Exhibit 10.20
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AGREEMENT AND PLAN OF MERGER
by and among
XXXXXX.XXX LTD.,
ITT ACQUISITION INC.
INTERACTIVE TRAFFIC INC.,
and
THE STOCKHOLDERS LISTED ON ANNEX I
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Dated as of October 21, 1999
TABLE OF CONTENTS
ARTICLE I ................................................................... 2
THE MERGER .................................................................. 2
Section 1.1 The Merger ................................................... 2
Section 1.2 Effective Time ............................................... 2
Section 1.3 Certificate of Incorporation and By-Laws of the
Surviving Corporation ........................................ 2
1.3.1 Certificate of Incorporation ................................. 2
1.3.2 By-Laws ...................................................... 2
Section 1.4 Directors and Officers of the Surviving Corporation .......... 3
1.4.1 Directors of the Surviving Corporation ....................... 3
1.4.2 Officers of the Surviving Corporation ........................ 3
ARTICLE II .................................................................. 3
CONVERSION OF STOCK AND COMMON STOCK ........................................ 3
Section 2.1 Definitions .................................................. 3
Section 2.2 Conversion of Shares ......................................... 4
2.2.1 MergerSub Common Stock ....................................... 4
2.2.2 Preferred Stock .............................................. 4
2.2.3 Company Common and Preferred Stock ........................... 5
2.2.4 Calculation of Revenues and PBT .............................. 7
2.2.5 Accounting/Dispute Procedures ................................ 8
2.2.6 Examination of Books and Records ............................. 8
2.2.78 Earn-Out Consideration ....................................... 9
2.2.8 Acceleration of Certain Payments ............................. 9
2.2.9 Company Treasury Stock ....................................... 9
Section 2.3 Stock Options ................................................ 9
2.3.1 Conversion of Outstanding Options ............................ 9
2.3.2 Agency Action ................................................ 10
Section 2.4 Surrender of Stock Certificates .............................. 10
2.4.1 Preferred Stock .............................................. 10
2.4.2 Company Common and Preferred Stock ........................... 11
2.4.3 Additional Cash Payment ...................................... 11
Section 2.5 Tangible Net Worth Adjustment ................................ 11
2.5.1 Payment of Reconciled Purchase Price ......................... 11
2.5.2 Other Definitions ............................................ 12
2.5.3 Accounting Procedures ........................................ 12
2.5.4 Examination of Books and Records ............................. 13
Section 2.6 Payment of the Purchase Price ................................ 13
2.6.1 Purchase Price ............................................... 13
2.6.2 No Fractional Shares ......................................... 14
Section 2.7 Indemnity Escrow ............................................. 14
Section 2.8 Closing ...................................................... 14
Section 2.9 Appointment of Representative ................................ 14
2.9.1 Appointment of Representative ................................ 14
2.9.2 Indemnification of Representative ............................ 15
ARTICLE III ................................................................. 15
REPRESENTATIONS OF THE STOCKHOLDERS AND THE COMPANY ......................... 15
Section 3.1 Execution and Validity of Agreements; Restrictive Documents .. 15
3.1.1 Execution and Validity ....................................... 15
3.1.2 No Restrictions .............................................. 16
3.1.3 Non-Contravention ............................................ 16
3.1.4 Approvals and Consents ....................................... 16
Section 3.2 Execution and Validity of Agreement; Existence and
Good Standing ................................................ 17
Section 3.3 Subsidiaries and Investments; Capital Stock .................. 17
3.3.1 Subsidiaries and Investments ................................. 17
3.3.2 Capital Stock; Options ....................................... 17
Section 3.4 Financial Statements and No Material Changes ................. 18
Section 3.5 Books and Records ............................................ 18
Section 3.6 Title to Properties; Encumbrances ............................ 18
Section 3.7 Real Property ................................................ 19
3.7.1 Owned Real Property .......................................... 19
3.7.2 Leased Real Property ......................................... 19
Section 3.8 Contracts .................................................... 20
Section 3.9 Non-Contravention; Approvals and Consents .................... 21
3.9.1 Non-Contravention ............................................ 21
3.9.2 Approvals and Consents ....................................... 21
Section 3.10 Litigation ................................................... 21
Section 3.11 Taxes ........................................................ 22
Section 3.12 Liabilities .................................................. 23
Section 3.13 Insurance .................................................... 23
Section 3.14 Intellectual Properties ...................................... 23
3.14.1 Definitions .................................................. 23
3.14.2 Registrations ................................................ 24
Section 3.15 Compliance with Laws; Licenses and Permits ................... 24
3.15.1 Compliance ................................................... 24
3.15.2 Licenses ..................................................... 25
Section 3.16 Client Relations ............................................. 25
Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable ....... 25
Section 3.18 Employment Relations ......................................... 26
Section 3.19 Employee Benefit Matters ..................................... 26
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3.19.1 List of Plans ................................................ 26
3.19.2 Severance .................................................... 27
3.19.3 Multi-Employer Plans ......................................... 27
3.19.4 Welfare Benefit Plans ........................................ 27
3.19.5 Administrative Compliance .................................... 27
3.19.6 Tax-Qualification ............................................ 28
3.19.7 Funding; Excise Taxes ........................................ 28
3.19.8 Tax Deductions ............................................... 28
Section 3.20 Interests in Customers, Suppliers, Etc........................ 29
Section 3.21 Bank Accounts; Powers of Attorney; Authority of
Representative ............................................... 29
Section 3.22 Compensation of Employees .................................... 29
Section 3.23 No Changes Since the Balance Sheet Date ...................... 30
Section 3.24 Corporate Controls ........................................... 31
Section 3.25 Disclosure ................................................... 31
Section 3.26 Brokers ...................................................... 31
Section 3.27 Year 2000 Compliant .......................................... 32
3.27.1 Definition ................................................... 32
3.27.2 Computer Systems ............................................. 32
3.27.3 Other Products and Services .................................. 32
Section 3.28 Copies of Documents .......................................... 33
ARTICLE IV .................................................................. 33
REPRESENTATIONS OF MERGERSUB AND PARENT ..................................... 33
Section 4.1 Existence and Good Standing .................................. 33
Section 4.2 Execution and Validity of Agreements ......................... 33
Section 4.3 Non-Contravention; Approvals and Consents .................... 34
4.3.1 Non-Contravention ............................................ 34
4.3.2 Approvals and Consents ....................................... 34
Section 4.4 Agency Shares ................................................ 34
Section 4.5 MergerSub .................................................... 34
Section 4.6 Brokers ...................................................... 35
Section 4.7 Litigation ................................................... 35
Section 4.8 Disclosure ................................................... 35
ARTICLE V ................................................................... 35
ACTIONS AT CLOSING BY THE COMPANY AND THE STOCKHOLDERS ...................... 35
Section 5.1 Required Approvals and Consents .............................. 35
Section 5.2 Regulatory Consents and Approvals ............................ 36
Section 5.3 Good Standing Certificates ................................... 36
Section 5.4 Certified Resolutions ........................................ 36
Section 5.5 Employment Agreements ........................................ 36
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Section 5.6 Non-Solicitation/Non-Servicing Agreement ..................... 36
Section 5.7 Opinion of Counsel ........................................... 36
Section 5.8 Investment Representation Certificate ........................ 37
Section 5.9 Lockup Agreement ............................................. 37
Section 5.10 Repayment of Loans ........................................... 37
Section 5.11 Appointment of Representative ................................ 37
Section 5.12 Optionholder Forbearance Agreements .......................... 37
Section 5.13 Indemnity and Escrow Agreement ............................... 37
Section 5.14 Proceedings .................................................. 37
ARTICLE VI .................................................................. 37
ACTIONS AT CLOSING BY PARENT AND MERGERSUB .................................. 37
Section 6.1 Required Approvals, Notices and Consents ..................... 38
Section 6.2 Regulatory Consents and Approvals ............................ 38
Section 6.3 Certified Resolutions ........................................ 38
Section 6.4 Opinion of Counsel ........................................... 38
Section 6.5 Employment Agreements ........................................ 38
Section 6.6 Non-Solicitation/Non-Servicing Agreements .................... 38
Section 6.7 Xxxxxx.Xxx Options ........................................... 38
Section 6.8 Indemnity and Escrow Agreement ............................... 39
Section 6.9 Proceedings .................................................. 39
ARTICLE VII ................................................................. 39
OTHER AGREEMENTS ............................................................ 39
Section 7.1 Separate Subsidiary .......................................... 39
Section 7.2 Management of the Surviving Corporation ...................... 39
Section 7.3 Private Placement and Registration and Listing ............... 39
Section 7.4 Release of Stockholder Guarantees ............................ 39
Section 7.5 Autonomy ..................................................... 40
ARTICLE VIII ................................................................ 42
SURVIVAL; INDEMNITY ......................................................... 42
Section 8.1 Survival ..................................................... 42
Section 8.2 Obligation of the Company and the Stockholders to Indemnify .. 42
8.2.1 General Indemnity ............................................ 42
8.2.2 Special Indemnity ............................................ 43
8.2.3 Clarification of the term .................................... 43
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Section 8.3 Obligation of Parent to Indemnify ............................ 44
Section 8.4 Indemnification Procedure for Third Party Claims ............. 44
Section 8.6 Limitations on and Other Matters Regarding Indemnification ... 46
8.6.1 Indemnity Cushion and Cap .................................... 46
8.6.2 Termination of Indemnification Obligations of the
Stockholders ................................................. 47
8.6.3 Termination of Indemnification Obligations of Parent ......... 47
8.6.4 Treatment .................................................... 47
8.6.5 Exceptions ................................................... 47
ARTICLE IX .................................................................. 48
MISCELLANEOUS ............................................................... 48
Section 9.1 Expenses ..................................................... 48
Section 9.2 Governing Law ................................................ 48
Section 9.3 "Person" Defined ............................................. 48
Section 9.4 "Knowledge" Defined .......................................... 49
Section 9.5 "Affiliate" Defined .......................................... 49
Section 9.6 Material Adverse Effect Defined .............................. 49
Section 9.7 Captions ..................................................... 49
Section 9.8 Publicity .................................................... 49
Section 9.9 Notices ...................................................... 49
Section 9.10 Parties in Interest .......................................... 50
Section 9.11 Severability ................................................. 51
Section 9.12 Counterparts ................................................. 51
Section 9.13 Entire Agreement ............................................. 51
Section 9.14 Amendments ................................................... 51
Section 9.15 Third Party Beneficiaries .................................... 51
Section 9.16 Use of Terms ................................................. 51
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of October 21,
1999 by and among XXXXXX.XXX LTD., a Delaware corporation ("Parent"), ITI
ACQUISITION INC., a Delaware corporation and wholly-owned subsidiary of Parent
("MergerSub"), INTERACTIVE TRAFFIC, INC., a Delaware corporation (the
"Company"), and the PERSONS LISTED ON ANNEX I hereto, (individually, a
"Stockholder," and collectively, the "Stockholders").
