acquired Company to any liability to the IRS with respect to
any Employee Plan, including any liability imposed by Chapter 43 of the Code. No
Acquired Company or ERISA Affiliate has any liability to the PBGC with respect
to any Employee Plan or has any liability to any Person under ERISA Section 502.
All filings required by ERISA, the Code and HIPAA as to each Employee Plan have
been timely filed, and all notices and disclosures to participants required by
ERISA, or the Code or HIPAA have been timely provided. All contributions and
payments made or accrued by the Acquired Companies with respect to all Employee
Plans are deductible under Code Section 162 or Section 404. No amount, or any
asset of any Employee Plan is subject to tax as unrelated business taxable
income under Code Section 511. No Acquired Company, Employee Plan or employee,
administrator or agent thereof, is or has been in violation of the transaction
and code set rules under HIPAA Sections 1172-1175 or the HIPAA privacy rules
under 45 CFR Part 160 and Subparts A and E of Part 164. No penalties have been
imposed on any Acquired Company or Employee Plan, or any employee, officer,
director, administrator or agent thereof, under HIPAA Section 1176 or Section
1177.
4.14.4. Except as set forth in the Xxxxxxxx Corresponding Schedule,
by its terms, each Employee Plan can be terminated unilaterally by Xxxxxxxx
within thirty (30) days. Except as set forth in the Xxxxxxxx Corresponding
Schedule, since December 31, 2003, there has
31
been no establishment or amendment of any Employee Plan, nor has there been any
material change in the number of participants, the aggregate or per participant
cost, or the manner of administration or interpretation of any Employee Plan.
Except as set forth in the Xxxxxxxx Corresponding Schedule, no event has
occurred or circumstance exists, except for market conditions of general
applicability, that could be reasonably anticipated to result in a material
increase in premium costs of Employee Plans that are insured, or a material
increase in benefit costs of such Plans and Obligations that are self-insured.
Except as set forth in the Xxxxxxxx Corresponding Schedule and for which
adequate reserves have been established on the Closing Balance Sheet, other than
undisputed claims for benefits submitted by participants or beneficiaries, no
claim against, or legal proceeding involving, any Employee Plan is pending or,
to the Knowledge of Xxxxxxxx is Threatened. The Closing Balance Sheet contains
reserves adequate for all obligations of the Acquired Companies under Employee
Plans related to periods prior to the Closing Date, including the funding of
self-insured medical risks related to the periods prior to the Closing Date.
4.15 Compliance With Legal Requirements; Governmental Authorizations.
4.15.1. Except as set forth in the Xxxxxxxx Corresponding Schedule:
(a) each Acquired Company is, and at all times since July 31,
2001 has been, in compliance in all material respects with each Legal
Requirement that is or was applicable to it with respect to the conduct or
operation of its business or the ownership or use of any of its assets;
(b) to the Knowledge of Xxxxxxxx, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (i) is
reasonably likely to constitute or result in a violation by any Acquired Company
of, or a failure on the part of any Acquired Company to comply with, any Legal
Requirement or (ii) may give rise to any obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the cost of, any required
remedial action of any nature; and
(c) no Acquired Company has received, at any time since July
31, 2001, any written notice or other written communication from any
Governmental Body or any other Person regarding (i) any actual or alleged
violation of, or failure to comply with, any material Legal Requirement, or (ii)
any actual or alleged obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any required remedial
action of any nature.
4.15.2. Except as set forth in the Xxxxxxxx Corresponding Schedule,
the Acquired Companies have all of the material Governmental Authorizations
necessary to permit the Acquired Companies to lawfully conduct and operate their
businesses in the manner in which they currently conduct and operate such
businesses and to permit the Acquired Companies to own and use their assets in
the manner in which they currently own and use such assets. Except as set forth
in the Xxxxxxxx Corresponding Schedule:
(a) each such Governmental Authorization is valid and in full
force and effect, and each Acquired Company is, and at all times since July 31,
2001 has been, in
32
compliance in all material respects with all of the terms and requirements of
each such Governmental Authorization;
(b) no event has occurred or circumstance exists that is
reasonably likely to (with or without notice or lapse of time) (i) constitute or
result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any such Governmental Authorization, or (ii) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any such Governmental Authorization;
(c) no Acquired Company has received, at any time since July
31, 2001, any written notice or other written communication from any
Governmental Body or any other Person regarding (i) any actual, alleged, or
reasonably likely to occur violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (ii) any actual, proposed, or
reasonably likely to occur revocation, withdrawal, suspension, cancellation,
termination of or modification to any such Governmental Authorization; and
(d) all applications required to have been filed for the
renewal of such Governmental Authorizations have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
4.16 Legal Proceedings; Orders.
4.16.1. Except as set forth in the Xxxxxxxx Corresponding Schedule,
there is no pending, or to the Knowledge of Xxxxxxxx, Threatened Proceeding:
(a) by or against any Acquired Company or that otherwise
directly relates to or may affect the business of, or any of the assets owned or
used by, any Acquired Company; or
(b) that directly challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
4.16.2. Adequate reserves have been established in the Closing
Balance Sheet for Liabilities related to Proceedings by or against any Acquired
Company, including matters described in Xxxxxxxx Corresponding Schedule 4.16.1.
To the Knowledge of Xxxxxxxx, no event has occurred or circumstance exists that
is reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding except as set forth in the Xxxxxxxx Corresponding Schedule.
4.16.3. Except as set forth in the Xxxxxxxx Corresponding Schedule:
(a) there is no Order to which any of the Acquired Companies,
or any of the assets owned or used by any Acquired Company, is subject; and
33
(b) no officer, director, agent, or employee of any Acquired
Company is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any material conduct, activity, or
practice relating to the business of any Acquired Company, all as conducted as
of the Closing Date.
4.16.4. Except as set forth in the Xxxxxxxx Corresponding Schedule:
(a) each Acquired Company is, and at all times since July 31,
2001 has been, in compliance in all material respects with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject;
(b) no event has occurred or circumstance exists that are
reasonably likely to constitute or result in (with or without notice or lapse of
time) a violation of, or failure to comply with, any term or requirement of any
Order to which any Acquired Company, or any of the assets owned or used by any
Acquired Company, is subject;
(c) no Acquired Company has received, at any time since July
31, 2001, any written notice or other written communication from any
Governmental Body or any other Person regarding any actual or alleged violation
of, or failure to comply with, any term or requirement of any Order to which any
Acquired Company, or any of the assets owned or used by any Acquired Company, is
or has been subject; and
(d) there is no existing award, decision, injunction,
judgment, order, ruling, subpoena, or verdict adversely affecting the Acquired
Companies including their business and their properties that would be an Order
but for the fact that it is being appealed or contested, or but for the passage
of time.
4.17 Absence of Certain Changes and Events.
4.17.1. Except as set forth in the Xxxxxxxx Corresponding Schedule,
since December 31, 2003, the Acquired Companies have conducted their businesses
in all material respects only in the Ordinary Course of Business and, and
without limiting the generality of the foregoing, there has not been any:
(a) (i) increase, decease or other change in any Acquired
Company's authorized or issued capital stock, (ii) grant of any stock option,
warrant or other right to purchase or subscribe for shares of capital stock of
any Acquired Company, (iii) issuance of any security convertible into or
exchangeable for shares of capital stock of any Acquired Company, (iv) grant of
any registration rights, (v) purchase, redemption, retirement, or other
acquisition by any Acquired Company of any shares of any capital stock of any
Acquired Company, or (vi) declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock of any Acquired
Company;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment (except for any payments of bonuses, salaries,
benefits or other compensation in the Ordinary Course of Business), increase or
decrease (except
34
for merit increases and general employee wage adjustments in the Ordinary Course
of Business consistent with past practice), by any Acquired Company of any
bonuses, salaries, benefits or other compensation to any stockholder, director,
officer, or employee or entry into or amendment of any employment, severance,
bonus, retirement, loan or other Applicable Contract with any stockholder,
director, officer, or employee;
(d) damage to or destruction or loss of any asset or property
of any Acquired Company in excess of $50,000 in each instance, whether or not
covered by insurance;
(e) termination or expiration of (except completion of client
Contracts for services and expiration of leases in the Ordinary Course of
Business), or receipt of notice of termination of any Material Contract;
(f) sale, lease, or other disposition of any asset or property
of any Acquired Company (including any of the Intellectual Property Assets)
other than dispositions in the Ordinary Course of Business, or any mortgage,
pledge, or imposition of any lien or other Encumbrance on any asset or property
of any Acquired Company;
(g) to the Knowledge of Xxxxxxxx, cancellation or waiver of
any actual claims of any Acquired Company with a value in each case in excess of
$100,000;
(h) change in the accounting methods used by any Acquired
Company;
(i) entry into, or amendment of, any Contract providing for
the voting of any capital stock of any Acquired Company or relating to the size
of, composition of or election of members to the board of directors or similar
governing body of any Acquired Company; or
(j) Contract by any Acquired Company or any Stockholder to do
any of the foregoing.
4.18 Contracts; No Defaults.
4.18.1. The Xxxxxxxx Corresponding Schedule contains a complete and
accurate list of:
(a) each Applicable Contract that was not entered into in the
Ordinary Course of Business;
(b) each Applicable Contract affecting the leasing of any real
property, and each Material Contract involving the purchase or leasing of any
personal property;
(c) each Applicable Contract, including any joint venture,
partnership or limited liability company agreement, involving a sharing of
profits, losses, costs, Taxes or other liabilities by any Acquired Company with
any other Person;
35
(d) each Applicable Contract containing covenants that in any
material way purport to restrict the business activity of any Acquired Company
or any Affiliate of an Acquired Company or limit in any material way the freedom
of any Acquired Company or any Affiliate of an Acquired Company to engage in any
line of business, to do business or enter into relationships with other Persons,
or to compete with any Person;
(e) each Applicable Contract providing for non-optional
payments to or by any Person based on sales, purchases, or profits (including
commissions), other than (i) agreements to make such payments to Persons in
connection with referrals of business that is within the discretion of the
Acquired Companies to accept or reject, (ii) to employees, and (iii) direct
payments for goods or services;
(f) each power of attorney of Xxxxxxxx or any stockholder,
officer or director of an Acquired Company relating to any of the Acquired
Companies that is currently effective and outstanding;
(g) each Applicable Contract for capital expenditures in
excess of $50,000;
(h) each Material Contract made since July 31, 2001, or that
has any continuing limiting effect on the Acquired Companies, involving the
settlement, release, compromise or waiver of any material rights, claims,
obligations, duties or liabilities;
(i) each Applicable Contract relating to indebtedness for
borrowed money or guarantees related to indebtedness for borrowed money; and
(j) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
4.18.2. The Xxxxxxxx Corresponding Schedule sets forth the parties
to the Applicable Contracts described in Section 4.18.1.