WITNESSETH:
WHEREAS, the authorized capital stock of the Company consists of 500,000
shares of common stock, par value $.01 per share, of which 213,483.32 shares are
issued and outstanding, and 37,041 shares of Series A Convertible preferred
stock, $.01 par value per share, all of which are issued and outstanding, and
there are outstanding options to acquire 93,116 shares of common stock of the
Company pursuant to the Company's option plan;
WHEREAS, the authorized capital stock of MergerSub consists of 1,000
shares of common stock, $01 par value, of which 100 shares are issued and
outstanding;
WHEREAS, the Boards of Directors of Parent, MergerSub and the Company each
have determined that it is advisable and in the best interests of the
corporations and their respective shareholders to consummate, and have approved
the business combination transaction provided for herein, in which the Company
would merge with and into MergerSub (the "Merger") upon the terms and subject to
the conditions of this Agreement; and
WHEREAS, Parent, MergerSub, the Company and the Stockholders desire to
make certain representations, warranties, covenants and agreements in connection
with the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, Parent, MergerSub, the
Company and the Stockholders hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2), the Company shall
be merged with and into MergerSub and the separate corporate existence of the
Company shall thereupon cease. MergerSub (i) shall be the successor or surviving
corporation in the Merger (sometimes herein referred to as the "Surviving
Corporation"), (ii) shall continue to be governed by the laws of the State of
Delaware, and (iii) the separate corporate existence of MergerSub with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. The Merger shall have the effects of Section 259 of the Delaware
General Corporation Law.
Section 1.2 Effective Time. Parent, MergerSub, and the Company will cause
an executed original of an appropriate Certificate of Merger (the "Certificate
of Merger") to be filed on the Closing Date (as defined in Section 2.8) with the
Secretary of State of the State of Delaware. The Merger shall become effective
on the date on which the Certificate of Merger has been duly filed with the
Secretary of State of Delaware, and such time is hereinafter referred to as the
"Effective Time." Notwithstanding the Effective Time, it is agreed that the
economic effort of the merger, for purposes of Parent's and Surviving
Corporation's internal accounting and recordkeeping purposes, will be deemed to
be October 1, 1999.
Section 1.3 Certificate of Incorporation and By-Laws of the Surviving
Corporation.
1.3.1 Certificate of Incorporation. The Certificate of Incorporation of
the Surviving Corporation in the form of Exhibit A hereto shall be at and as of
the Effective Time the Certificate of Incorporation of MergerSub immediately
prior to the Effective Time (except that the name of the Surviving Corporation
shall be changed to "Interactive Traffic Inc.").
1.3.2 By-Laws. The By-Laws of the Surviving Corporation in the form of
Exhibit B hereto shall be at and as of the Effective Time the By-Laws of
MergerSub immediately prior to the Effective Time.
Section 1.4 Directors and Officers of the Surviving Corporation.
1.4.1 Directors of the Surviving Corporation. The directors of the
Surviving Corporation at the Effective Time shall, from and after the Effective
Time, be the Persons (as defined in Section 9.3 below) listed on Schedule 1.4.1
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
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1.4.2 Officers of the Surviving Corporation. The officers of the Surviving
Corporation shall, from and after the Effective Time, be the Persons listed on
Schedule 1.4.2 until their successors have been duly elected or appointed and
qualified or until their death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE II
CONVERSION OF PREFERRED STOCK AND COMMON STOCK
Section 2.1 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Agency Shares" shall mean shares of common stock, par value $.001 per
share, of Parent.
(b) "Company Common Stock" shall mean each issued and outstanding share of
common stock, par value $.01 per share, of the Company.
(c) "Indemnity Escrow" shall mean an aggregate of 236,250 of the Agency
Shares otherwise payable to the holders of Company Common and Preferred
Stock pursuant to Section 2.2.3(i) hereof and 37.5% of the Agency Shares
(allocated in accordance with Schedule I to the Indemnity and Escrow
Agreement) payable pursuant to Section 2.2.3(iv) to the holders of Company
Common and Preferred Stock and (following exercise of the converted ITI
Options pursuant to Section 2.3.1 hereof), to holders of ITI Options, to
be held by Parent in escrow, in accordance with Section 2.7 hereof
(d) "Payment Acceleration Event" shall mean the occurrence, prior to
December 31, 2000 of (i) a merger, consolidation, combination,
reorganization or other transaction involving MergerSub that results in
less than 80% of the combined voting power of the surviving or resulting
entity being owned directly or indirectly by Parent, or the sale, transfer
or other disposition of all or substantially all of the assets or business
of MergerSub other than to Parent or a controlled affiliate of Parent;
(ii) the acquisition (whether by merger, consolidation, combination,
reorganization or other transaction) by Parent or any controlled affiliate
of Parent of any company engaged in the internet traffic-driving business
and having annualized revenues from such activity (based upon such
acquired company's actual revenues during the calendar quarter immediately
preceding such acquisition) of $5 million or more; or (iii) the breach by
Parent of its obligations under Section 7.1 hereof
(e) "Preferred Stock" shall mean each issued and outstanding share of
Series A Preferred Stock, par value $.01 per share, of the Company.
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(f) "Securities Act" means the Securities act of 1933, as amended, or any
similar or successor statute, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, all as the same
shall be in effect at the time.
(g) "Representative" shall have the meaning set forth in Section 2.9.1
below.
Section 2.2 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof
2.2.1 MergerSub Common Stock. Each issued and outstanding share of the
common stock, par value $0.01 per share, of MergerSub ("MergerSub Common Stock")
shall be unchanged and remain as one fully paid and non-assessable share of
common stock, $0.01 par value per share, of the Surviving Corporation
("Surviving Corporation Common Stock"). Each certificate representing
outstanding shares of MergerSub Common Stock shall at the Effective Time
represent an equal number of shares of the Surviving Corporation Common Stock.
2.2.2 Preferred Stock. Each issued and outstanding share of Preferred
Stock shall be canceled and converted into and shall represent the following:
(i) a right to receive, at the Closing, a cash payment of $32.33 and
one (1) Agency Share, collectively representing the per share liquidation
preference of the Preferred Stock; provided however, that none of such
Agency Shares shall be issued or delivered to a stockholder of the Company
unless and until such stockholder shall have executed and delivered to
Parent a Lock-up Agreement and Certificate of Investment Representation in
the forms of Exhibits G and F hereto respectively; and
(ii) a right to receive the Agency Shares and cash amounts set forth
in 2.2.3 below.
2.2.3 Company Common and Preferred Stock. Each issued and outstanding
share of Company Common Stock and Preferred Stock shall be converted into and
shall represent the following:
(i) subject to the Indemnity Escrow, a right to receive, at the
Closing, payment of 1.725522 Agency Shares in accordance with Section
2.4.2; provided however, that none of such Agency Shares shall be issued
or delivered to a stockholder of the Company unless and until such
stockholder shall have executed and delivered to Parent a Lock-up
Agreement and Certificate of Investment Representation in the forms of
Exhibits G and F hereto respectively;
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(ii) together with each outstanding ITI Option to acquire shares of
Company common Stock, a right to receive, a cash payment of the Reconciled
Purchase Price, subject to and in accordance with Section 2.5.
(iii) together with each outstanding ITI Option to acquire shares of
Company common Stock, a right to receive, upon the earlier of (A) 30
business days after the Parent has closed its firm commitment underwritten
initial public offering of Agency Shares pursuant to an effective
registration statement under the Securities Act, and (B) March 31, 2000, a
payment of cash equal to $2.91, in accordance with Section 2.4.
(iv) together with each outstanding ITI Option to acquire shares of
Company common Stock, the contingent right to receive, within 5 business
days after the Determination shall have become final and subject to the
Indemnity Escrow, such stockholder's proportional amount of that number of
Agency Shares determined as follows:
Schedule 2.2.3 sets forth a certain revenue target (the "Revenue Target")
and a certain profit before tax target (the "PBT Target") in respect of
the operations of the Company for the period commencing October 1, 1999
and ending September 30, 2000 (the "Measuring Period"). Subject to the
Surviving Corporation's achievement of the Revenue Target and the PBT
Target, Parent will deliver certificates registered in the name of the
respective Company stockholders and holders of ITI Options representing an
aggregate of 320,000 additional Agency Shares or such lesser number of
Agency Shares determined as follows (to such Persons and to Escrow Agent
for deposit as part of the Indemnity Escrow pursuant to Section 2.7
hereof):
(a) if both the Revenue Target and the PBT Target are achieved,
320,000 Agency Shares;
(b) if Revenues are less than 80% of the Revenue Target and/or PBT
is less than 80% of the PBT Target, 0 (none) Agency Shares;
(c) if the Revenue Target is met and PBT is at least 80% of the PBT
Target, then a number of Agency Shares determined under the following
formula:
(the average of (x) 100% and (y) PBT divided by the PBT Target)
times 320,000;
(d) if the PBT Target is met and Revenues are less than the Revenue
Target but at least 80% of the Revenue Target, then a number of Agency
Shares determined under the following formula:
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(the average of (x) 100% and (y) Revenues divided by the Revenue
Target) times 320,000;
(e) If Revenues are less than the Revenue Target but at least 80% of
the Revenue Target and PBT is less than the PBT Target but at least 80% of
the PBT Target, then a number of Agency Shares determined under the
following formula:
(the average of (x) Revenues divided by the Revenue Target and (y)
PBT divided by the PBT Target) times 320,000.
For example, if Revenues are 85 and Revenue Target is 100 and PBT is
95 and PBT Target is 100:
Revenues = 85 = .85
Revenue Target 100
PBT = 95 = .95
PBT Target 100
(.85 + .95) x 320,000 = 288,000 shares
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2.2.4 Calculation of Revenues and PBT.
(i) For the purpose of determining the Surviving Corporation's
revenues and profitability, the following terms shall have the meanings
assigned to them in this clause 2.4.4:
"Revenues" shall mean the commissions and fees, xxxx-ups and hourly
charges earned by the Surviving Corporation (excluding pass-through
expenses) during the measuring period for work generated or performed by
employees or contractors and charged to clients, determined in accordance
with U.S. generally accepted accounting principles ("GAAP");
"PBT" shall mean the net income (loss) of the Surviving Corporation
before provision for all income-based taxes determined in accordance with
GAAP; provided that in making such determinations:
(i) neither the proceeds from nor any dividends or refunds xvith
respect to, nor any increases in the cash surrender value of, any life
insurance policy under which the Surviving Corporation is the named
beneficiary or otherwise entitled to recovery, shall be included as
income, and the premium
6
expense related to any such life insurance policy shall not be included as
an expense;
(ii) any write-off or amortization of goodwill arising out of the
merger of the Company shall not be treated as an expense;
(iii) intercompany management fees charged by Parent to the
Surviving Corporation shall not be treated as an expense;
(iv) any Losses (as defined in Section 8.2.3) of Parent and/or the
Surviving Corporation which give rise to an indemnity payment pursuant to
the indemnification provisions of Section 8.2 and which are assumed by one
or more of the Stockholders or as to which Parent and/or the Surviving
Corporation has been reimbursed, shall not be treated as an expense, and
there shall be excluded from income any amount received by the Surviving
Corporation pursuant thereto;
(v) any expenses of the Company prior to the Closing incurred in
connection with the negotiation, preparation and execution of this
Agreement and the other documents to be delivered at the Closing hereunder
(including without limitation the fees and disbursements of their
respective attorneys and accountants and any brokers or finders fees)
shall not be treated as an expense;
(vi) any stock or stock option based compensation shall not be
treated as an expense;
(vii) any indemnity payments made by a Parent Indemnifying Party to
any Stockholder Indemnified Party shall not be treated as income;
(viii) any costs and expenses incurred by the Stockholders in
contesting the Determination or in pursuing any indemnity claim under
Section 8.3 shall not be treated as an expense.