4.18.3. Except as set forth in the Xxxxxxxx Corresponding Schedule:
(a) no Stockholder (and no Related Person of any Stockholder)
has or may acquire any rights under, and no Stockholder has any current
obligation or liability under, any Applicable Contract (excluding any Applicable
Contract related to employment, consulting, or a similar relationship, and also
excluding any agreement related to the Merger and/or any Contemplated
Transaction); and
(b) to the Knowledge of Xxxxxxxx, no officer, director, or
employee of any Acquired Company is bound by any Contract that purports to limit
the ability of such Person to (i) engage in or continue any conduct, activity,
or practice relating to the business of any Acquired Company, or (ii) assign to
any Acquired Company or to any other Person any rights to any invention,
improvement, or discovery other than standard confidentiality or similar
agreements with employees that are generally sought from all similarly situated
employees and
36
which do not materially interfere with the performance of normal duties of the
applicable employee for the applicable Acquired Company.
4.18.4. Except as set forth in the Xxxxxxxx Corresponding Schedule,
with respect to each Applicable Contract identified in Section 4.18.1 and each
other Material Contract:
(a) each such Applicable Contract and Material Contract is in
full force and effect and is valid and enforceable in accordance with its terms;
(b) each Acquired Company is, and at all times since July 31,
2001 has been, in full compliance (or has timely cured any non-compliance) with
all applicable terms and requirements of each such Applicable Contract and
Material Contract;
(c) no Acquired Company has given to or received from any
other Person, at any time since July 31, 2001, any written notice or other
written communication regarding any actual or alleged violation or breach of, or
default under, any such Applicable Contract or Material Contract, which alleged
violation or default has not been resolved or for which reserves adequate to
cover any loss have not been established in the Closing Balance Sheet; and
(d) to the Knowledge of Xxxxxxxx, each other Person that has
or had any obligation or liability under any such Applicable Contract or
Material Contract since July 31, 2003 has been in compliance in all material
respects with all applicable terms and requirements of such Applicable Contract
or Material Contract, and no event has occurred or circumstance exists that
(with or without notice or lapse of time) contravenes or conflicts with, or is
or is reasonably likely to result in a violation or breach of, or give any
Acquired Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of or payment under,
or to cancel, terminate, or modify, any Material Contract.
4.18.5.
(a) to the Knowledge of Xxxxxxxx, all Applicable Contracts
with suppliers that are necessary, and are not replaceable in a reasonable and
timely manner, for the completion of committed client projects after the Closing
Date will remain in full force and effect after such date;
(b) that certain contract with XxxxXxxxxxxx.xxx has been
terminated and Xxxxxxxx has no continuing obligations or Liability to
XxxxXxxxxxxx.xxx;
(c) as of the Effective Time and except for this Agreement and
the Ancillary Agreements, there are no Applicable Contracts that grant any stock
option, warrant or other right to purchase or subscribe for shares of capital
stock of any Acquired Company; provide for the issuance of any security
convertible into or exchangeable for shares of capital stock of any Acquired
Company; grant any registration rights; provide for the purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares of any
capital stock of any Acquired Company; provide for the declaration or payment of
any dividend
37
or other distribution or payment in respect of shares of capital stock of any
Acquired Company, or provide for the voting of any capital stock of any Acquired
Company or relate to the size of, composition of or election of members to the
board of directors or similar governing body of any Acquired Company; and
(d) there are no Applicable Contracts that contain or provide
for an express undertaking by any Acquired Company to be responsible for
consequential damages, liquidated damages, or penalties in excess of $100,000.
4.18.6. Each Material Contract relating to the sale, design, or
provision of products or services by the Acquired Companies has been entered
into in the Ordinary Course of Business and has been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in material
violation of any Legal Requirement.
4.18.7. That certain promissory note issued on April 29, 2004 by
Xxxxxxxx to Xxxxx Xxxxxxx in the original principal amount of $2,642,760.60 has
an outstanding principal amount on the Closing Date of $2,642,760.60, bears
interest at the prime rate of interest (adjusted each December 31, but not to
exceed 12%) per annum, and is freely prepayable at any time, without premium or
penalty, by payment of all then outstanding principal and accrued interest.
Except for obligations under such note the Acquired Companies have no
obligations to Xxxxx Xxxxxxx.
4.19 Insurance.
4.19.1. The insurance policies of Xxxxxxxx and each of the Acquired
Companies (including policies providing coverage to their respective directors
and officers) are of a general scope and provide coverage as of the date hereof
consistent with reasonably prudent and customary practice of comparable
businesses. Each such currently effective policy is listed on Xxxxxxxx
Corresponding Schedule 4.19.1.
4.19.2. The Xxxxxxxx Corresponding Schedule describes:
(a) any self-insurance health care arrangement by or affecting
any Acquired Company, including any reserves established thereunder and a
statement of the aggregate cost of self-insured medical insurance claims made
between July 1, 2003 and June 30, 2004;
(b) any Applicable Contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk by any Acquired
Company; and
(c) the Xxxxxxxx Corresponding Schedule sets forth for the
current and immediately preceding policy year a statement listing each claim
under a policy of insurance (excluding health insurance) for an amount in excess
of $25,000.
4.19.3. Except as set forth in the Xxxxxxxx Corresponding Schedule,
all policies of insurance to which any Acquired Company is a party or that
provide coverage to any director or officer of an Acquired Company in their
capacity as such:
38
(a) are valid, outstanding and enforceable in all material
respects in accordance with their terms;
(b) are issued by an insurer that to the Knowledge of Xxxxxxxx
is financially sound and reputable;
(c) are sufficient for compliance with all Legal Requirements
and Applicable Contracts;
(d) will not be terminated or cancelled by the consummation of
the Contemplated Transactions; and
(e) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any Acquired Company.
4.19.4. Adequate reserves have been established in the Closing
Balance Sheet for self-insured medical insurance Liabilities related to service
provided prior to the Closing Date.
4.19.5. No Acquired Company has received: (a) with respect to any
claim of $25,000 or more that has not been finally resolved, any refusal of
insurance coverage or any notice that a defense will be afforded with
reservation of rights that has not been rescinded, except in each case with
respect to which reserves adequate for any related costs or loss are reflected
in the Closing Balance Sheet, or (b) since July 31, 2002, any written notice of
cancellation (other than in connection with an Acquired Company's replacement of
a policy in the ordinary course of such Acquired Company's business) or any
other written indication that any policy of insurance will not be renewed or
that the issuer of any policy of insurance is not willing or able to perform its
obligations thereunder. The Acquired Companies have paid all premiums due, and
have otherwise performed all of their respective material obligations, under
each policy of insurance described in Xxxxxxxx Corresponding Schedule 4.19.1. To
the Knowledge of Xxxxxxxx, the Acquired Companies have given notice to the
insurer of all claims of more than $100,000 that may be insured thereby. Except
as set forth in the Xxxxxxxx Corresponding Schedule, no Acquired Company has
received any written notice of any planned or proposed increase in the premiums
under any policy of insurance covering any Acquired Company or any officer or
director of an Acquired Company in their capacity as such.
4.19.6. No Acquired Company provides any material insurance coverage
to a Third Party except as described in Xxxxxxxx Corresponding Schedule 4.19.6.
4.20 Environmental Matters. Except as set forth in the Xxxxxxxx
Corresponding Schedule: (i) each of the Acquired Companies are in compliance
with all Environmental Laws; each of the Acquired Companies have obtained, and
each of them is in compliance with all Environmental Permits required of the
business of the Acquired Companies, or required of any property owned, leased or
operated by any of them, (ii) none of the Acquired Companies is subject to any
pending or, to the Knowledge of Xxxxxxxx, Threatened Environmental Claim, (iii)
there are no facts, conditions or circumstances related to the business of any
Acquired Company, or to any real property currently or formerly owned, operated
or leased by any of them which could give rise to any obligation under
Environmental Law to investigate, remediate or clean up,
39
or to pay for the costs of any investigation, remediation or cleanup of any
hazardous substances, (iv) there are no facts, conditions or circumstances
related to any real property currently or formerly owned, operated or leased by
any of them which pose or could reasonably be expected in the future to pose a
threat to the health of employees of the Company due to the presence of or
exposure to hazardous or toxic substances, and (v) none of the Acquired
Companies have transported, disposed of, or arranged for the transportation or
disposal of any hazardous substances at any site which is subject to, or has
been proposed for, an investigation or clean up under applicable Environmental
Laws.
4.21 Employees.
4.21.1. The Xxxxxxxx Corresponding Schedule contains a complete and
accurate list of each independent contractor, consultant and sales agent of the
Acquired Companies who has received compensation in excess of $25,000 in the
twelve months prior to the Closing Date, and also contains the following
information for each current full time employee and director of the Acquired
Companies, including each employee on leave of absence: (i) employer; (ii) name;
(iii) job title; (iv) date of commencement of employment or engagement; (v)
general details of current leave of absence, if any; (vi) annual or hourly
salary; (vii) accrued but unpaid vacation and personal time as of July 31, 2004
for U.K. employees and August 6, 2004 for U.S. employees; (viii) service
credited for purposes of vesting and eligibility to participate under any
Acquired Company's Employee Plan if different from credit for service from the
date shown in clause (iv) to the Closing Date; and (ix) bonuses paid with
respect to the last completed fiscal year.
4.21.2. To the Knowledge of Xxxxxxxx, no director, officer, or other
key employee of any Acquired Company is reasonably expected to terminate their
employment with any of the Acquired Companies during 2004, but after the Closing
Date.
4.21.3. The Xxxxxxxx Corresponding Schedule states the number of
full time employees involuntarily terminated by any Acquired Company since July
31, 2003, broken down by location to which such employees were assigned.
4.21.4. No Acquired Company has violated the Worker Adjustment and
Retraining Notification Act (the "WARN Act") or any similar state or local Legal
Requirement.
4.21.5. The Xxxxxxxx Corresponding Schedule lists each Applicable
Contract relating to the employment of any Person by any Acquired Company (the
"Contracted Employees"), excluding confidentiality and similar agreements sought
on a general basis from full-time employees of the Acquired Companies.
4.22 Labor Disputes; Compliance.
4.22.1. Except as set forth in the Xxxxxxxx Corresponding Schedule,
each Acquired Company has complied in all material respects with all Legal
Requirements relating to employment practices and terms and conditions of
employment, including equal employment opportunity, nondiscrimination, sexual
harassment, immigration, wages, hours, benefits, the payment of social security
and similar Taxes and occupational safety and health. No Acquired Company has
any Liability for the payment of any Taxes, fines, penalties, damages, or other
40
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
4.22.2. Except as disclosed in the Xxxxxxxx Corresponding Schedule:
(a) no Acquired Company has been, or is now, a party to any
collective bargaining agreement or other labor Contract;
(b) since July 31, 2001, there has not been, there is not
presently pending or existing, and, to the Knowledge of Xxxxxxxx, there is not
Threatened, any strike, slowdown, picketing, work stoppage or material employee
grievance process involving any Acquired Company;
(c) to the Knowledge of Xxxxxxxx, no event has occurred or
circumstance exists that would be reasonably likely to provide the basis for any
work stoppage or other material labor dispute;
(d) there is not pending or, to the Knowledge of Xxxxxxxx,
Threatened against any Acquired Company any Proceeding relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed with the National Labor
Relations Board or any comparable Governmental Body, and there is no
organizational activity or other labor dispute against or affecting any Acquired
Company or the Facilities;
(e) no application or petition for an election of or for
certification of a collective bargaining agent is pending;
(f) no grievance or arbitration Proceeding exists that might
have a Material Adverse Effect upon any Acquired Company;
(g) there is no lockout of any employees by any Acquired
Company, and no such action is contemplated by any Acquired Company; and
(h) there has been no unresolved charge of discrimination
filed against or, to the Knowledge of Xxxxxxxx Threatened, against any Acquired
Company with the Equal Employment Opportunity Commission or similar Governmental
Body.
4.23 Intellectual Property.
4.23.1. The Acquired Companies own, or possess adequate and valid
licenses or other valid rights to use, (in each case, free and clear of any
material Encumbrances and free and clear of obligations of payment except for
applicable licensing fees related to "off-the-shelf" software) all material
Intellectual Property used or held for use in connection with the business of
the Acquired Companies as currently conducted in each case. The number of valid
licenses for computers (including workstations, personal computers, and servers)
and related software held by the Acquired Companies is sufficient to cover the
number of such computers and related software currently used by them.
41
4.23.2. The use of any Intellectual Property by any Acquired Company
does not infringe on, or otherwise violate, the intellectual property rights of
any Person, and is in accordance with each applicable license pursuant to which
the Acquired Companies acquired the right to use such Intellectual Property.
None of the Acquired Companies has received any written notice of any material
adverse assertion, challenge, or adverse claim with respect to any Intellectual
Property used by any Acquired Company and to the Knowledge of Xxxxxxxx, (i) no
such claim has been Threatened in writing and (ii) there is no trademark or
registered trademark application of any Person that potentially interferes with
a registered trademark of the Acquired Companies. Each of the Acquired Companies
has made all necessary and required filings and recordations to reasonably
protect and maintain its interest in all material Intellectual Property Assets
used or held for use in connection with the business of the Acquired Companies.
4.23.3. It has been the general practice of Xxxxxxxx in recent years
to seek to secure a written consent from its full-time permanent employees
intending that rights and title in inventions, methods, artistic works and
compositions, and other ideas that are in Xxxxxxxx'x field of interest and that
are discovered, conceived, or otherwise developed by such employee (jointly or
with others) in conjunction with and during his/her employment with Xxxxxxxx
shall be "works made for hire" and shall be the sole and exclusive property of
Xxxxxxxx.
4.23.4. Since July 31, 2003, no Acquired Company has assigned or
otherwise transferred ownership of, or agreed to assign or otherwise transfer
ownership to any other Person of, any material Intellectual Property Asset.
4.23.5. No Acquired Company is or ever was a member or promoter of,
or a contributor to, any industry standards body or similar organization that
could require or obligate any Acquired Company to grant or offer to any other
Person any license or right to any Intellectual Property Asset.
4.23.6. No Acquired Company owns a patent or has made a patent
application.
4.23.7. The Xxxxxxxx Corresponding Schedule contains a complete and
accurate list and summary description of all assumed fictional business names,
trade names, registered trade marks and service marks, and applications for any
of them that are used in the Acquired Companies' business as currently
conducted.
4.23.8. Except as set forth in the Xxxxxxxx Corresponding Schedule,
Xxxxxxxx owns all right, title, and interest in and to, and has a U.S. trademark
registration with respect to, the name and xxxx, "Xxxxxxxx Worldwide" as used in
the business of any Acquired Company in connection with the goods and services
offered under such name and xxxx.
4.23.9. Neither the execution, delivery or performance of this
Agreement nor the consummation of any of the Contemplated Transactions will,
with or without notice or lapse of time, result in, or give any other Person the
right or option to cause or declare (i) the release, disclosure, or delivery of
any material Intellectual Property by or to any escrow agent or other Person, or
(ii) the grant, assignment, or transfer to any other Person of any license or
other right or interest under, to, or in any material Intellectual Property.
42
4.23.10. All Xxxxxxxx Software material to the operation of the
business of the Acquired Companies as currently conducted is listed on Xxxxxxxx
Corresponding Schedule 4.23.10. None of such Xxxxxxxx Software to the Knowledge
of Xxxxxxxx:
(a) contains any bug, defect, or error (including any bug,
defect, or error relating to or resulting from the display, manipulation,
processing, storage, transmission, or use of date data) that materially and
adversely affects the use, functionality, or performance of such Xxxxxxxx
Software or any product or system containing or used in conjunction with such
Xxxxxxxx Software all as currently used in the business of the Acquired
Companies;
(b) fails to comply with any applicable warranty or other
contractual commitment relating to the use, functionality, or performance of
such software or any product or system containing or used in conjunction with
such Xxxxxxxx Software in any manner that materially and adversely affects the
use, functionality, or performance of such Xxxxxxxx Software or any product or
system containing or used in conjunction with such Xxxxxxxx Software all as
currently used in the business of the Acquired Companies; and
(c) contains any "back door," "drop dead device," "time bomb,"
"Trojan horse," "virus," or "worm" (as such terms are commonly understood in the
software industry) or any other code designed or intended to have any of the
following functions (i) disrupting, disabling, harming, or otherwise impeding in
any manner the operation of, or providing unauthorized access to, a computer
system or network or other device on which such code is stored or installed, or
(ii) damaging or destroying any data or file without the user's consent.
4.23.11. Except as set forth in the Xxxxxxxx Corresponding Schedule,
the Acquired Companies know the location of and have access to the source code
for all material software used by them, but excluding source code for off-the
shelf and other non-customized readily available software. No source code for
any Xxxxxxxx Software has been delivered, licensed, or made available (nor do
any of the Acquired Companies have an obligation to deliver, license or make
available) to any Person (i) who is not an employee of an Acquired Company, or
(ii) who is not a client of an Acquired Company for use in connection with
services performed by an Acquired Company for such client. No event has
occurred, and no circumstance or condition exists (including the Contemplated
Transactions), that (with or without notice or lapse of time) will, or could
reasonably be expected to, result in the delivery, license, or disclosure of any
source code for any Xxxxxxxx Software to any other Person who is not, as of the
date of this Agreement, an employee of an Acquired Company.
4.24 Foreign Corrupt Practices Act; Export Control and Antiboycott Laws.
4.24.1. No Acquired Company or to the Knowledge of Xxxxxxxx no
Representative of an Acquired Company has violated the FCPA or committed any act
or acts that are reasonably likely to constitute a violation of the FCPA.
4.24.2. Except as set forth in the Xxxxxxxx Corresponding Schedule,
each Acquired Company has at all times been in compliance in all material
respects with all Legal Requirements relating to export control and trade
embargoes. No product sold or service
43
provided by an Acquired Company during the last five (5) years has been,
directly or indirectly, sold to or performed on behalf of any country in
violation of Legal Requirements relating to export control or trade embargoes.
4.24.3. Except as set forth in the Xxxxxxxx Corresponding Schedule,
none of the Acquired Companies has violated the antiboycott prohibitions
contained in 50 U.S.C. Sections 2401 et seq. or taken any action that can be
penalized under Section 999 of the Code (collectively, the "Antiboycott
Prohibitions"). Except as set forth in the Xxxxxxxx Corresponding Schedule,
during the last five (5) years, No Acquired Company has been a party to, is
beneficiary under or has performed any service or sold any product under any
Contract under which a product has been sold to customers in any country in
violation of the Antiboycott Prohibitions.
4.25 Disclosure.
4.25.1. No representation or warranty or other statement made by
Xxxxxxxx in this Agreement or the Xxxxxxxx Closing Documents contains any
material untrue statement or omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances in which they
were made, not misleading.
4.25.2. There is no fact that, to the Knowledge of Xxxxxxxx, has
specific application to Xxxxxxxx (other than general economic or industry
conditions) and that materially and adversely affects the assets, business,
prospects, financial condition, or results of operations of the Acquired
Companies (on a consolidated basis) that has not been set forth in this
Agreement or the Xxxxxxxx Corresponding Schedule.
4.26 Relationships with Related Persons. Except as described in the
Xxxxxxxx Corresponding Schedule, no Stockholder or any Related Person of
Xxxxxxxx or of any Acquired Company: (a) has, or since July 31, 2003 has had,
any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Acquired Companies'
businesses, (b) has owned, of record or as a Beneficial owner, an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with any
Acquired Company, or (ii) engaged in competition with any Acquired Company with
respect to any line of the products or services of such Acquired Company (a
"Competing Business") in any market presently served by such Acquired Company
except for less than one percent (1%) of the outstanding capital stock of any
Competing Business that is publicly traded on any recognized exchange or in the
over-the-counter market, and (c) is a party to any Applicable Contract with, or
has any claim or right against, any Acquired Company.
4.27 Brokers or Finders. Xxxxxxxx and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4.28 Clients. The Xxxxxxxx Corresponding Schedule contains a list setting
forth the twenty (20) largest clients of the Acquired Companies, taken as a
whole, by dollar amount of revenues during each of calendar year 2003 and the
first six (6) months of calendar year 2004. The Executive Nucleus Committee has
made inquiry of the account manager responsible for
44
each such client within the last thirty (30) days and Xxxxxxxx has provided a
summary that, to the Knowledge of Xxxxxxxx based upon such inquiries, reasonably
accurately reflects the status of Xxxxxxxx'x relationships with such clients.
4.29 Suppliers and Vendors. The Xxxxxxxx Corresponding Schedule sets forth
a list of each of the vendors, including independent contractors and
consultants, of the Acquired Companies to which the Acquired Companies accrued
payments of $20,000 or more for the period commencing January 1, 2004 and ending
July 31, 2004. The Executive Nucleus Committee has not received notice that any
of the Acquired Companies' material suppliers intends to change its business
relationship with the Acquired Companies in a manner that is reasonably likely
to have a Material Adverse Effect on the Acquired Companies.