2.2.5 Accounting/Dispute Procedures. On or prior to November 15, 2000,
Parent shall deliver to the Representative a report setting forth the Revenues
and PBT of the Surviving Corporation for the Measuring Period, together with a
calculation of the payment due under Section 2.2.3(iii) (the "Determination").
If the Stockholders do not agree that the Determination correctly states the
Revenues or Profit Margin for the Measuring Period, or properly calculates the
payment due under Section 2.2.3(iii), the Representative shall promptly (but not
later than 15 days after the delivery of the Determination) give written notice
to Parent of any exceptions thereto (in reasonable detail describing the nature
of the disagreement asserted). If the Representative and Parent reconcile their
differences, the determination shall be adjusted accordingly and shall thereupon
become binding, final and conclusive upon all of
7
the parties hereto and enforceable in a court of law. If the Representative and
Parent are unable to reconcile their differences in writing within 30 days after
written notice of exceptions is delivered to Parent, the items in dispute shall
be submitted to the New York City office of a mutually-acceptable accounting
firm selected from among the six largest accounting firms in the United States
in terms of gross revenues (the "Independent Auditors") for final determination,
and the Determination shall be deemed adjusted in accordance with the findings
of the Independent Auditors and shall become final and conclusive upon all of
the parties hereto and enforceable in a court of law. The Independent Auditors
shall consider only the items in dispute and shall be instructed to act within
20 days (or such longer period as the Representative and Parent may agree) to
resolve all items in dispute. If the Representative does not give notice of any
exception within 15 days after the delivery of the Determination, or if the
Representative gives written notification of the Stockholders' acceptance of the
Determination prior to the end of such 15-day period, the amounts set forth in
the Determination shall thereupon become binding, final and conclusive upon all
of the parties hereto and enforceable in a court of law.
2.2.6 Examination of Books and Records. The books and records of the
Surviving Corporation shall be made available during normal business hours upon
reasonable advance notice at the principal office of the Surviving Corporation
to the parties hereto, and the Independent Auditors to the extent required to
make the calculations required under Section 2.2.5. The parties hereto shall
cause the Surviving Corporation to make arrangements to make available to the
Independent Auditors and the Representative any back-up materials generated by
the Surviving Corporation, Parent and/or their respective representatives in
preparing the Determination and/or to support a position which is contrary to
the decision taken by the other party with respect to the Determination.
2.2.7 Earn-Out Consideration. Provided that the Company achieves certain
agreed-upon key success factors (employee retention, utilization and monthly
revenue per billable head for each of the quarterly periods referred to below)
described on Schedule 2.2.7, Parent will pay to the holders of Company Common
Stock, the holders of options to purchase Company Common Stock and the holders
of Preferred Stock, pro rata in accordance with their respective interests, up
to an aggregate of $500,000 in respect of each of the four calendar quarters
(commencing October 1, 1999) that the Company shall achieve such quarterly
targets up to a maximum aggregate amount of $2,000,000. Payment of such earn-out
amounts will be made within 30 days following the audited close of the calendar
quarter to which such payment relates.
2.2.8 Acceleration of Certain Payments. Upon the occurrence of a Payment
Acceleration Event, each of the Revenue Target and the PBT Target will be deemed
to have been achieved and each of the key success factors described on Schedule
2.2.7 for the calendar quarter in which such Payment Acceleration Event occurs
and each subsequent quarter, will be deemed to have been achieved, and all
amounts due to the Company stockholders and holders of ITI Options (subject to
the Indemnity Escrow) as a result thereof,
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will be paid to them by Parent within 30 days following the completion of the
transaction constituting the Payment Acceleration Event.
2.2.9 Company Treasury Stock. Each share of Company Common Stock or
Preferred Stock that is owned by the Company as treasury stock shall be canceled
and retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
Section 2.3 Stock Options.
2.3.1 Conversion of Outstanding Options. Options to purchase shares of
Company Stock that have been issued by the Company and which are outstanding at
the Effective Time (each, an "ITT Option") pursuant to the ITI 1999 Stock
Incentive Plan (the "ITI Option Plan") shall be automatically converted into
options to purchase Agency Shares as follows:
(a) in the case of each holder of outstanding and unexercised ITI
Options at the Effective Time, the aggregate number of Agency Shares issuable
upon the exercise of the converted ITI Options after the Effective Time shall be
equal to the product of 1.725522 multiplied by the number of shares of the
Company Common Stock issuable upon exercise of the ITI Options immediately prior
to the Effective Time, such product to be rounded down to the nearest whole
share of Agency Shares; and
(b) the exercise price per share of each converted ITI Option shall
be equal to the quotient of the exercise price of each such ITI Option at the
Effective Time divided by 1.725522, such quotient to be rounded up to the
nearest whole cent;
PROVIDED, however, that, in the case of any ITI Option that is intended to
qualify as an incentive stock option under Section 422 of the Code, the number
of Agency Shares issuable upon exercise of and the exercise price per share for
such converted ITI Option determined in the manner provided above shall be
further adjusted as necessary to conform to the requirements of Section 424(b)
of the Code. Options to purchase Agency Shares that arise from the operation of
this Section 2.3.1 shall be referred to as the "Converted Options." All
Converted Options shall be exercisable for the same period and otherwise have
the same terms and conditions applicable to the ITI Options which they replace,
as provided under the current terms of the ITI Options. Prior to the Effective
Time, Agency shall take, or cause to be taken, all necessary action to effect
the intent of the provisions set forth in this Section 2.3.1.
(c) a right to receive the Agency Shares and cash amounts set forth
in 2.2.3 (ii) and (iv) above.
2.3.2 Agency Action. Agency shall, prior to the Effective Time, take all
corporate action necessary to reserve for future issuance a sufficient
additional number of Agency Shares to provide for the satisfaction of its
obligations with respect to the Converted Options.
9
As soon as practicable following the effective time of Agency's pending
Registration (S-1) Statement with the Securities and Exchange Commission, Agency
shall file a registration statement on Form S-8 of the Securities and Exchange
Commission (or any successor or other appropriate form) with respect to the
Agency Shares issuable upon exercise of the Converted Options to persons who
become employees of the Surviving Corporation at the Effective Time.
Section 2.4 Surrender of Stock Certificates. At the Closing (as defined in
Section 2.8 below):
2.4.1 Preferred Stock. Each holder of Preferred Stock shall surrender the
certificate(s) representing his/her shares of Preferred Stock, and in exchange
therefor he/she shall receive the cash payment and that number of Agency Shares
set forth in Section 2.2.2 and 2.2.3, as applicable.
2.4.2 Company Common and Preferred Stock. Each holder of Company Common
Stock shall surrender the certificate(s), if any, representing his/her shares of
Company Stock, and in exchange therefor and together with each holder of
Preferred Stock he/she shall receive the cash payment and that number of Agency
Shares set forth in Section 2.2.3, as applicable, subject to the Indemnity
Escrow.
2.4.3 Additional Cash Payment. Upon the earlier of (i) 30 business days
after Parent shall have closed its firm commitment underwritten initial public
offering referred to in Section 2.2.3(iii), and (ii) March 31, 2000, the holders
of the Company Common Stock, the holders of Preferred Stock and holders of ITI
Options, shall receive the cash payment referred to therein.
Section 2.5 Tangible Net Worth Adjustment. If the Tangible Net Worth is a
positive number, the purchase price payable to the holders of Company Common
Stock, the holders of Preferred Stock and holders of ITI Options pursuant to
Section 2.2.3(ii) in the aggregate shall be $1,802,464.50 (the "Net Worth
Amount"). If the Tangible Net Worth is a negative number, the Net Worth Amount
will be reduced by the amount of such negative Tangible Net Worth (as so
adjusted, the "Adjusted Net Worth Amount"). The Net Worth Amount or the Adjusted
Net Worth Amount, whichever is applicable, divided by 343,640.32 (is referred to
herein as the "Reconciled Purchase Price").
2.5.1 Payment of Reconciled Purchase Price.
(i) On the Closing Date, the Stockholders shall deliver to Parent
and MergerSub an estimated balance sheet of the Company immediately prior
to the Effective Time (the "Estimated Closing Balance Sheet") and,
provided that the Tangible Net Worth reflected on the Estimated Closing
Balance Sheet is a positive number, Parent shall pay, at Closing, to the
holders of Company Common Stock, the
10
holders of Preferred Stock and holders of ITI Options, the aggregate
amount of $1,400,000 as an advance against the aggregate Reconciled
Purchase Price.
(ii) Within 10 days following the Special Determination, Parent
shall pay to the holders of Company Common Stock, the holders of Preferred
Stock and holders of ITI Options, the remainder, if any, of the aggregate
Reconciled Purchase Price, provided, however, that if the aggregate
Reconciled Purchase Price shall be less than $1,400,000, the Stockholders
shall immediately pay over to Parent, in cash, the full amount of such
shortfall.
2.5.2 Other Definitions. "Tangible Net Worth" shall mean the combined
stockholders' equity (deficit) of the Company (exclusive of goodwill and other
like intangibles) immediately prior to the Effective Time, prepared in
accordance with GAAP and as finally determined pursuant to Section 2.5.2 below.