SECTION 5. - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder, hereby severally and not jointly, represents and
warrants, to Xxxxxx and Merger Sub as follows:
5.1 Authority; No Conflict. Upon the execution and delivery by each of the
Stockholders of this Agreement, of the Ancillary Agreements to which they are a
Party and any other document to be executed and/or delivered by the Stockholders
under this Agreement (collectively, the "Stockholders Closing Documents"), each
of the Stockholders Closing Documents will constitute the legal, valid, and
binding obligation of each of the Stockholders, enforceable against each of the
Stockholders in accordance with their respective terms. Each of the Stockholders
has the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and each of the Stockholders Closing Documents and to
perform its obligations under this Agreement and the Stockholders Closing
Documents. To the Knowledge of each respective Stockholder, no such
Stockholder's execution and delivery of this Agreement nor such Stockholder's
consummation or performance of any of the Contemplated Transactions will give
any Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions.
5.2 Certain Proceedings. There is no pending Proceeding against any
Stockholder that directly challenges, or is reasonably likely to have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To each Stockholder's Knowledge, no such
Proceeding has been Threatened.
5.3 Brokers or Finders. No Stockholder or its agents have incurred an
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
5.4 Ownership of Shares. Each Stockholder owns, Beneficially and of
record, and has full rights and power to transfer, the Xxxxxxxx Shares indicated
adjacent to such Stockholder's name in Xxxxxxxx Corresponding Schedule 2.4.2,
free and clear of all Encumbrances. Such Xxxxxxxx Shares are duly authorized,
validly issued, fully paid and nonassessable.
5.5 No Further Right or Interest. Immediately after the Closing, no
Stockholder shall hold any warrant or option permitting them to subscribe or
purchase shares of Xxxxxxxx and, more generally shall have no further right,
title or interest in or to Xxxxxxxx or its assets, properties,
45
business, securities or equity interests (other than as a stockholder of, or
holder of options to purchase stock of, Xxxxxx).
5.6 No Claims. Except for rights and obligations under this Agreement, any
applicable Ancillary Agreements, and any agreements regarding retirement or
insurance benefits between Xxxxxxxx and Stockholders, each Stockholder has no
claims or rights against Xxxxxxxx, and Xxxxxxxx has no obligation,
responsibility or liability to such Stockholder.
5.7 Warranties relating to Acquisition of Xxxxxx Shares.
5.7.1. Each Stockholder is either (i) an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act, or (ii) by reason of his, her or its business and financial
experience has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that the
Stockholder is capable of (i) evaluating the merits and risks of an investment
in the Xxxxxx Shares and making an informed investment decision, and (ii)
bearing the economic risk of such investment. If any Stockholder retained a
"purchaser representative" (as defined in Rule 501(h)) with respect to the
investment in the Xxxxxx Shares that may be made hereby then such Stockholder
shall (i) acknowledge in writing such representation and such person's
qualification as a "purchaser representative", and (ii) cause such "purchaser
representative" to deliver a certificate to Xxxxxx containing such
representations as are reasonably requested by Xxxxxx (which representations
may, at a minimum, include representations substantially similar to
Stockholders' representations set forth in this Section 5.7). Each Stockholder
is acquiring the Xxxxxx Shares for investment for his or her own account, not as
a nominee or agent and not with the view to, or any intention of, a resale or
distribution thereof, in whole or in part, or the grant of any participation
therein, until a registration statement under the Securities Act covering the
Xxxxxx Shares has been filed and becomes effective (which Xxxxxx has agreed to
file pursuant to Section 7.3.1 hereof). Each Stockholder understands that as of
the date hereof the Xxxxxx Shares have not been registered under the Securities
Act or state securities laws by reason of certain exemptions from the
registration provisions of the Securities Act and applicable state securities
laws that depend upon, among other things, the bona fide nature of the
investment intent and the accuracy of his or her representations as expressed in
this Section 5.7. Each Stockholder understands that he or she may not offer,
sell or otherwise transfer the Xxxxxx Shares except pursuant to an effective
registration statement under the Securities Act covering the Xxxxxx Shares, or
pursuant to an exemption from the registration requirements of the Securities
Act. Each Stockholder understands that hedging transactions involving the Xxxxxx
Shares may not be conducted unless in compliance with the Securities Act, and
agrees not to engage in any such transactions in the absence of such compliance.
Each Stockholder understands that for the sole purpose of enforcing the
Securities Act as hereafter defined, Xxxxxx may place stop transfer instructions
against the Xxxxxx Shares and the certificates therefor to restrict the transfer
thereof. Each Stockholder understands that a legend, in substantially the form
as that set forth below, will be placed on any certificate or certificates
evidencing the Xxxxxx Shares:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or
applicable state securities laws, and may not be offered, sold or
otherwise transferred under the Securities Act, except pursuant to
46
an effective registration statement under the Securities Act and
applicable state securities laws covering the securities, or
pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. Hedging
transactions involving the securities may not be conducted unless in
compliance with the Securities Act."
Such legend shall be immediately removed upon the effectiveness of any
Registration Statement regarding the Xxxxxx Shares, but may be replaced by any
other applicable legend reflecting any legal restriction related to such Xxxxxx
Shares such as a legal restriction related to transfers of Xxxxxx Shares by a
then "affiliate" (as defined in Rule 144(a)(1) of the Securities Act) of Xxxxxx.
5.7.2. Each Stockholder hereby acknowledges that because of the
restrictions on transfer of the Xxxxxx Shares to be issued in connection with
this Agreement he or she may have to bear the economic risk of the investment
commitment in the Xxxxxx Shares for an indefinite period of time, subject to
Xxxxxx'x obligations and Stockholder's registration rights pursuant to Section
7.3. Each Stockholder will observe and comply with the Securities Act and the
rules and regulations promulgated thereunder, as now in effect and as from time
to time amended, in connection with any offer, sale, pledge, transfer or other
disposition of the Xxxxxx Shares. In furtherance of the foregoing, and in
addition to any restrictions contained in this Agreement and/or the Stockholder
Closing Documents, he or she will not offer to sell, exchange, transfer, pledge,
or otherwise dispose of any of the Xxxxxx Shares unless at such time at least
one of the following is satisfied:
(a) a registration statement under the Securities Act covering
the Xxxxxx Shares proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, shall have been filed with the
SEC and made effective under the Securities Act;
(b) such transaction shall be permitted pursuant to the
provisions of Rule 144;
(c) counsel representing such Stockholder in each case
satisfactory to Xxxxxx, shall have advised Xxxxxx in a written opinion letter
reasonably satisfactory to Xxxxxx and its counsel, and upon which Xxxxxx and its
counsel may rely, that no registration under the Securities Act would be
required in connection with the proposed sale, transfer or other disposition; or
(d) an authorized representative of the SEC shall have
rendered written advice to such Stockholder (sought by him or her or their
counsel with a copy thereof and of all other related communications delivered to
Xxxxxx) to the effect that the SEC would take no action, or that the staff of
the SEC would not recommend that the SEC take action, with respect to the
proposed sale, transfer or other disposition if consummated.
5.7.3. Each Stockholder understands that an investment in the Xxxxxx
Shares involves substantial risks. He or she has been given the opportunity to
make a thorough investigation of the proposed activities of Xxxxxx and, upon
request to Xxxxxx, has been furnished
47
with materials relating to Xxxxxx and its proposed activities, including,
without limitation, the Xxxxxx SEC Documents. Each Stockholder has been afforded
the opportunity to obtain any additional information deemed necessary by him or
her to verify the accuracy of any representations made or information conveyed
to them. Each Stockholder confirms that all documents, records and books
pertaining to its investment in the Xxxxxx Shares and requested by them have
been made available or delivered to such Stockholder. Each Stockholder has had
an opportunity to ask questions of and receive answers from Xxxxxx, or from a
person or persons acting on Xxxxxx' behalf, concerning the terms and conditions
of the Stockholder's investment in the Xxxxxx Shares. Each Stockholder has
relied upon, and is making its investment decision upon, the Xxxxxx SEC
Documents, and other information publicly available about Xxxxxx.
5.8 Disclosure.
5.8.1. No representation or warranty or other statement made by any
Stockholder in this Agreement or the Stockholder Closing Documents contains or
shall contain any material untrue statement or omit to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
5.8.2. There is no fact that, to the Knowledge of any Stockholder,
has specific application to any Stockholder and that would be reasonably likely
to have a Material Adverse Effect on the assets, business, prospects, financial
condition, or results of operations of the Acquired Companies (on a consolidated
basis) that has not been set forth in this Agreement.
SECTION 6. - REPRESENTATIONS AND WARRANTIES OF XXXXXX
Xxxxxx hereby represents and warrants to Xxxxxxxx as follows:
6.1 Organization and Good Standing. Xxxxxx is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
6.2 Authority: No Conflict.
6.2.1. Upon the execution and delivery by Xxxxxx of this Agreement,
the Ancillary Agreements to which Xxxxxx is a Party, the Xxxxxx Corresponding
Schedules, the Xxxxxx Corresponding Exhibits and any other document to be
executed and/or delivered by Xxxxxx under this Agreement (collectively, the
"Xxxxxx Closing Documents"), each of the Xxxxxx Closing Documents will
constitute the legal, valid, and binding obligation of Xxxxxx, enforceable
against Xxxxxx in accordance with their respective terms. Xxxxxx has the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Xxxxxx Closing Documents to which it is a party
and to perform its obligations under this Agreement and the Xxxxxx Closing
Documents to which it is a party. Such actions have been duly authorized by all
necessary corporate action.
6.2.2. Neither Xxxxxx'x execution and delivery of this Agreement nor
Xxxxxx' consummation or performance of any of the Contemplated Transactions will
give any Person the right to prevent, delay, or otherwise interfere with any of
the Contemplated Transactions pursuant to:
48
(a) any provision of Xxxxxx'x Organizational Documents;
(b) any resolution adopted by the Xxxxxx Board (acting for
itself or as member of Merger Sub);
(c) any Legal Requirement or Order to which Xxxxxx is subject;
or
(d) any Contract to which Xxxxxx is a party or by which Xxxxxx
may be bound.
6.3 Certain Proceedings. There is no pending, or to the Knowledge of
Xxxxxx, Threatened Proceeding against Xxxxxx that directly challenges, or is
reasonably likely to have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To the
Knowledge of Xxxxxx, no event has occurred or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding.
6.4 Brokers or Finders. Xxxxxx and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
6.5 SEC Filings. Xxxxxx has filed all required reports, schedules, forms,
statements and other documents with the SEC since July 1, 2001 (such documents,
together with any documents filed or furnished during such period by Xxxxxx with
the SEC on a voluntary basis, the "Xxxxxx SEC Documents"). As of their
respective dates, the Xxxxxx SEC Documents (i) complied in all material respects
with the applicable requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to the Xxxxxx SEC Documents and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.6 Xxxxxx Shares. The Xxxxxx Shares to be issued hereunder, when issued
by Xxxxxx to Stockholders upon a Stockholders' surrender of all Xxxxxxxx Shares
held by such Stockholder pursuant to the terms of this Agreement, will (i) be
duly authorized, validly issued, fully paid and nonassessable, (ii) based on
Stockholders' representations in Section 5.7, be issued in compliance with all
applicable United States federal and state securities laws, and (iii) be free
and clear of all Encumbrances except for restrictions pursuant to the Lockup
Agreements and restrictions of general application under the United States
federal and state securities laws.
6.7 Disclosure.
6.7.1. No representation or warranty or other statement made by
Xxxxxx in this Agreement or the Xxxxxx Closing Documents contains or shall
contain any material untrue statement or omit to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
49
6.7.2. There is no fact that to the Knowledge of Xxxxxx has specific
application to Xxxxxx (other than general economic or industry conditions) and
that materially adversely affects the assets, business, prospects, financial
condition, or results of operations of Xxxxxx that has not been set forth in
this Agreement, Xxxxxx SEC Documents or the Xxxxxx Corresponding Schedule.
6.8 Consents. Except as set forth in the Xxxxxx Corresponding Schedule,
Xxxxxx is not and will not be required to give any notice to, or obtain any
Consent from, any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
SECTION 7. - ADDITIONAL AGREEMENTS
7.1 Directors.
7.1.1. Effective on the date of the Effective Time, Xxxxxx shall
cause Xxxxxxx X. Xxxxxxxx to be appointed as a member of Xxxxxx'x Board. He
shall hold office in accordance with the Organizational Documents of Xxxxxx.
Subject to the applicable fiduciary obligations of the Xxxxxx Board and
compliance in all material respects by Xxxxxxx X. Xxxxxxxx with Xxxxxx'x
policies applicable to all of its directors, in connection with the 2005 annual
meeting of Xxxxxx' stockholders, the Nominating and Governance Committee of the
Xxxxxx Board will nominate Xxxxxxx X. Xxxxxxxx as a director for election by
Xxxxxx' stockholders to serve an additional three (3) year term on the Xxxxxx
Board.
7.1.2. Immediately following the Effective Time, the Xxxxxx Board
will appoint Xxx Xxxxxx and Xxxxx Xxxxxxxxxx to Xxxxxx' executive management
council.
7.2 Severance. Xxxxxx shall provide at its expense, to all former
full-time employees of Xxxxxxxx whose employment is terminated by the Surviving
Entity (the "Terminated Xxxxxxxx Employees") on or within six (6) months after
the Closing Date, (i) for each employee with the Employment Agreement or an
Employment Letter, severance payments in accordance with the Employment
Agreement or Employment Letter, as the case may be, (ii) for other full-time
employees, at least two (2) weeks severance, and (iii) for all full-time
employees, reasonable expenses for out-placing services. Terminated Xxxxxxxx
Employees whose employment is terminated more than six (6) months after the
Closing Date shall be covered by the Acquired Companies' then existing severance
policies as they may have been modified or replaced by Xxxxxx which changes (if
any) shall take into account such employees' service with the Acquired
Companies.
7.3 Registration Statement on Form S-3.
7.3.1. Promptly after the Closing, but in no case more than sixty
(60) days following the Closing Date, at its sole cost and expense Xxxxxx will
file with the SEC a registration statement (the "Registration Statement") on
Form S-3 or another appropriate form then available to Xxxxxx for the purpose of
registering all of the Xxxxxx Shares for resale. Thereafter, Xxxxxx will use all
good faith commercially reasonable efforts to cause the Registration Statement
to become effective under the Securities Act (taking into account the interest
of the Stockholders in having the Registration Statement become effective within
180
50
days of the Closing Date) as promptly as practicable and to remain continuously
effective until the earlier of (i) the second anniversary of the date such
Registration Statement is declared effective by the SEC, or (ii) such time at
which all of the Xxxxxx Shares have been resold.
7.3.2. Notwithstanding the foregoing, Xxxxxx shall have the right
upon notice to the Stockholders (the "Delay Right") to delay filing the
Registration Statement or withhold efforts to cause the Registration Statement
to become effective, (a) if Xxxxxx determines in good faith and after
consultation with its legal counsel, the chairman of its Board of Directors, and
its Lead Director that such registration is reasonably likely to (i) materially
interfere with or materially affect the negotiation or completion of any
material transaction (the disclosure of which Xxxxxx determines in good faith
would be reasonably likely to materially impede Xxxxxx'x ability to consummate
such transaction) that is being contemplated by Xxxxxx (whether or not a final
decision has been made to undertake such transaction) at the time the right to
delay is exercised, or (ii) involve initial or continuing disclosure obligations
that are reasonably likely to be materially detrimental to the interest of
Xxxxxx' stockholders (other than as relating solely to the price of the stock of
Xxxxxx), and (b) for so long as Xxxxxx is delayed in receiving any consent
required to be given by Xxxxx Xxxxxxxx LLP with respect to incorporation in the
Registration Statement of financial statements of the Acquired Companies audited
by them. Additionally, Xxxxxx shall have the right (the "Suspension Right") to
suspend sales under the Registration Statement, if Xxxxxx determines in good
faith and after consultation with its legal counsel, the chairman of its Board
of Directors, and its Lead Director that it would be materially detrimental to
Xxxxxx and its stockholders to continue sales under the Registration Statement
at such time and therefore Xxxxxx has elected to suspend sales of the Xxxxxx
Shares under the Registration Statement. Xxxxxx agrees that it shall not
exercise its Delay Right or Suspension Right (as applicable) for more than sixty
(60) consecutive days in any one hundred eighty (180) day period, and not more
than ninety (90) days in the aggregate in any twelve (12) month period.
7.3.3. Xxxxxx shall promptly notify the Stockholder Representative
upon the occurrence of the following events:
(a) the effectiveness of the Registration Statement or any
post-effective amendment thereto filed with the SEC;
(b) the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement;
(c) the exercise by Xxxxxx of its Delay Right or its
Suspension Right as set forth above;
(d) Xxxxxx' receipt of any notification of the suspension of
the qualification of any Xxxxxx Shares covered by the Registration Statement for
sale in any jurisdiction; or
(e) any other event, fact or circumstance that results in the
Registration Statement or any prospectus relating to the Xxxxxx Shares or any
document incorporated by reference therein containing an untrue statement of
material fact or omitting to
51
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
7.3.4. Stockholders shall immediately cease selling Xxxxxx Shares
upon their receipt of a notice described in Sections 7.3.3(b), (c) or (e) above
and shall immediately cease selling Xxxxxx Shares in the relevant jurisdiction
upon receipt of a notice described in Section 7.3.3(d). Stockholders shall not
resume sales of Xxxxxx Shares until receiving notice from Xxxxxx that such sales
may resume. Xxxxxx agrees to use good faith commercially reasonable efforts
(taking into account the interests of the Stockholders) to avoid the issuance of
and to obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement or the qualification of the Xxxxxx Shares in any state or
other jurisdiction as soon as practicable.
7.3.5. Xxxxxx shall furnish (at Xxxxxx'x expense) to Stockholders or
their assignees such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of the Xxxxxx Shares held by them.
7.3.6. Xxxxxx agrees to use good faith commercially reasonable
efforts (taking into account the interests of the Stockholders) to cause the
Xxxxxx Shares covered by the Registration Statement to be registered with or
approved by such state securities authorities as may be necessary to enable
Stockholders to consummate the disposition of such Xxxxxx Shares pursuant to the
plan of distribution set forth in the Registration Statement; provided, however,
that Xxxxxx shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 7.3.6 in any
particular jurisdiction in which Xxxxxx would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance unless Xxxxxx is already subject to service of process in such
jurisdiction.
7.3.7. Subject to Xxxxxx' Delay Right and its Suspension Right
(including any limitations with respect thereto), if any event, fact or
circumstance shall exist or occur (including any event described in Section
7.3.3(e) above), that requires an amendment to the Registration Statement (or
other modification with respect to any document incorporated or deemed to be
incorporated therein by reference) or supplement to a prospectus relating to the
Xxxxxx Shares in order to keep the Registration Statement continuously
Effective, then immediately upon becoming aware of such event or occurrence,
Xxxxxx shall notify Stockholders thereof and shall prepare and file with the SEC
such post-effective amendments to the Registration Statement or supplements to
the prospectus or any other required document as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of the
Xxxxxx Shares covered by the Registration Statement.
7.3.8. Xxxxxx shall pay all registration and filing fees, fees and
expenses related to compliance with securities or blue sky laws, printing
expenses, fees and disbursements of custodians, and fees and disbursements of
counsel for Xxxxxx and all independent certified public accountants and other
persons retained by Xxxxxx and incurred in connection with the registration,
qualification or compliance of the Xxxxxx Shares as set forth above. All other
expenses incurred in connection with the sale of Xxxxxx Shares by any
Stockholder shall be borne
52
by such Stockholder. Without limiting the foregoing, each Stockholder shall pay
the fees and disbursements of its own counsel, if any.
7.3.9. Each Stockholder shall furnish to Xxxxxx such information as
Xxxxxx may reasonably request and as shall be required in connection with the
registration of the Xxxxxx Shares and related proceedings set forth above.
7.4 Tax Treatment. Each of Harris, Wirthlin, Stockholders, and Merger Sub
shall use its commercially reasonable best efforts to cause the Contemplated
Transactions to qualify, and will not take or fail to take any actions which
could reasonably be expected to prevent the Contemplated Transactions from
qualifying as a reorganization within the meaning of Section 368(a) of the Code;
provided, however, that no Party shall be liable to any other Party for any
failure of the Contemplated Transactions to so qualify. Xxxxxx will not elect to
treat Merger Sub as a corporation for tax purposes.
7.5 Customer and other Business Relationships. During the twelve (12)
months following the Closing, Stockholders will provide reasonable cooperation
in connection with the efforts of the Surviving Entity and the Acquired
Companies and upon the reasonable request of Xxxxxx to continue and maintain for
the benefit of the Surviving Entity and/or the Acquired Companies those business
relationships of the Acquired Companies existing prior to the Closing and
relating to the business to be operated by the Surviving Entity and the Acquired
Companies after the Closing, including relationships with lessors, employees,
regulatory authorities, licensors, customers, suppliers, and others.
7.6 Retention of and Access to Records. Xxxxxx and the Surviving Entity
shall retain for a period consistent with Xxxxxx'x record-retention policies and
practices those records of the Acquired Companies delivered to Xxxxxx and the
Surviving Entity. Xxxxxx also shall provide the Stockholders Representative
reasonable access thereto, during normal business hours and on at least three
(3) Business Days' prior written notice, including to enable Stockholders to
prepare financial statements or Tax Returns or deal with tax audits. Through and
including the date three (3) years after the Effective Time, Xxxxxx will give
reasonable written notice to Stockholders before transferring, destroying, or
discarding any records of Stockholders and the Acquired Companies previously
delivered to Xxxxxx. Xxxxxx will allow Stockholders to copy or take possession
of any such records if Stockholders so request and do so at Stockholders'
expense within thirty (30) days after the notice is given. After the expiration
of that 30-day period, Xxxxxx may transfer, destroy, or discard any such records
that Stockholders have not so taken.