11
2.5.3 Accounting Procedures.
(i) Parent shall cause Xxxxxx Xxxxxxxx LLP, or another independent
accounting firm chosen by Parent (the "Accountants") as soon as practicable
after the Closing, to prepare in accordance with GAAP, a report containing an
audited balance sheet of the Company immediately prior to the Effective Time
(the "Closing Balance Sheet"), together with a statement of the Accountants
based upon such report and stating that it was prepared in accordance with this
Agreement and setting forth the Tangible Net Worth and all adjustments required
to be made to such audited balance sheet in order to make the calculations
required by this Section 2.5 (the "Special Determination"). If the Stockholders
do not agree that the Special Determination correctly states the Tangible Net
Worth, the Representative shall promptly (but not later than 45 days after the
delivery to them of the Special Determination) give written notice to Parent of
any exceptions thereto (in reasonable detail describing the nature of the
disagreement asserted). If the Representative and Parent reconcile their
differences, the Tangible Net Worth calculation shall be adjusted accordingly
and shall thereupon become binding, final and conclusive upon all of the parties
hereto and enforceable in a court of law. If the Representative and Parent are
unable to reconcile their differences in writing within 20 days after written
notice of exceptions is delivered to Parent (the "Reconciliation Period"), the
items in dispute shall be submitted to a mutually acceptable accounting firm
(other than the Accountants) selected from any of the five largest accounting
firms in the United States in terms of gross revenues (the "Independent
Auditors") for final determination, and the Tangible Net Worth calculation shall
be deemed adjusted in accordance with the determination of the Independent
Auditors and shall become binding, final and conclusive upon all of the parties
hereto and enforceable in a court of law. The Independent Auditors shall
consider only the items in dispute and shall be instructed to act within 20 days
(or such longer period as the Stockholders and Parent may agree) to resolve all
items in dispute. If the Representative does not give notice of any exception
within 45 days after the delivery to them of the Special Determination or if the
Representative gives written notification of the Stockholders' acceptance of the
Tangible Net Worth prior to the end of such 45 day period, the Tangible Net
Worth set forth in the Special Determination shall thereupon become binding,
final and conclusive upon all the parties hereto and enforceable in a court of
law.
(ii) In the event the Independent Auditors are for any reason unable or
unwilling to perform the services required of it under this Section 2.5, then
Parent and the Representative agree to select another accounting firm from among
the five largest accounting firms in the United States in terms of gross
revenues to perform the services to be performed under this Section 2.5.3 by the
Independent Auditors. If Parent and the Representative fail to select the
Independent Auditors as required by clause (i) above within seven days after the
expiration of the Reconciliation Period or fail to select another accounting
firm within seven days after it is determined that the Independent Auditors will
not perform the services required, either Parent or the Representative may
request the American Arbitration Association in New York, New York to appoint an
independent firm of certified public accountants to perform the services
required under this Section 2.5 by the Independent Auditors. The fees of the
American
12
Arbitration Association shall be shared equally by Parent, on the one hand, and
the Stockholders on the other hand. For purposes of this Section 2.5 the term
"Independent Auditors" shall include such other accounting firm chosen in
accordance with this clause (ii).
(iii) The Independent Auditors shall determine the party (i.e., Parent or
the Stockholders, as the case may be) whose asserted position as to the amount
of Purchase Price payment for the period under examination before the
Independent Auditors is furthest from the determination of the Reconciled
Purchase Price payment by the Independent Auditors, which non-prevailing party
shall pay the fees and expenses of the Independent Auditors.
2.5.4 Examination of Books and Records. The books and records of the
Surviving Corporation and its subsidiaries (if any) shall be made available
during normal business hours upon reasonable advance notice at the principal
office of the Surviving Corporation, to the parties, the Accountants and the
Independent Auditors to the extent required to determine the calculations
required under this Section 2.5. The parties hereto shall cause the Surviving
Corporation to make reasonable arrangements to make available to Parent, the
Representative and their representatives (including auditors) any back-up
materials generated by the Surviving Corporation or the Accountants, as the case
may be, with respect to any adjustments made by them to the financial statements
in the process of preparing the Special Determination. In addition, the
Representative, on the one hand, and Parent, on the other hand, shall make
available to the other party and their representatives (including auditors) any
back-up materials generated by them to support a position which is contrary to
the position taken by the other party.
Section 2.6 Payment of the Purchase Price.
2.6.1 Purchase Price. Payment of each cash component of the Purchase Price
under Section 2.4 or 2.5, shall be made by Parent in cash by direct wire
transfer (of immediately available funds) to one or more accounts of the
Stockholders as set forth on Schedule 2.6 hereto, or as the Stockholders may
otherwise direct. The Stockholders assume responsibility for distribution of the
cash component of Purchase Price among the stockholders and option holders of
the Company.
2.6.2 No Fractional Shares. No fractional shares of Agency Stock shall be
issued, but in lieu thereof each Stockholder will be paid in cash the value of
any such fractional shares of Agency Stock such Stockholder would have otherwise
be entitled to receive based on a stipulated value of $10.00 per share.
Section 2.7 Indemnity Escrow. Solely to fund and secure the payment
obligations of the Stockholders to a Parent Indemnified Party (as defined in
Section 8.2.1), the Stockholders shall deliver to the corporate secretary and
general counsel of Parent as Escrow Agent, an aggregate of 236,250 of the Agency
Shares issuable to Company stockholders at Closing, and 37.5% of the Agency
Shares payable to Company stockholders and holders of ITI
13
Options pursuant to Section 2.2.3(iv), in accordance with and subject to the
terms of the Indemnity and Escrow Agreement among Parent, MergerSub, the Company
and the Company stockholders and holders of ITI Options in the form annexed
hereto as Exhibit K.
Section 2.8 Closing. The Closing under this Agreement (the "Closing") is
taking place simultaneously with the execution and delivery of this Agreement at
10:00 A.M. on October 20, 1999, at the offices of Xxxxx & Xxxxxxx LLP, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other date and place as agreed to
the parties hereto. Such date is herein referred to as the "Closing Date".
Section 2.9 Appointment of Representative.
2.9.1 Appointment of Representative. The approval by the shareholders of
the Company of this Agreement and the transactions contemplated hereby shall
include the approval of Xxxxx Xxxxxxxxx as representative and agent (the
"Representative") to act on behalf of all of the stockholders of the Company in
the matters, and in the manner, described in this Section 2.9. The
Representative shall act as representative for and agent of the stockholders of
the Company, and shall use his best efforts to carry out his duties under this
Agreement, with respect to the following: (i) responding to and making
determinations in respect of the assertion of any and all claims for
indemnification by the stockholders of the Company; (ii) giving and receiving
notices and communications with respect to the provisions of this Agreement, and
negotiating, agreeing to, and entering into settlements or compromises of
matters arising under this Agreement; and (iii) taking all such other actions as
may be necessary or desirable on behalf of the stockholders of the Company,
including hiring advisors, accountants or attorneys, and asserting claims or
defenses through judicial proceedings, as agent for the stockholders of the
Company in respect of this Agreement. No party dealing with the Representative
hereunder need inquire concerning such approval and such party shall be entitled
to rely exclusively upon the decisions, notices or other acts of the
Representative as being the fully authorized acts of the Representative under
this Agreement. By execution of this Agreement, the Representative agrees to
accept his appointment upon and effective as of the subsequent approval of this
Agreement by appropriate stockholder action.
Section 2.9.2 Indemnification of Representative. Nothing in this Agreement
is intended, and nothing in this Agreement shall be interpreted as, imposing
upon the Representative, as Representative, any personal liability, personal
economic obligation, or personal guarantee in favor of any party to this
Agreement or any third party. The stockholders of the Company, by approving this
Agreement and the transactions contemplated hereby, agree to severally indemnify
and hold the Representative harmless against any loss, liability or expense
incurred without gross negligence or willful misconduct on the part of
Representative, arising out of or in connection with carrying out his duties
hereunder, including the costs and expenses of defending himself against any
claim of
14
liability in connection with the exercise or performance of any of his powers or
duties hereunder (including reasonable fees, expenses and disbursements of his
counsel).
ARTICLE III
REPRESENTATIONS OF THE STOCKHOLDERS AND THE COMPANY
A. Each of the Stockholders severally, and not jointly, represents and
warrants to MergerSub and Parent as follows:
Section 3.1 Execution and Validity of Agreements; Restrictive Documents.
3.1.1 Execution and Validity. The Stockholder has the legal right and
capacity to enter into this Agreement and to perform his/her obligations
hereunder. This Agreement has been duly and validly executed and delivered by
such Stockholder and, assuming due authorization, execution and delivery by
MergerSub and Parent, constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
in each case, except as enforceability may be limited by bankruptcy, insolvency
reorganization, moratorium and other laws affecting creditors' rights generally,
or by general equitable principles (regardless of whether enforcement is sought
in a proceeding at law or in equity), and to the extent any indemnification or
contribution provisions thereof may be limited by applicable federal, state or
securities laws.
3.1.2 No Restrictions. There is no suit, action, claim, investigation or
inquiry by any Governmental or Regulatory Authority (as defined in Section
3.1.3), and no legal, administrative or arbitration proceeding pending or, to
such Stockholder's knowledge, threatened against such Stockholder or any of such
Stockholder's properties or assets, with respect to the execution, delivery and
performance of this Agreement or the transactions contemplated hereby or any
other agreement entered into by such Stockholder in connection with the
transactions contemplated hereby.
3.1.3 Non-Contravention. The execution, delivery and performance by such
Stockholder of his/her obligations hereunder and the consummation of the
transactions contemplated hereby, will not (a) result in the violation by such
Stockholder of any statute, law, rule, regulation or ordinance (collectively,
"Laws"), or any judgment, decree, order, writ, permit or license (collectively,
"Orders"), of any court, tribunal, arbitrator, authority, agency, commission,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision (a
"Governmental or Regulatory Authority"), applicable to such Stockholder or any
of his/her assets or properties, or (b) conflict with, result in a violation or
material breach of, constitute (with or without notice or lapse of time or both)
a default under, or require such Stockholder to obtain any consent, approval or
action of, make any filing with or give any
15
notice to, or result in or give to any Person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the Company stock
held by such Stockholder under any of the terms, conditions or provisions of any
agreement, commitment, lease, license, evidence of indebtedness, note, bond,
mortgage, security agreement, indenture, franchise, permit, concession,
contract, or other instrument, obligation or agreement of any kind
(collectively, "Contracts") or license, permit and other governmental
certificate, authorization and approval, including applications therefor
(collectively, "Licenses") to which such Stockholder is a party or by which such
Stockholder or any of the Company stock held by such Stockholder is bound.
3.1.4 Approvals and Consents. No consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or other Person is
necessary or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any Contract to
which such Stockholder is a party or his/her assets or properties are bound for
the execution and delivery of this Agreement by such Stockholder, the
performance by such Stockholder of his/her obligations hereunder or the
consummation by such Stockholder of the transactions contemplated hereby.
B. Each of the Stockholders and the Company, jointly and severally,
represents and warrants to MergerSub and Parent, as follows:
Section 3.2 Execution and Validity of Agreement; Existence and Good
Standing. The Company has the full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and the Company stockholders, and no other corporate
proceedings on the part of the Company or its stockholders are necessary to
authorize the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company and, assuming due authorization, execution and delivery by MergerSub and
Parent, constitutes the legal, valid and binding obligations of the Company
enforceable against it in accordance with its terms, in each case, except as
enforceability may be limited by bankruptcy, insolvency reorganization,
moratorium and other laws affecting creditors' rights generally, or by general
equitable principles (regardless of whether enforcement is sought in a
proceeding at law or in equity), and to the extent any indemnification or
contribution provisions thereof may be limited by applicable federal, state or
securities laws. The Company is duly organized and validly existing and in good
standing under the laws of the State of Delaware, with the full corporate power
and authority to own its property and to carry on its business as such business
is now being conducted. Schedule 3.2 sets forth each jurisdiction in which the
Company is qualified to do business. Except as set forth on Schedule 3.2, there
is no jurisdiction in which the character of the property owned or leased by the
Company or the nature of its business
16
activities requires qualification of the Company in such jurisdiction, except
where such failure to qualify would not reasonably be expected to have a
Material Adverse Effect.
Section 3.3 Subsidiaries and Investments; Capital Stock.
3.3.1 Subsidiaries and Investments. The Company does not own any capital
stock or other equity or ownership or proprietary interest in any Person, other
than investments in publicly traded debt or equity securities held for
investment.
3.3.2 Capital Stock; Options. The Company has an authorized capitalization
consisting of 500,000 shares of common stock, par value $.0l per share, of which
213,483.32 shares were issued and outstanding, and 37,041 shares of Series A
Convertible preferred stock, $.01 par value per share, all of which are issued
and outstanding. No other classes of capital stock of the Company are authorized
or outstanding. There are 93,116 options to acquire shares of Company Common
Stock outstanding pursuant to the ITI Option Plan. Except as set forth on
Schedule 3.3.2, there are no outstanding subscriptions, options, warrants,
rights (including "phantom stock rights"), calls, commitments, understandings,
conversion rights, rights of exchange, plans or other Contracts of any kind
providing for the purchase, issuance or sale of any shares of the capital stock
of the Company by the Company.
Section 3.4 Financial Statements and No Material Changes. Schedule 3.4
sets forth the following: (a) unaudited balance sheet of the Company as at
December 31, 1997 and audited balance sheet of the Company as at December 31,
1998 and the related combined statements of income, stockholders' equity and
cash flows for the year then ended, as reported on by PriceWaterhouse Coopers
Certified Public Accountants, and (b) an unaudited combined balance sheet of the
Company as at June 30, 1999 (the "Balance Sheet"), and the related unaudited
combined statements of income, stockholders' equity and cash flows for the nine
months then ended. Such financial statements have been prepared in accordance
with GAAP throughout the periods indicated except as set forth on Schedule
3.4.1. Each balance sheet fairly presents the combined financial condition of
the Company at the respective date thereof and reflects all claims against and
all debts and liabilities of the Company, fixed or contingent, as at the date
thereof, required to be shown thereon under GAAP and the related combined
statements of income, stockholders' equity and cash flows fairly present the
results of operations, stockholders' equity and cash flows of the Company for
the respective periods indicated. Since June 30, 1999 (the "Balance Sheet
Date"), there has been no material adverse change in the assets or liabilities,
or in the business or condition, financial or otherwise, or in the results of
operations of the Company.
Section 3.5 Books and Records. All accounts, books, ledgers and official
and other records material to the Company have been properly and accurately kept
and are complete in all material respects, and there are no material
inaccuracies or discrepancies of any kind contained or reflected therein. Except
as set forth on Schedule 3.5, the Company's records, systems, controls, data or
information recorded, stored, maintained, operated, or otherwise wholly or
17
partly dependent on or held by any means (including any electronic, mechanical
or photographic process, whether computerized or not) which (including all means
of access thereto and therefrom) are under the exclusive ownership and
possession of the Company.
Section 3.6 Title to Properties: Encumbrances. The Company has good and
valid title to, or enforceable leasehold interests in, or valid rights under
contract to use, all the properties and assets owned or used by it (real and
personal, tangible and intangible), including, without limitation (a) all the
properties and assets reflected in the Balance Sheet, and (b) all the properties
and assets purchased or otherwise contracted for by the Company since the
Balance Sheet Date (except for properties and assets reflected in the Balance
Sheet or acquired or otherwise contracted for since the Balance Sheet Date, that
have been sold or otherwise disposed of in the ordinary course of business), in
each case free and clear of all Liens, except for Liens set forth on Schedule
3.6, and except for those Liens, which individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. The property,
plant and equipment owned or otherwise contracted for by the Company are in a
state of good maintenance and repair (ordinary wear and tear excepted) and are
adequate and suitable for the purposes for which they are presently being used.
"Liens" shall mean and include security interests, mortgages, liens, pledges,
guarantees, easements, reservations, restrictions, clouds, equities, rights of
way, options, rights of first refusal and all other encumbrances, whether or not
relating to the extension of credit or the borrowing of money, except for any of
the foregoing for (i) which taxes or other charges are not due and payable, (ii)
which workmen's, repairmen's or other similar Liens (inchoate or otherwise) have
arisen or been incurred in the ordinary course of business, and (iii) minor
title defects, easements or other Liens affecting real property, which do not
materially impair the continued use, occupancy, value or marketability of title
of the real property to which they relate.
Section 3.7 Real Property.
3.7.1 Owned Real Property. The Company does not own any real property
including ground leases) or hold any option or right of first refusal or first
offer to acquire any real property, and the Company is not obligated by Contract
or otherwise to purchase any real property.
3.7.2 Leased Real Property. Schedule 3.7.2 contains an accurate and
complete list of all real property leases to which the Company is a party ("Real
Property Leases"), including without limitation, any modification, amendment or
supplement thereto and any other related document or agreement executed or
entered into by the Company (including without limitation, any Real Property
Lease which the Company has subleased or assigned to another Person and as to
which the Company remains liable). With respect to each Real Property Lease set
forth on Schedule 3.7.2 (or required to be set forth on Schedule 3.7.2): (a) the
Real Property Lease is valid, binding and in full force and effect; (b) all
rents and additional rents and other sums, expenses and charges due to date have
been paid; (c) the lessee has been in peaceable possession since the
commencement of the original term thereon (d) no waiver, indulgence or
18
postponement of the lessee's obligations thereunder has been granted by the
lessor; (e) there exists no default or event of default by the Company or to the
knowledge of the Company and the Stockholders, by any other party thereto; (f)
there exists no occurrence, condition or act (including the transactions
contemplated hereunder) which, with the giving of notice, the lapse of time or
the happening of any further event or condition, would become a default or event
of default by the Company thereunder; and (g) there are no outstanding claims of
breach or indemnification or notice of default or termination thereunder. The
Company holds the leasehold estate on all Real Property Leases, free and clear
of all Liens, except as set forth on Schedule 3.6 and the liens of mortgagees of
the real property in which such leasehold estate is located. The real property
leased by the Company is adequate and suitable for the purposes for which it is
presently being used, and there are no material repair or restoration works
likely to be required in connection with any of the leased real properties. The
Company is in physical possession and actual and exclusive occupation of the
whole of each of its leased properties. The Company does not owe any brokerage
commission with respect to any Real Property Lease.
Section 3.8 Contracts. Schedule 3.8 hereto contains an accurate and
complete list of the following Contracts of the Company: (a) all Plans (as such
term is defined in Section 3.19); (b) any personal property lease with a fixed
annual rental of $10,000 or more; (c) any Contract relating to capital
expenditures which involves payments of $25,000 or more in any single
transaction or series of related transactions; (d) any Contract relating to the
making of a loan or advance to, or investment in, any other Person, which loan
or investment exceeds $10,000; (e) any Contract evidencing or relating in any
way to indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of loan, purchase money obligation, guarantee (other than the
endorsement of negotiable instruments for collection in the ordinary course of
business), conditional sale, purchase or otherwise; (f) any management service,
employment, consulting or similar type of Contract which is not cancelable by
the Company without significant (i.e., in excess of $5000) penalty or other
financial obligation within 30 days; (g) any Contract limiting the freedom of
the Company party thereto to engage in any line of business or to compete with
any other Person, including agreements limiting the ability of the Company or
any of its affiliates to service competitive accounts during or after the term
thereof; (h) any collective bargaining or union agreement; (i) any Contract with
any of its officers or directors or the Stockholders not covered by subsection
(f) above (including indemnification agreements); (j) any secrecy or
confidentiality agreement (other than standard confidentiality agreements in
computer software license agreements or agreements with clients entered into in
the ordinary course of business and other than the Company's standard employee
confidentiality agreement which has been signed by each of the Company's
employees and directors, unless otherwise disclosed under this Agreement); (k)
any Contract with respect to any Intellectual Property of the Company (as
defined in Section 3.14 below), other than "shrink-wrap" and similar end-user
licenses; (1) any agreement with a client which generates annual revenues of
$25,000 or more; (m) any joint venture agreement involving a sharing of profits
not covered by clauses (a) through (1) above; and (n) any Contract (not covered
by another subsection of this Section 3.8) which involves $25,000 or more over
the
19
unexpired term thereof and is not cancelable by the Company without significant
penalty or other financial obligation within 30 days. Notwithstanding the
foregoing, (x) commitments to media and production expenses which are fully
reimbursable from clients, and (y) estimates or purchase orders given in the
ordinary course of business relating to the execution of projects, do not have
to be set forth on Schedule 3.8. Each Contract to which a Company is a party,
including, but not limited to those set forth on Schedule 3.8, is in full force
and effect, and there exists no default or event of default by the Company or to
the knowledge of the Stockholders and the Company, by any other Person, or
occurrence, condition, or act (including the Merger) which, with the giving of
notice, the lapse of time or the happening of any other event or condition,
would become a default or event of default thereunder by the Company, and there
are no outstanding claims of breach or indemnification or notice of default or
termination of any such Contract.
Section 3.9 Non-Contravention; Approvals and Consents.
3.9.1 Non-Contravention. The execution, delivery and performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby, will not (a) violate, conflict with or result in the breach
of any provision of the certificate or articles of incorporation or by-laws (or
other comparable corporate charter documents) of the Company, or (b) result in
the violation by the Company of any Laws or Orders of any Governmental or
Regulatory Authority, applicable to the Company or any of its assets or
properties, or (c) if the consents and notices set forth on Schedule 3.9.2 are
obtained, given or waived, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under, or
(except as set forth on Schedule 3.9.2) require the Company to obtain any
consent, approval or action of, make any filing with or give any notice to, or
result in or give to any Person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of the
Company, under any of the terms, conditions or provisions of any Contract to
which the Company is a party or by which the Company or any of its assets or
properties are bound, except where such violation, conflict, breach, default or
failure would not reasonably be expected to have a Material Adverse Effect.
3.9.2 Approvals and Consents. Except as disclosed on Schedule 3.9.2, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other Person is necessary or required under any of the
terms, conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any Contract to which the Company is a party or by which
its assets or properties are bound for the execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder or the consummation by the Company of the transactions contemplated
hereby.
Section 3.10 Litigation. Except as set forth on Schedule 3.10, there is no
action, suit, proceeding at law or in equity by any Person, or any arbitration
or any administrative or other
20
proceeding by or before (or to the knowledge of the Company and the
Stockholders, any investigation by) any Governmental or Regulatory Authority,
pending or, to the knowledge of the Company and the Stockholders, threatened
against the Company with respect to this Agreement or the transactions
contemplated hereby, or against or affecting the Company or its properties or
assets; and, to the knowledge of the Company or the Stockholders, no acts,
facts, circumstances, events or conditions occurred or exist which are a basis
for any such action, proceeding or investigation. Schedule 3.10 also sets forth
with respect to each pending or threatened action, suit or proceeding listed
thereon, the amount of costs, expenses or damages the Company has incurred to
date and reasonably expects to incur through conclusion thereof. The Company is
not subject to any Order entered in any lawsuit or proceeding.