7.7 Majority Stockholder Assets. During the one-year period commencing on
the Closing Date, the Xxxxxxxx Family Trust will maintain unencumbered assets
with a then current value of at least $5,000,000 at all times. During the
one-year period commencing on the first annual anniversary of the Closing Date,
the Xxxxxxxx Family Trust will maintain unencumbered assets with a then current
value of at least $7,500,000 at all times. Upon request by Xxxxxx from time to
time, which requests will not be made more than once during any six-month
period, the Xxxxxxxx Family Trust will provide a letter from its accountant,
bank, or other reasonably reliable source confirming that there are sufficient
assets in the Xxxxxxxx Family Trust to meet the requirements of this Section
7.7. Notwithstanding this Section 7.7, the assets in the Xxxxxxxx Family Trust
may pass to various
53
successor trusts as provided in the "Restatement of Xxxxxxxx Family Trust" dated
February 11, 1997 upon the death of Xxxxxxx X. Xxxxxxxx and/or Jeralie Xxx
Xxxxxxxx, provided that one or more such successor trusts with sufficient net
worth expressly assume the obligations of the Xxxxxxxx Family Trust under this
Agreement.
7.8 Employment Agreement Amendments. The Stockholders shall strongly
encourage and seek to cause each of the Acquired Companies' U.S. Contracted
Employees to acknowledge in writing his or her consent to the Employment Letter
delivered by Xxxxxx to him or her.
7.9 Consents and Waivers. The Stockholders and Xxxxxx shall cooperate
fully with each other in using commercially reasonable efforts (i) to obtain all
consents, and to cause to be given all notices, described in Xxxxxxxx
Corresponding Schedule 4.3, and (ii) to obtain waivers of all breaches and
defaults described in Xxxxxxxx Corresponding Schedule 4.2(e).
7.10 Xxxxx Xxxxxxxx Consents. The Stockholders shall cooperate with Xxxxxx
in obtaining from Xxxxx Xxxxxxxx LLP consents to incorporate the Acquired
Companies' financial statements previously audited by Xxxxx Xxxxxxxx LLP into
Xxxxxx'x filings with the Securities and Exchange Commission.
7.11 Further Actions; Power of Attorney.
7.11.1. The Parties will cooperate reasonably with each other in
connection with any steps required to be taken as part of their respective
obligations under this Agreement, and will, as another other Party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the Contemplated Transactions:
(a) furnish upon request to each other such requested further
information;
(b) execute and deliver to each other such requested other
documents;
(c) cooperate with their respective counsel in the contest or
defense of, and make available their personnel and provide any testimony and
access to their books and records in connection with, any Proceeding involving
or relating to any Contemplated Transaction;
(d) cooperate in all reasonable respects in preparation and
execution of any information, reports, returns, or other filings with any
Governmental Body related to any of the Acquired Companies or their businesses
prior to the Effective Time, or the transactions contemplated hereby; and
(e) do such other acts and things, as another Party may
reasonably request for the purpose of carrying out (including any event
described in Section 7.3.3(e) above) the intent of this Agreement and the
Contemplated Transactions.
7.11.2. In furtherance of Section 7.11.2, if at any time after the
Effective Time, the Surviving Entity shall consider or be advised that any
further deeds, assignments or
54
assurances in law or any other acts are necessary or desirable to (i) vest,
perfect or confirm, of record or otherwise, in the Surviving Entity its
respective right, title or interest in, to or under any of the rights,
properties or assets of Xxxxxxxx, or (ii) otherwise carry out any Contemplated
Transaction, Xxxxxxxx and its officers and directors (in their capacity as
officers and directors of Xxxxxxxx) shall be deemed to have granted to the
Surviving Entity an irrevocable power of attorney to execute and deliver all
such deeds, assignments or assurances in law or any other acts as are necessary
or proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Entity, as the case may be, and otherwise
to carry out the purposes of the Merger and the Contemplated Transactions, and
the officers and directors of the Surviving Entity are authorized in the name of
Xxxxxxxx or otherwise to take any and all such action.
SECTION 8. - INDEMNIFICATION; REMEDIES
8.1 Survival; Right to Indemnification not Affected by Knowledge. Subject
to Section 8.4, (i) all representations, warranties, covenants, and obligations
of Xxxxxxxx in the Xxxxxxxx Closing Documents, (ii) all representations,
warranties, covenants, and obligations of Stockholders in the Stockholder
Closing Documents, and (iii) all representations, warranties, covenants, and
obligations of Xxxxxx in the Xxxxxx Closing Documents, will survive the Closing
and the consummation of the Contemplated Transactions. The right to
indemnification, reimbursement or other remedy based upon any such
representation, warranty, covenant, or obligation will not be affected by any
investigation conducted with respect to, or any Knowledge acquired (or capable
of being acquired) at any time, whether before or after the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, reimbursement or other remedy based on such representation,
warranty, covenant or obligation unless such waiver makes express reference to
this Section 8.
8.2 Indemnification and Reimbursement by Stockholders. Subject to Sections
8.4.1 and 8.5, each of Stockholders (with respect to their ownership percentages
as of the Closing) will indemnify and hold harmless Xxxxxx, the Acquired
Companies, the Surviving Entity, and their respective Representatives,
shareholders, subsidiaries, controlling persons, and affiliates (collectively,
the "Xxxxxx Indemnified Persons") for, and will pay to Xxxxxx Indemnified
Persons the amount of any loss, liability, claim, damage, expense (including
reasonable costs of investigation and defense and reasonable attorneys' fees and
expenses) or diminution of value, but not including incidental or consequential
damages, whether or not involving a Third-Party Claim (collectively, "Damages"),
arising, directly or indirectly (but in the case of Damages arising directly or
indirectly in part from or in connection with any of Sections 8.2.1 or 8.2.4 and
in part from other circumstances, only in proportion to the portion of the
Damages arising from or in connection with any of Sections 8.2.1 or 8.2.4), from
or in connection with:
8.2.1. any Breach of any representation or warranty made by Xxxxxxxx
and/or Stockholders in the Xxxxxxxx Closing Documents and/or the Stockholder
Closing Documents;
55
8.2.2. any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding made,
or alleged to have been made, by such Person with any Stockholder, Xxxxxxxx or
any Acquired Company (or any Person acting on their behalf) in connection with
any of the Contemplated Transactions;
8.2.3. any failure to give any notice or obtain any consent required
by any real property lease described in Xxxxxxxx Corresponding Schedule 4.3, or
any failure to obtain a waiver of any breaches or defaults described in Xxxxxxxx
Corresponding Schedule 4.2(e) related to any such real property lease, but
specifically limited to the amount of any direct and unmitigated (Xxxxxx using
commercially reasonable efforts to so mitigate) costs to Xxxxxx, including
landlord consent fees, legal fees and disbursements of counsel to Xxxxxx and any
landlord, increases in rent, and out-of-pocket moving and relocation costs;
8.2.4. any untrue statement of a material fact contained in any
registration statement or prospectus relating to the Xxxxxx Shares, or any
amendment or supplement thereto, or based on any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but limited by and only to
the extent, that such untrue statement or omission is made in such registration
statement or prospectus solely from and in conformity with information furnished
in writing to Xxxxxx by a Stockholder prior to the Effective Time for inclusion
therein, or arising out of or based on a Stockholder's failure to deliver a copy
of the Registration Statement or prospectus or any amendments or supplements
thereto after Xxxxxx has furnished such Stockholder with a sufficient number of
copies of the same.
For the avoidance of doubt Damages do not include liabilities or expenses fully
reflected in the Closing Balance Sheet. Subject to Section 8.11, the remedies
provided in this Section 8.2 will be the sole and exclusive remedies that are
available to Xxxxxx Indemnified Persons under this Agreement.
8.3 Indemnification and Reimbursement by Xxxxxx. Subject to Sections 8.4.2
and 8.6, Xxxxxx will indemnify and hold harmless Stockholders for, and will pay
to Stockholders (with respect to their ownership percentages as of the Closing)
for any Damages arising from or in connection (but in the case of Damages
arising in part from or in connection with any of Sections 8.3.1 or 8.3.3 and in
part from other circumstances, only in proportion to the portion of the Damages
arising from or in connection with any of Sections 8.3.1 or 8.3.3)with:
8.3.1. any Breach of any representation or warranty made by Xxxxxx
in the Xxxxxx Closing Documents;
8.3.2. any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding made,
or alleged to have been made, by such Person with Xxxxxx (or any Person acting
on its behalf) in connection with any of the Contemplated Transactions; or
8.3.3. any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus relating to
Xxxxxx or the Xxxxxx shares, or any amendment or supplement thereto, or based on
any omission (or alleged omission) to state
56
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that Xxxxxx will not be
liable in any such case only to the extent of any Damages that arise out of or
are based on any untrue statement or omission based upon and in conformity with
information furnished in writing to Xxxxxx by a Stockholder for inclusion
therein prior to the Effective Time.
Subject to Section 8.11, the remedies provided in this Section 8 will be the
sole and exclusive remedies that are available to the Stockholders under this
Agreement.
8.4 Time Limitations Related to Representations and Warranties.
8.4.1. Pursuant to and within the terms of this Agreement,
Stockholders will have liability (for indemnification or otherwise) with respect
to any Breach covered by Section 8.2 only if Xxxxxx notifies the Stockholder
Representative and Escrow Agent of a claim specifying the factual basis of the
claim in reasonable detail to the extent then known by Xxxxxx on or before the
date two years after the Closing Date, or if later (but not more than thirty
(30) days later), the date on which Xxxxxx'x independent auditors deliver
Xxxxxx'x audited financial statements for its fiscal year ending June 30, 2006
to Xxxxxx; provided, however,
(a) claims for applicable Damages may be made at any time
within any applicable statute of limitations if made with respect to Section
4.12, Section 4.20, and/or Section 5.7, and
(b) claims for applicable Damages may be made at any time if
made with respect to any Breach covered by Section 5.4, and
(c) claims for applicable Damages may be made at any time, but
not later than ninety (90) days, after the total amount of any such Damages is
fully and finally established with respect to the Virginia Lawsuit.