Section 3.11 Taxes. The Company has timely filed, or caused to be filed,
taking into account any valid extensions of due dates, completely and
accurately, all federal, state, local and foreign tax or information returns
(including estimated tax returns) required under the statutes, rules or
regulations of such jurisdictions to be filed by such Company. The term "Taxes"
means taxes, duties, charges or levies of any nature imposed by any taxing or
other Governmental or Regulatory Authority, including without limitation income,
gains, capital gains, surtax, capital, franchise, capital stock, value-added
taxes, taxes required to be deducted from payments made by the payor and
accounted for to any tax authority, employees' income withholding, back-up
withholding, withholding on payments to foreign Persons, social security,
national insurance, unemployment, worker's compensation, payroll, disability,
real property, personal property, sales, use, goods and services or other
commodity taxes, business, occupancy, excise, customs and import duties,
transfer, stamp, and other taxes (including interest, penalties or additions to
tax in respect of the foregoing), and includes all taxes payable by the Company
pursuant to Treasury Regulations ss. 1.1502-6 or any similar provision of state,
local or foreign law. All Taxes shown on said returns to be due and all
additional assessments received prior to the date hereof have been paid or are
being contested in good faith, in which case, such contested assessments are set
forth on Schedule 3.11. The Company has collected all sales, use, goods and
services or other commodity Taxes required to be collected and remitted or will
remit the same to the appropriate taxing authority within the prescribed time
periods. The Company has withheld all amounts required to be withheld on account
of Taxes from amounts paid to employees, former employees, directors, officers,
residents and non-residents and remitted or will remit the same to the
appropriate taxing authorities within the prescribed time periods. The amount
set up as an accrual for Taxes on the Balance Sheet is sufficient for the
payment of all unpaid Taxes of the Company, whether or not disputed, for all
periods ended on and prior to the date thereof. Since the Balance Sheet Date,
the Company has not incurred any liabilities for Taxes other than in the
ordinary course of business. The Company has delivered to Parent correct and
complete copies of all federal income tax returns filed with respect to the
Company for all taxable periods beginning on or after January 1, 1996. None of
the Federal, state or local income tax returns of the Company have ever been
audited by the Internal Revenue Service or any other Governmental or Regulatory
Authority. No examination of any return of the Company is currently in progress,
and the Company has not received notice of any proposed audit or examination.
21
No deficiency in the payment of Taxes by the Company for any period has been
asserted in writing by any taxing authority and remains unsettled at the date of
this Agreement. The Company has not made any agreement, waiver or other
arrangement providing for an extension of time with respect to the assessment or
collection of any Taxes against it. The Company has not been a member of an
affiliated group filing consolidated Federal income tax returns nor has it been
included in any combined, consolidated or unitary state or local income tax
return.
Section 3.12 Liabilities. Except as set forth in the Balance Sheet, the
Company has no outstanding claims, liabilities or indebtedness of any nature
whatsoever (collectively in this Section 3.12, "Liabilities"), whether accrued,
absolute or contingent, determined or undetermined, asserted or unasserted, and
whether due or to become due, other than (i) Liabilities specifically disclosed
in any Schedule hereto; (ii) Liabilities under Contracts of the type required to
be disclosed by the Company and the Stockholders on any Schedule and so
disclosed or which because of the dollar amount or other qualifications are not
required to be listed on such Schedule; and (iii) Liabilities incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date not involving borrowings by the Company.
Section 3.13 Insurance. Schedule 3.13 is a schedule of all insurance
policies (including life insurance) or binders maintained by the Company. All
such policies are in full force and effect and all premiums that have become due
have been currently paid. None of such policies shall lapse or terminate by
reasons of the Merger. The Company has not received any notice of cancellation
of any such policy or binder. Except as set forth on Schedule 3.13, within the
last two years the Company has not filed for any claims exceeding $25,000
against any of its insurance policies, exclusive of automobile policies.
Section 3.14 Intellectual Properties.
3.14.1 Definitions. For purposes of this Agreement, the following terms
have the following definitions:
"Intellectual Property" shall include, without limitation, any or
all of the following and all rights associated therewith: (a) all domestic and
foreign patents and applications therefor and all reissues, divisions, renewals,
extensions, continuations and continuations-in-part thereof; (b) all inventions
(whether patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, rights of privacy and publicity, and all documentation relating to any of
the foregoing; (c) all copyrights, copyright registrations and applications
therefor, and all other rights corresponding thereto throughout the world; (d)
all mask works, mask work registrations and applications therefor; (e) all
industrial designs and any registrations and applications therefor; (f) all
trade names, logos, common law trademarks and service marks; trademark and
service xxxx registrations and applications therefor and all goodwill associated
22
therewith; and (g) all computer software including all source code, object code,
firmware, development tools, files, records and data, all media on which any of
the foregoing is recorded, and all documentation related to any of the
foregoing.
"Intellectual Property of the Company" shall mean any Intellectual
Property that: (a) is owned by or exclusively licensed to the Company, or (b)
which is necessary to the operation of the Company, including the design,
manufacture and use of the products of the Company as it currently is operated
or is reasonably anticipated to be operated in the future, but shall
specifically not include any rights in or to materials created for clients as
"work-made-for-hire" or which are subject to an exclusive assignment or license
in favor of clients of the Company.
3.14.2 Registrations. The registrations of the Intellectual Property
listed on Schedule 3.14 are valid and subsisting, all necessary registration and
renewal fees in connection with such registrations have been made and all
necessary documents and certificates in connection with such registrations have
been filed with the relevant patent, copyrights and trademark authorities in the
United States or other jurisdiction for the purposes of maintaining such
Intellectual Property registrations, except such filings as will not result in
the loss of any such registration, abandonment of any xxxx or proprietary right,
or the assessment of any significant (i.e., in excess of $5,000) penalty or
charge. Except as set forth in Schedule 3.14 (a) no Person has any rights to use
any of the Intellectual Property of the Company; and (b) the Company has not
granted to any Person, nor authorized any Person to retain, any rights in the
Intellectual Property of the Company. Except as set forth on Schedule 3.14 and
for "shrink wrap" and similar commercial end-user licenses, the Company Owns and
has good and exclusive title to each item of Intellectual Property of the
Company, free and clear of any Lien; and the Company owns, or has the right,
pursuant to a valid Contract to use or operate under, all other Intellectual
Property of the Company. To the knowledge of the Company and the Stockholders,
the operation of the businesses of the Company as it is currently conducted does
not infringe the Intellectual Property of any other Person. The Company has not
received notice from any Person that the operation of its business infringes the
Intellectual Property of any Person. There are no Contracts between the Company
and any other Person with respect to the Intellectual Property of the Company in
respect of which there is any dispute known to the Company or the Stockholders
regarding the scope of such agreement, or performance under such Contract,
including with respect to any payments to be made or received by the Company. To
the knowledge of the Company and the Stockholders, no Person is infringing or
misappropriating any of the Intellectual Property of the Company.
Section 3.15 Compliance with Laws; Licenses and Permits.
3.15.1 Compliance. The Company is, and its business has been conducted, in
compliance with all applicable Laws and Orders, except in each case (other than
with respect to compliance with Laws and Orders relating to the regulation or
protection of the environment; "Environmental Laws and Orders") where the
failure to so comply would not reasonably be
23
expected to have a Material Adverse Effect, including without limitation: (a)
all Laws and Orders promulgated by the Federal Trade Commission or any other
Governmental or Regulatory Authority; (b) all Environmental Laws and Orders; and
(c) all Laws and Orders relating to labor, civil rights, and occupational safety
and health laws, worker's compensation, employment and wages, hours and
vacations, or pay equity. The Company has not been charged with, or, to the
knowledge of the Company and the Stockholders, threatened with or under any
investigation with respect to, any charge concerning any violation of any Laws
or Orders.
3.15.2 Licenses. The Company has all Licenses required by any Governmental
or Regulatory Authority for the operation of its business and the use of its
assets and properties as presently operated or used, except where the failure to
have such Licenses would not reasonably be expected to have a Material Adverse
Effect. All of the Licenses are in full force and effect and no action or claim
is pending, nor to the knowledge of the Company and the Stockholders is
threatened, to revoke or terminate any of such Licenses or declare any such
License invalid in any material respect.
Section 3.16 Client Relations. Schedule 3.16 sets forth for the Company
(a) the 10 largest clients (measured by revenues), and the revenues from each
such client and from all clients (in the aggregate) for the calendar year ended
December 31, 1998 and the nine months ended September 30, 1999 and (b) the
clients projected to be the 10 largest clients (measured by revenues) based on
the current profit plans of the Company for the twelve months ending December
31, 1999, together with the estimated revenues from each such client and all
clients (in the aggregate) for such period. The Stockholders and the Company do
not warrant that the estimated revenues set forth on Schedule 3.16 will prove to
be accurate; provided, however, the Stockholders and the Company do represent
that they were made in good faith and on a reasonable basis. Except as set forth
on Schedule 3.16, no client of the Company has advised the Company or the
Stockholders in writing that it is (x) terminating or considering terminating
the handling of its business by the Company as a whole or in respect of any
particular product, project or service or (y) planning to reduce its future
spending with the Company in any material manner; and to the knowledge of the
Company and the Stockholders (without making any special inquiry of any
clients), no client has orally advised the Company, the Stockholders or any of
the Company's executive or other employees at or above the Account Director
level of any of the foregoing events.
Section 3.17 Accounts Receivable; Work-in-Process: Accounts Payable. The
amount of all work-in-process, accounts receivable, unbilled invoices (including
without limitation unbilled invoices for services and out-of-pocket expenses)
and other debts due or recorded in the records and books of account of the
Company as being due to the Company and reflected on the Balance Sheet or the
Closing Balance Sheet represent or will represent valid obligations arising from
sales actually made or services actually performed in the ordinary course of
business and are or will be good and collectible in full (less the amount of any
provision, reserve or similar adjustment therefor reflected on the Balance Sheet
or the Closing
24
Balance Sheet) in the ordinary course of business, and none of the accounts
receivable or other debts (or accounts receivable arising from any such
work-in-process or unbilled invoices) is or will be subject to any counterclaim
or set-off except to the extent of any such provision, reserve or adjustment.
There has been no material adverse change since the Balance Sheet Date in the
amount or aging of the work-in-process, accounts receivable, unbilled invoices,
or other debts due to the Company, or the reserves with respect thereto, or
accounts payable of the Company.
Section 3.18 Employment Relations. (a) To the knowledge of the Company and
the Stockholders, the Company is not engaged in any unfair labor practice; (b)
no unfair labor practice complaint against the Company is pending before any
Governmental or Regulatory Authority; (c) there is no organized labor strike,
dispute, slowdown or stoppage actually pending or to the knowledge of the
Company and the Stockholders threatened against or involving the Company; (d)
there are no labor unions representing or, to the knowledge of the Company and
the Stockholders, attempting to represent the employees of the Company; (e) no
claim or grievance nor any arbitration proceeding arising out of or under any
collective bargaining agreement is pending and to the knowledge of the Company
and the Stockholders, no such claim or grievance has been threatened; (f) no
collective bargaining agreement is currently being negotiated by the Company;
and (g) the Company has not experienced any work stoppage or similar organized
labor dispute during the last three years. There is no legal action, suit,
proceeding or claim pending or, to the knowledge of the Company and the
Stockholders, threatened between the Company and any of its employees, former
employees, agents, former agents, job applicants or any association or group of
any of its employees, except as set forth on Schedule 3.10.
Section 3.19 Employee Benefit Matters.
3.19.1 List of Plans. Schedule 3.8 to this Agreement lists all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all termination,
severance or other Contracts, whether covering one Person or more than one
Person, and whether or not subject to any of the provisions of ERISA, which are
or have been maintained, contributed to or sponsored by the Company or any ERISA
Affiliate (as defined in Section 3.19.3 below) for the benefit of any employee
(each item listed on Schedule 3.8 being referred to herein individually, as a
"Plan" and collectively, as the "Plans"). The Company has made available to
Parent, to the extent applicable, a complete and accurate copy of (a) each
written Plan and descriptions of any unwritten Plan (including all amendments
thereto whether or not such amendments are currently effective); (b) each
summary plan description and summary of material modifications relating to a
Plan; (c) each trust agreement or other funding arrangement with respect to each
Plan, including insurance contracts; (d) the most recently filed Internal
Revenue Service Form 5500 relating to each Plan; (e) the most recently received
Internal Revenue Service determination letter for each Plan; and (f) the three
most recently prepared actuarial reports and financial statements in connection
25
[ILLEGIBLE] ch Plan. Except as set forth on Schedule 3.19.1, neither the
Stockholders nor any [ILLEGIBLE] has made any commitment, (i) to create or cause
to exist any Plan not set forth on [ILLEGIBLE] le 3.8 & (ii) to modify, change
or terminate any Plan. [ILLEGIBLE]
3.19.2 Severance. Except as set forth on Schedule 3.19.2, none of the Plans, or
any [ILLEGIBLE] ment agreement or other Contract to which the Company is a party
or bound, (a) [ILLEGIBLE] s for the payment of or obligates the Company to pay
separation, severance, termination [ILLEGIBLE] lar-type benefits to any Person;
or (b) obligates the Company to pay separation, [ILLEGIBLE] ze, termination or
similar-type benefits solely as a result of any transaction [ILLEGIBLE] Aated by
this Agreement or as a result of a "change in control," within the meaning of
[ILLEGIBLE] m under Section 280G of the Code.
[ILLEGIBLE] 3.19.3 Multi-Employer Plans. Neither the Company nor any ERISA
Affiliate (as [ILLEGIBLE] fter defined) has maintained, contributed to or
participated in a multi-employer plan [ILLEGIBLE] the meaning of Section 3(37)
or 4001(a)(3) of ERISA) or a multiple employer plan [ILLEGIBLE] to Sections 4063
and 4064 of ERISA, nor has any obligations or liabilities, including [ILLEGIBLE]
wal or successor liabilities, regarding any such plan. As used herein, the term
"ERISA [ILLEGIBLE] e" means any Person that, together with the Company, is
considered a "single [ILLEGIBLE] er" pursuant to Section 4001(b) of ERISA.
[ILLEGIBLE] 3.19.4 Welfare Benefit Plans. The Company has expressly reserved the
right, in all [ILLEGIBLE] ocuments relating to welfare benefits provided to
employees, former employees, [ILLEGIBLE] , directors and other participants and
beneficiaries, to amend, modify or terminate at [ILLEGIBLE] ne the Plans which
provide for welfare benefits, and the Company and the [ILLEGIBLE] lders are not
aware of any fact, event or condition that could reasonably be expected
[ILLEGIBLE] ct or impair such right.
[ILLEGIBLE] 3.19.5 Administrative Compliance. Each Plan is now and has been
operated in all [ILLEGIBLE] 1 respects in accordance with the requirements of
all applicable Laws, including, [ILLEGIBLE] limitation, ERISA, the Health
Insurance Portability and Accountability Act of 1996 [ILLEGIBLE] Code, and the
regulations and authorities published thereunder. The Company has [ILLEGIBLE] ed
all material obligations required to be performed by it under, is not in any
respect [ILLEGIBLE] At under or in violation of, and neither the Company nor the
Stockholders have [ILLEGIBLE] dge of any default or violation by any Person to,
any Plan. Except as set forth on [ILLEGIBLE] le 3.10, no legal action, suit,
audit, investigation or claim is pending or, to the [ILLEGIBLE] dge of the
Company and the Stockholders threatened with respect to any Plan (other
[ILLEGIBLE] urns for benefits in the ordinary course), and no fact, event or
condition exists that [ILLEGIBLE] be reasonably likely to provide a legal basis
for any such action, suit, audit, [ILLEGIBLE] ation or claim. All reports,
disclosures, notices and filings with respect to such Plans [ILLEGIBLE] d to be
made to employees, participants, beneficiaries, alternate payees and any
[ILLEGIBLE] mental or Regulatory Authority have been timely made or an extension
has been obtained.
26
Section 3.20 Interests in Customers, Suppliers, Etc. Except as set forth
on Schedule 3.20, (x) no Stockholder nor any Person controlled by a Stockholder
nor (y) to the knowledge of the Company and the Stockholders (without making any
inquiry of any member of the Related Group, as hereinafter defined), any
officer, director, or employee of the Company, (collectively, the "Related
Group"), or any entity controlled by anyone in the Related Group:
(i) owns, directly or indirectly, any interest in (excepting for
ownership, directly or indirectly, of less than 2% of the issued and
outstanding shares of any class of securities of a publicly held and
traded company) or received or has any right to receive payments from, or
is an officer, director, employee or consultant of, any Person which is,
or is engaged in business as, a competitor, lessor, lessee, supplier,
distributor, sales agent, customer or client of the Company;
(ii) owns, directly or indirectly (other than by virtue of their ownership
of stock of the Company), in whole or in part, any tangible or intangible
property (including, but not limited to Intellectual Property) that the
Company uses in the conduct of the business of such Company, other than
immaterial personal items owned and used by employees at their work
stations; or
(iii) has any significant cause of action or other claim whatsoever
against, or owes any amount to, the Company, except for claims in the
ordinary course of business such as for accrued vacation pay, accrued
benefits under employee benefit plans, and similar matters and agreements
existing on the date hereof
Section 3.21 Bank Accounts; Powers of Attorney: Authority of
Representative. Set forth in Schedule 3.21 is an accurate and complete list
showing (a) the name of each bank in which the Company has an account, credit
line or safe deposit box and the names of all Persons authorized to draw thereon
or to have access thereto, and (b) the names of all Persons, if any, holding
powers of attorney from the Company and a summary statement of the terms thereof
The Representative is duly authorized and empowered to act on behalf of each of
the Stockholders and each of the other holders of Common and Preferred Stock and
options to acquire common stock of the Company pursuant to the ITI Option Plan,
as set forth in Section 2.9.1 hereof.
Section 3.22 Compensation of Employees. Schedule 3.22 is an accurate and
complete list showing (a) the names and positions of all employees and exclusive
consultants who are currently employed by the Company, together with a statement
of the current annual salary, and the annual salary, bonus and incentive
compensation paid or payable with respect to calendar years 1997 and 1998, and
the material fringe benefits of such employees and exclusive consultants not
generally available to all employees of the Company, if any; (b) all bonus and
incentive compensation paid or payable (whether by agreement, custom or
understanding) to
28
any employee of the Company not listed in clause (a) above for services rendered
during calendar years 1997 and 1998; (c) the names of all retired employees, if
any, of the Company who are receiving or entitled to receive any healthcare or
life insurance benefits or any payments from the Company not covered by any
pension plan to which the Company is a party, their ages and current unfunded
pension rate, if any; and (d) a description of the current severance and
vacation policy of the Company. The Company has not, because of past practices
or previous commitments with respect to its employees, established any rights on
the part of any of its employees to additional compensation (including grant of
options) with respect to any period after the Closing Date (other than wage
increases in the ordinary course of business).
Section 3.23 No Changes Since the Balance Sheet Date. Since the Balance
Sheet Date, except as specifically stated on Schedule 3.23, the Company has not
(a) incurred any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except in the ordinary course of business;
(b) permitted any of its assets to be subjected to any Lien; (c) sold,
transferred or otherwise disposed of any of its assets except in the ordinary
course of business; (d) made any capital expenditure or commitment therefor
which individually or in the aggregate exceeded $25,000; (e) declared or paid
any dividends or made any distributions on any shares of its capital stock, or
redeemed, purchased or otherwise acquired any shares of its capital stock or any
option, warrant or other right to purchase or acquire any such shares; (f) made
any bonus or profit sharing distribution; (g) increased or prepaid its
indebtedness for borrowed money, except current borrowings under credit lines
listed on Schedule 3.8, or made any loan to any Person other than to any
employee for normal travel and expense advances; (h) written down the value of
any work-in-process, or written off as uncollectible any notes or accounts
receivable, except write-downs and write-offs in the ordinary course of
business, none of which, individually or in the aggregate, is material to the
Company; (i) granted any increase in the rate of wages, salaries, bonuses or
other remuneration of any employee who, whether as a result of such increase or
prior thereto, receives aggregate compensation from the Company at an annual
rate of $50,000 or more, or except in the ordinary course of business to any
other employees; (j) entered into an employment or exclusive consultant
agreement which is not cancelable without significant penalty or other financial
obligation within 30 days; (k) canceled or waived any claims or rights of
material value; (1) made any change in any method of accounting procedures; (m)
otherwise conducted its business or entered into any transaction, except in the
usual and ordinary manner and in the ordinary course of its business; (n)
amended or terminated any agreement which is material to its business; (o)
renewed, extended or modified any Real Property Lease or except in the ordinary
course of business, any lease of personal property; (p) adopted, amended or
terminated any Plan; or (q) agreed, whether or not in writing, to do any of the
actions set forth in any of the above clauses.
Section 3.24 Corporate Controls. None of the Stockholders, nor, to the
knowledge of the Company and the Stockholders, any officer, authorized agent,
employee or any other Person while acting on behalf of the Company, has,
directly or indirectly: used any corporate fund for unlawful contributions,
gifts, or other unlawful expenses relating to political activity;
29
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; made any false or fictitious entry on its
books or records; made any bribe, rebate, payoff, influence payment, kickback,
or other unlawful payment, or other payment of a similar or comparable nature,
to any Person, whether in money, property, or services, to obtain favorable
treatment in securing business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained, and the Company has not participated in any illegal boycott or other
similar illegal practices affecting any of its actual or potential customers.