8.4.2. Pursuant to and within the terms of this Agreement, Xxxxxx
will have liability (for indemnification or otherwise) with respect to any
Breach covered by Section 8.3 as to which a claim may be made only if the
Stockholder Representative notifies Xxxxxx of a claim specifying the factual
basis of the claim in reasonable detail to the extent then known by Stockholders
on or before the date two years after the Closing Date, or if later (but not
more than thirty (30) days later), the date on which Xxxxxx'x independent
auditors deliver Xxxxxx'x audited financial statements for its fiscal year
ending June 30, 2006 to Xxxxxx; provided, however, claims for applicable Damages
may be made at any time if made with respect to Section 6.6.
8.5 Stockholders Threshold and Cap.
8.5.1. The Stockholders will have no liability (for indemnification
or otherwise) with respect to claims under Section 8.2.1 and 8.2.4 until the
aggregate total of all Damages exceeds $250,000; provided, however, that once
such claims exceed $250,000 in the aggregate, then Stockholders and Xxxxxxxx
will be liable for all Damages within the terms of Section 8.2.1 and 8.2.4, as
applicable. Notwithstanding the foregoing, Stockholders will be liable for all
Damages:
57
(a) relating to any intentional or fraudulent Breach of any of
Xxxxxxxx'x and/or Stockholders' representations and warranties,
(b) for a breach of the representations and warranties
contained in Section 4.9, 4.12 (including the Thin Capitalization Issue, the
PAYE Issue, the Gold Payment Issue and the Expatriate Issue), and 5.4, and
(c) any Damages in excess of applicable insurance coverage
relating to the Virginia Lawsuit.
8.5.2. Notwithstanding anything to the contrary in this Section 8,
the Stockholders will have no liability (for indemnification or otherwise) with
respect to claims under Sections 8.2.1 and 8.2.4 for Damages (on a cumulative
basis) in excess of $5,000,000; provided, however, that this limitation of
liability will not apply to:
(a) any Breach of a representation or warranty under Section
5.4 and such Damages shall not be included within such cap,
(b) any Breach of a representation or warranty under Sections
4.12 (including the Thin Capitalization Issue, the PAYE Issue, the Gold Payment
Issue and the Expatriate Issue), 4.20, and 5.7 but such Damages shall still be
included within and up to such cap, and
(c) any Damages in excess of applicable insurance coverage
relating to the Virginia Lawsuit and such Damages shall not be included within
such cap.
In any case, such aggregate cap shall not affect nor be impacted by the amount
of Accounts Receivable and Unbilled Receivables in excess of the Bad Debt
Reserve that are not collected by the second anniversary of the Closing Date
pursuant to the terms of Section 4.9.
8.6 Xxxxxx Threshold and Cap.
8.6.1. Xxxxxx will have no liability (for indemnification or
otherwise) with respect to claims under Section 8.3.1 with the exception of
claims related to Section 6.6, until the aggregate total of all Damages with
respect to such matters exceeds $250,000; provided, however, that once such
claims exceed $250,000 in the aggregate, then Xxxxxx will be liable for all
Damages within the terms of Section 8.3.1. Notwithstanding the foregoing, Xxxxxx
will be liable for all Damages relating to any intentional or fraudulent Breach
of any of Xxxxxx'x representations and warranties, and (ii) for all Damages for
a breach of the representations and warranties contained in Section 6.6.
8.6.2. Notwithstanding anything to the contrary in this Section 8,
Xxxxxx will have no liability (for indemnification or otherwise) with respect to
claims under Section 8.3.1 and 8.3.3 for Damages (on a cumulative basis) in
excess of $5,000,000; provided, however, that this limitation of liability will
not apply to any Breach of a representation or warranty under Section 6.6.
8.7 Claims Against the Stockholders. Claims against Stockholders for
indemnification pursuant to this Section 8 and for Damages pursuant to Section
8.11, shall be
58
made in the manner provided in the Escrow Agreement, and any such
indemnification shall be paid first from the Escrow Deposit; provided, however,
that if the Escrow Deposit has been fully depleted, the Stockholders shall
remain liable all within the terms of this Section 8 for the amount of any
deficiency, and notice of any claims not covered by the remaining amount of the
Escrow Deposit must be asserted by timely notice to the Stockholder
Representative by Xxxxxx. Notwithstanding the foregoing, in the event that
Damages pursuant to Section 8.11 are related to breach of a covenant or
agreement by one or more, but not all, of the Stockholders, the amount of such
Damages to be paid from the Escrow Deposit with respect to each breaching
Stockholder (the "Breaching Stockholder") shall not exceed the amount computed
as follows: (a) the total amount of the original Escrow Deposit, minus (b) the
amount of such original Escrow Deposit previously distributed, if any, to either
Xxxxxx or to all Stockholders, but not including distributions, if any, (i) made
to Xxxxxx with respect to Breaching Stockholders if not made as part of a
distribution in which all of the Stockholders are Breaching Stockholders, and
(ii) made to all Stockholders in the same proportions as all such Stockholders'
respective proportionate interests in the Xxxxxxxx Shares ("Proportionate
Share"), multiplied by (c) the percentage of the Xxxxxxxx Shares owned by the
Breaching Stockholder immediately prior to the Closing, minus (d) any amount
previously distributed to Xxxxxx with respect to the applicable Breaching
Stockholder if not made as part of a distribution in which all of the
Stockholders are Breaching Stockholders. For the avoidance of doubt, it is the
intention of the Parties that no Stockholder's Proportionate Share of the Escrow
Deposit shall be distributed in connection with any breach of a covenant or
agreement by another Stockholder. Once any Stockholder's Proportionate Share of
the Escrow Deposit has been fully depleted, such Stockholder shall remain
directly and individually liable within the terms of this Section 8 for the
amount of any deficiency.
8.8 Claims Against Xxxxxx. Claims for indemnification pursuant to this
Section 8 must be asserted by timely notice to Xxxxxx from the Stockholder
Representative.
8.9 Third Party Claims.
8.9.1. Subject specifically to Section 8.4 and as otherwise set
forth in this Section 8, if a Person entitled to indemnity under Section 8.2 or
8.3 (an "Indemnified Person") receives notice of the assertion of a Third Party
Claim that may give rise to a claim against a Person obligated to indemnify the
Indemnified Person under this Section 8 (an "Indemnifying Person"), then the
Indemnified Person will promptly give notice of the assertion of the Third Party
Claim to the Indemnifying Person; provided, however, that no failure or delay on
the part of the Indemnified Person in notifying an Indemnifying Person will
relieve the Indemnifying Person from any obligation under this Section 8, except
to the extent that the Indemnifying Person demonstrates that the failure or
delay actually and materially prejudices the defense of the Third-Party Claim.
8.9.2.
(a) The Indemnifying Person will be entitled to participate in
the defense of any Third Party Claim in respect of which notice has been given
pursuant to Section 8.9.1. In addition, the Indemnifying Person may elect (in
its sole and absolute discretion) to assume the sole defense of the Third Party
Claim with counsel reasonably satisfactory to the Indemnified Person (with any
objection by the Indemnified Person being limited to counsel's competency in
such matter or any conflict of interest of such counsel) by (i) giving written
notice to the Indemnified Person of its election to so assume the defense of the
Third Party Claim, and (ii) giving the Indemnified Person evidence reasonably
acceptable to the Indemnified Person that the Indemnifying Person will have
adequate financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations under this Section 8, in each case no later than
fifteen (15) Business Days after the Indemnified Person gives notice of the
Third Party Claim under Section 8.9.1.
(b) If the Indemnifying Person elects to assume the sole
defense of a Third Party Claim pursuant to Section 8.9.2(a), then: (i) it will
not be liable to the Indemnified Person for its fees or expenses subsequently
incurred in connection with the defense of the Third Party Claim other than
reasonable costs of investigation; (ii) the election will conclusively establish
for purposes of this Agreement that the Indemnified Person is entitled to
indemnification under and within the terms of this Agreement for the entirety of
any and all Damages arising from such Third Party Claim; (iii) no compromise or
settlement of such claims may be effected by the Indemnifying Person without the
Indemnified Person's consent, which shall not be unreasonably or untimely
withheld, unless (A) there is no finding or admission of any violation by the
Indemnified Person of any applicable Legal Requirements or any rights of
59
any applicable Person, (B) the Indemnified Person receives a full release of and
from any other claims that may be made against the Indemnified Person by the
Third-Party bringing the Third-Party Claim, and (C) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Person; and (iv) the
Indemnified Person will have no liability with respect to any compromise or
settlement of such claims effected without its consent.
(c) If the Indemnifying Person does not assume the sole
defense of a Third Party Claim in the manner provided in Section 8.9.2(a), then
the Indemnifying Person shall indemnify the Indemnified Person against any
Damages within the terms and conditions of this Section 8 with respect to the
conduct of and any determination made in such Proceeding or any compromise or
settlement effected by the Indemnified Person so long as such Indemnified Person
has conducted such defense and, if applicable, settled or compromised in good
faith.
8.9.3. Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding may materially and adversely affect it or its affiliates other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Person may, by notice to
the Indemnifying Person (within sixty (60) days of the original notice provided
by the Indemnified Party under Section 8.9.1), assume the exclusive right to
defend, compromise, or settle such Proceeding, but the Indemnifying Person will
not be bound by any determination of a Proceeding so defended or any compromise
or settlement effected without its consent (which may not be unreasonably or
untimely withheld).
8.9.4. Notwithstanding the provisions of Section 9.5, the
Indemnifying Person hereby consents to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on the Indemnifying Person with respect to such a claim
anywhere in the world.
8.9.5. With respect to any Third-Party Claim subject to
indemnification under this Section 8:
(a) both the Indemnified Person and the Indemnifying Person,
as the case may be, shall keep the other Person fully informed of the status of
such Third Party Claim and related Proceedings at all stages thereof where such
Person is not represented by its own counsel; and
(b) the Parties agree (each at its own expense) to render to
each other such assistance as they may reasonably require of each other and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense any Third Party Claim.
8.9.6. With respect to any Third Party Claim subject to
indemnification under this Section 8, the Parties agree to cooperate in such
manner as to preserve in full (to the extent possible) the confidentiality of
all Confidential Information and the attorney-client and work-product
privileges. In connection therewith, each Party agrees that:
60
(a) it will use its commercially reasonable best efforts, in
respect of any Third Party Claim in which it has assumed or participated in the
defense, to avoid production of confidential information (consistent with
applicable law and rules of procedure); and
(b) all communications between any Party and counsel
responsible for or participating in the defense of any Third Party Claim shall,
to the extent possible, be made so as to preserve any applicable attorney-client
or work-product privilege.
8.10 Indemnification in Case of Strict Liability or Indemnitee Negligence.
The indemnification provisions in this Section 8, as applicable, shall be
enforceable regardless of whether Liability, subject to the express and
applicable provisions of the relevant representation, warranty, covenant, or
obligation hereunder, is based upon past, present or future acts, claims or
legal requirements (including any past, present or future environmental law,
fraudulent transfer act, occupational safety and health law or products
liability, securities or other legal requirement) and regardless of whether any
Person (including the Person from whom indemnification is sought) alleges or
proves the sole, concurrent, contributory or comparative negligence of the
person seeking indemnification or the sole or concurrent strict liability
imposed upon the person seeking indemnification.
8.11 Violation of Covenants. Notwithstanding anything to the contrary
contained in this Agreement (but subject to Sections 8.2 and 8.3, as applicable,
with respect to representations and warranties under this Agreement), each of
Stockholders and Xxxxxx respectively shall be entitled to exercise any and all
legal and equitable rights and remedies available to them at any time with
respect to breach of any covenant or agreement in the Xxxxxxxx Closing
Documents, the Stockholder Closing Documents, and the Xxxxxx Closing Documents.
SECTION 9. - MISCELLANEOUS
9.1 Expenses. Except as otherwise expressly provided in this Agreement,
each Party will bear its respective fees and expenses incurred in connection
with the preparation, negotiation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expense of its
Representatives; provided, however, that Xxxxxxxx may pay all such fees and
expenses for and on behalf of the Stockholders. All such Xxxxxxxx fees and
expenses, for itself and paid on behalf of Stockholders, shall be accrued in the
Closing Balance Sheet.
9.2 Incorporation by Reference. The Xxxxxx Corresponding Schedule, the
Xxxxxxxx Corresponding Schedule, the Xxxxxx Corresponding Exhibits, the Xxxxxxxx
Corresponding Exhibits, and the Confidentiality Agreement are each hereby
incorporated into and made a part of this Agreement by reference thereto.
9.3 Public Announcements. Any public announcement, press release or
similar publicity with respect to the Merger, if at all, at such time and in
such manner as the parties mutually agree, provided, however, that Xxxxxx shall
be entitled to make, without Xxxxxxxx'x agreement, any disclosure and/or filing
relating to the Closing that is required by law after making good faith efforts
to consult with Xxxxxxxx to the greatest extent reasonably practical in light of
the then existing circumstances and legal requirements. Except with the prior
written
61
consent of the other Parties hereto or as expressly permitted by this Agreement,
no Party hereto nor any of their respective Representatives shall disclose any
information to any Person that is not permitted to be disclosed under the
Confidentiality Agreement. Xxxxxxxx, Stockholders and Xxxxxx will reasonably
consult with each other concerning the means by which the Acquired Companies'
employees, customers, suppliers and others having dealings with the Acquired
Companies will be informed of the Contemplated Transactions, and Xxxxxx will
have the right to be present for any such communication.
9.4 Notices. All notices, Consents, waivers, notifications, and other
communications required or permitted by this Agreement shall be in writing and
shall be deemed given to a Party when (a) delivered to the appropriate address
by hand or by nationally recognized overnight courier service (costs prepaid);
(b) sent by facsimile or e-mail with confirmation of transmission by the
transmitting equipment and confirmed by hard copy mailed by regular mail the
same day; or (c) received or rejected by the addressee, if sent by certified
mail, return receipt requested; in each case to the following addresses,
facsimile numbers or e-mail addresses and marked to the attention of the person
(by name or title) designated below (or to such other address, facsimile number,
e-mail address or person as a Party may designate by notice to the other
Parties):
If to Stockholders: As set forth in Xxxxxxxx Corresponding
Exhibit 9.4.
If to Stockholder Representative: Stockholder Representative
Attention: Xx. Xxxxxxx X. Xxxxxxxx
000 Xxxx Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxx 00000
Facsimile: 000-000-0000
Email: xxxxxxxxx@xxxxxxxx.xxx
If to Xxxxxxxx: Xxxxxxxx Worldwide, Inc.
0000 Xxxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxx
Facsimile: 000-000-0000
Email: xxxxxx@xxxxxxxx.xxx
With a required copy in
order to be effective to: Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile: 213-891-8763
Email: xxxxxxx.xxxxxxxx@xx.xxx
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If to Xxxxxx or Merger Sub: Xxxxxx Interactive Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Facsimile: 000-000-0000
Email: xxxxxxx@xxxxxxxxxxxxxxxxx.xxx
With a required copy in
order to be effective to: Xxxxxx Beach LLP
00 Xxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxx Xxxxxxx, Esq.
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxx.xxx
A copy of any notice provided to Xxxxxx & Xxxxxxx or Xxxxxx Beach LLP hereunder
shall not, in itself, constitute legal notice hereunder.
9.5 Jurisdiction; Service of Process. Any Proceeding arising out of or
relating to this Agreement or any Contemplated Transaction may be brought in the
state or federal courts sitting in the State of Delaware, and each of the
Parties irrevocably submits to the exclusive jurisdiction of each such court in
any such Proceeding, waives any objection it may now or hereafter have to venue
or to convenience of forum, agrees that all claims in respect of the Proceeding
shall be heard and determined only in any such court, and agrees not to bring
any Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction in any other court. The Parties agree that any of them may file a
copy of this paragraph with any court as written evidence of the knowing,
voluntary and bargained agreement between the Parties irrevocably to waive any
objections to venue or to convenience of forum. Process in any Proceeding
referred to in the first sentence of this Section may be served on any Party
anywhere in the world.
9.6 Waiver; Remedies Cumulative; Stockholder Representative. Except as
otherwise expressly provided herein, the rights and remedies of the Parties to
this Agreement are cumulative and not alternative. Except as expressly set forth
herein otherwise, neither any failure nor any delay by any Party in exercising
any right, power, or privilege under this Agreement or any of the documents
referred to in this Agreement will operate to modify or as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or any of the documents referred to in this Agreement can
be discharged by one Party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other Parties; (b) no waiver
that may be given by a Party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one Party will be
deemed to be a waiver of any obligation of that Party or of the right of the
Party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement. Notwithstanding anything to the contrary contained herein, as to
matters for which this
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Agreement specifies notice or action to, with, or by the Stockholder
Representative, the Stockholders shall be bound in the same manner as the
Stockholder Representative.
9.7 Entire Agreement and Modification. This Agreement (including the
documents incorporated herein by reference), the Xxxxxx Closing Documents, the
Xxxxxxxx Closing Documents, the Stockholder Closing Documents, and all other
documents delivered pursuant to this Agreement constitute the complete and
exclusive statement of the terms of the agreement between the Parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, whether written or oral, between the Parties with respect to the
subject matter hereof and thereof, including that certain letter of intent dated
July 22, 2004. This Agreement (including the documents incorporated herein by
reference) may not be amended, supplemented or otherwise modified except by a
written agreement executed by the Party to be charged with the amendment.
9.8 Corresponding Schedules; Definitions.
9.8.1. The information in the Xxxxxxxx Corresponding Schedule, the
Xxxxxxxx Corresponding Exhibit, the Xxxxxx Corresponding Schedule and the Xxxxxx
Corresponding Exhibit constitute (i) exceptions to particular representations,
warranties, covenants and obligations herein of the Party providing such
disclosure schedule to the extent and only to the extent as set forth in this
Agreement, or (ii) descriptions or lists of assets and liabilities and other
items referred to in this Agreement. The statements in the Xxxxxxxx
Corresponding Schedule, the Xxxxxxxx Corresponding Exhibit, the Xxxxxx
Corresponding Schedule and the Xxxxxx Corresponding Exhibit relate only to the
provisions in the Section of this Agreement to which they expressly relate or to
which they are expressly cross-referenced and not to any other provision in this
Agreement. Except for matters set forth in the Xxxxxxxx Corresponding Schedule,
the Xxxxxxxx Corresponding Exhibit, the Xxxxxx Corresponding Schedule, and/or
the Xxxxxx Corresponding Exhibit related to the particular applicable section of
this Agreement, in the event of any inconsistency between the statements in this
Agreement and those in the Xxxxxxxx Corresponding Schedule, the Xxxxxxxx
Corresponding Exhibit, the Xxxxxx Corresponding Schedule and/or the Xxxxxx
Corresponding Exhibit, the statements in this Agreement will control.
9.8.2. The words and phrases defined in this Agreement have the same
meaning, and may be used, in the Xxxxxxxx Corresponding Schedule, the Xxxxxx
Corresponding Schedule, the Xxxxxxxx Corresponding Exhibits and the Xxxxxx
Corresponding Exhibits unless specifically provided to the contrary therein.
9.9 Assignments, Successors, and No Third Party Rights. No Party may
assign any of its rights or delegate any of its obligations under this Agreement
without the prior written consent of the other Parties, except that (i) Xxxxxx
may assign any of its rights and delegate any of its obligations under this
Agreement to any Subsidiary of Xxxxxx provided that Xxxxxx shall remain
primarily liable hereunder, and (ii) in connection with any transfer of shares
in conformity with the terms set forth elsewhere in this Agreement, a
Stockholder may assign its rights under Section 6.6 and 7.3 (subject to Section
8) to a party that assumes all of such Stockholder's obligations related thereto
provided that the Stockholder shall remain primarily liable hereunder. Subject
to the preceding sentence, this Agreement will apply to, be binding in all
respects upon, and inure to the benefit of the successors and permitted assigns
of the Parties.
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Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the Parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement, except such rights as shall inure to a successor or permitted
assignee pursuant to this Section 9.9. No assignment by operation of law due to
a merger or consolidation, and no change of control, shall be deemed to be an
assignment hereunder.
9.10 Severability. If any non-essential provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
9.11 Construction. The headings of Articles and Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All references to "Sections" refer to the corresponding Sections
of this Agreement. Harris, Wirthlin, and each of the Stockholders acknowledge
that they have been represented by legal counsel in the negotiation and drafting
of this Agreement, that this Agreement has been drafted by mutual effort, and
that no ambiguity in this Agreement shall be construed against any Party as
draftsperson.
9.12 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
9.13 Governing Law. This Agreement will be governed by and construed under
the laws of the State of Delaware without regard to conflicts of laws principles
that would require the application of any other law.
9.14 Execution of Agreement. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective execution
and delivery of this Agreement as to the Parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the Parties transmitted by
facsimile shall be deemed to be their original signatures for all purposes.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
XXXXXX INTERACTIVE INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Its: Vice Chairman and CEO
--------------------------
XXXXXXXX WORLDWIDE, INC.
By: Xxxxxxx X. Xxxxxxxx
--------------------------
Its: Founder
--------------------------
CAPITOL MERGER SUB, LLC
By: Xxxxxx Interactive Inc., Its Sole Member
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Its: Vice Chairman and CEO
--------------------------
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This Agreement and Plan of Merger has been signed by the following
persons (individual signature pages have been omitted):
Xxxxxxxx Family Trust
White Family Living Trust
Xxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxx Xxxxxxx
Xxxxx Xxxxxxx
Hakan Atak
Xxx Xxxxxx
Xxxx Xxxxx (solely for purposes of Section 2.7.4)
67