Section 3.25 Disclosure. No representation or warranty of the Company or
the Stockholders contained in this Agreement, and no statement contained in any
Schedule or in any certificate, list or other writing furnished to Parent by the
Company or the Stockholders pursuant to any provision of this Agreement
(including without limitation any financial statements), contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
Section 3.26 Brokers. Except as set forth on Schedule 3.26, no broker,
finder, agent or similar intermediary has acted on behalf of the Company or the
Stockholders in connection with this Agreement or the transactions contemplated
hereby, and no brokerage commissions, finder's fees or similar fees or
commissions are payable by the Company or the Stockholders in connection
therewith based on any agreement, arrangement or understanding with any of them.
Section 3.27 Year 2000 Compliant.
3.27.1 Definition. The term "Year 2000 Compliant" shall mean:
(i) the functions, calculations and other computer processes of all
computer hardware, software and systems, including but not limited to
internal and outsourced MIS systems and embedded computer features within
other systems of the Company (collectively, "Processes"), perform properly
in a consistent manner regardless of the date in time on which the
Processes are actually performed and regardless of the date of input to
the software, whether before, on or after January 1, 2000 and whether or
not the dates are affected by leap years;
(ii) the computer hardware, software and systems accept, calculate,
compare, sort, extract, sequence and otherwise process data inputs and
date values, and return and display date values, in a consistent manner
regardless of the dates used, whether before, on or after January 1, 2000;
and
30
(iii) the computer hardware, software and systems will function
properly without interruptions or extraordinary manual intervention caused
by the date in time on which the Processes are actually performed or by
the date of input to the software, whether before, on or after January 1,
2000.
3.27.2 Computer Systems. The Company has used its reasonable commercial
efforts so that, to the knowledge of the Company and the Stockholders, current
computer hardware, software and systems, and accompanying documentation, of such
Company will be Year 2000 Compliant in a full production version, with
accompanying documentation, in all material respects, on or before November 1,
1999. The Company has used its reasonable commercial efforts so that, to the
knowledge of the Company and the Stockholders, receipt of Year 2000 Compliant
computer hardware, software and systems will be provided to the Company in a
timely manner under current supplier contracts or standard maintenance and
support plans without additional fee or charge of any kind (including any
installation, freight, or other costs or fees) to the Company.
3.27.3 Other Products and Services. The Company has used its reasonable
commercial efforts so that, to the knowledge of the Company and the
Stockholders, the products of the Company will be delivered and its services
will be scheduled and performed in a timely manner without interruptions caused
by the date in time on which the product is ordered or is actually delivered or
the services are scheduled or actually performed under normal procedures in the
ordinary course, whether before, on or after January 1, 2000. The Company has
used its reasonable commercial efforts so that, to the knowledge of the Company
and the Stockholders, the essential suppliers of products and services of the
Company, including the suppliers of its infrastructure systems, have Year 2000
Compliant programs in place to avoid interruptions in the supplier-customer
trading relationship which could have a Material Adverse Effect, whether before,
on or after January 1, 2000, except as set forth on Schedule 3.27.
Section 3.28 Copies of Documents. The Company has caused to be made
available for inspection and copying by Parent and its advisers, complete and
correct copies of all documents referred to in this Article III or in any
Schedule. Summaries of all oral contracts contained in Schedule 3.8 are complete
and accurate in all material respects.
ARTICLE IV
REPRESENTATIONS OF MERGERSUB AND PARENT
Parent and MergerSub, jointly and severally, represent and warrant to the
Company and the Stockholders as follows:
31
Section 4.1 Existence and Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. MergerSub is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and
MergerSub has all requisite corporate power and authority to own its assets and
to carry on its business as presently conducted.
Section 4.2 Execution and Validity of Agreements. Each of Parent and
MergerSub has the full corporate power and authority to enter into this
Agreement, to perform its respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and MergerSub and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all required
corporate action on behalf of Parent and MergerSub. This Agreement has been duly
and validly executed and delivered by Parent and MergerSub and, assuming due
authorization, execution and delivery by the Company and the Stockholders,
constitutes the legal, valid and binding obligation of Parent and MergerSub,
enforceable against each of them in accordance with its terms in each case,
except as enforceability may be limited by bankruptcy, insolvency
reorganization, moratorium and other laws affecting creditors' rights generally,
or by general equitable principles (regardless of whether enforcement is sought
in a proceeding at law or in equity), and to the extent any indemnification or
contribution provisions thereof may be limited by applicable federal state or
securities laws.
Section 4.3 Non-Contravention; Approvals and Consents.
4.3.1 Non-Contravention. The execution, delivery and performance by Parent
and MergerSub of their obligations hereunder and the consummation of the
transactions contemplated hereby will not conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, or require Parent or MergerSub to obtain any consent, approval or
action of, make any filing with or give any notice to, or result in or give to
any Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien upon any of the assets or properties of Parent or MergerSub, under any of
the terms, conditions or provisions of (a) the certificate of incorporation or
by-laws of Parent or MergerSub, or (b) subject to the taking of the actions
described in Section 4.3.2, (i) any Laws or Orders of any Governmental or
Regulatory Authority applicable to Parent or MergerSub or any of their assets or
properties, or (ii) any Contract to which Parent or MergerSub is a party or by
which Parent or MergerSub or any of its assets or properties are bound.
4.3.2 Approvals and Consents. Except for (a) the filing of the Certificate
of Merger with the Secretary of State of Delaware and any other appropriate
documents with the relevant authorities of other states in which the Company
and/or MergerSub is qualified to do business, and (b) as described on Schedule
4.3.2, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority or other Person is necessary or required
under any of the terms, conditions or provisions of any Law or Order of any
Governmental or
32
Regulatory Authority or any Contract to which Parent or MergerSub is a party or
by which Parent or MergerSub or any of their respective assets or properties are
bound for the execution and delivery of this Agreement by Parent or MergerSub,
the performance by Parent and MergerSub of their respective obligations
hereunder or the consummation of the transactions contemplated hereby.
Section 4.4 Agency Shares. The Agency Shares to be delivered to the
Stockholders pursuant to this Agreement have been duly authorized for issuance
by all requisite corporate action by Parent, and when delivered as provided
herein, will be validly issued and outstanding shares of voting common stock of
Parent, fully paid and non-assessable, and will not be subject to preemptive
rights of any Person.
Section 4.5 MergerSub. MergerSub was formed solely for the purpose of the
Merger and engaging in the transactions contemplated hereby. As of the date
hereof and the Effective Time, the capital stock of MergerSub is and will be
directly owned 100% by Parent. Further, there are not as of the date hereof and
there will not be at the Effective Time any outstanding or authorized options,
warrants, calls, rights, commitments or any other Contracts requiring MergerSub
to issue, transfer, sell, purchase, redeem or acquire any shares of capital
stock. As of the date hereof and the Effective Time, MergerSub has not and will
not have incurred any obligations or liabilities or engaged in any business or
activities of any type of kind whatsoever or entered into any Contract with any
Person.
Section 4.6 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of Parent or MergerSub or their affiliates in connection with
this Agreement or the transactions contemplated thereby, and no brokerage
commissions, finders' fees or similar fees or commissions are payable by Parent
or MergerSub or their affiliates in connection therewith based on any Contract
or understanding with either of them.
Section 4.7 Litigation. There is no action, suit, proceeding at law or in
equity by any Person, or any arbitration or any administrative or other
proceeding by or before (or to the knowledge of Parent or MergerSub any
investigation by) any Governmental or Regulatory Authority, pending or, to the
knowledge of Parent or MergerSub threatened against Parent or MergerSub with
respect to this Agreement or the transactions contemplated hereby, or against or
affecting Parent or MergerSub the properties or assets of either of them; and,
to the knowledge of Parent or MergerSub, no acts, facts, circumstances, events
or conditions occurred or exist which are a basis for any such action,
proceeding or investigation.
Section 4.8 Disclosure. No representation or warranty of Parent or
MergerSub contained in this Agreement, and no statement contained in any
Schedule or in any certificate, list or other writing furnished by Parent or
MergerSub to the Company and the Stockholders pursuant to any provision of this
Agreement, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
33
ARTICLE V
ACTIONS AT CLOSING BY THE COMPANY AND THE STOCKHOLDERS
Simultaneously herewith:
Section 5.1 Required Approvals and Consents. The Stockholders and the
Company shall have obtained or given, at no expense to Parent or MergerSub, and
there shall not have been withdrawn or modified, any consents or approvals or
other actions listed on Schedule 3.9.2 hereof (including without limitation, all
consents, approvals and/or waivers required under the Contracts listed on
Schedule 3.8 in order to permit the consummation of the transactions
contemplated by this Agreement without causing or resulting in a default, event
of default, acceleration event or termination event under any of such documents
and without entitling any party to any of such documents to exercise any other
right or remedy adverse to the interests of Parent or MergerSub or the Company
thereunder). Each such consent or approval shall be in form satisfactory to
counsel for Parent and MergerSub.
Section 5.2 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the Company and the Stockholders to perform their respective
obligations under this Agreement and to consummate the transactions contemplated
thereby shall have been duly obtained, made or given and shall be in full force
and effect, and all waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement, shall have terminated or expired.
Section 5.3 Good Standing Certificates. The Company shall have delivered
to Parent and MergerSub: a copy of the Company's certificate of incorporation
(or other comparable corporate charter documents), including all amendments,
certified by the Secretary of State of the State of Delaware and a certificate
from the Secretary of State in each state in which the Company is qualified as a
foreign corporation to do business to the effect that such Company is in good
standing in such state (in each case together with the applicable tax status
certificate).
Section 5.4 Certified Resolutions. The Company shall have delivered to
Parent and MergerSub a copy of resolutions of the Board of Directors and the
stockholders of the Company authorizing the execution, delivery and performance
of this Agreement and the transactions contemplated hereby, certified by an
officer of the Company as of the Closing Date.
Section 5.5 Employment Agreements. Each of Xxxxx Xxxxxxxxx, Xxx Xxxxx, Xx
Xxxxxxxx and Xxxxx Xxxxxx shall have entered into an Employment Agreement with
MergerSub in the form of Exhibit C hereto.
34
Section 5.6 Non-Solicitation/Non-Servicing Agreement. Each of Xxxxx
Xxxxxxxxx, Xxx Xxxxx, Xx Xxxxxxxx and Xxxxx Xxxxxx shall have entered into a
Non-Solicitation/Non-Servicing Agreement with Parent and MergerSub in the form
of Exhibit D hereto.
Section 5.7 Opinion of Counsel. MergerSub shall have received the opinion
of Xxxxxxxx & Xxxxxxxx LLP, counsel to the Company and the Stockholders, dated
the Closing Date, substantially in the form and to the effect of Exhibit E
hereto.
Section 5.8 Investment Representation Certificate. Each of the holders of
Company Common Stock shall have executed and delivered an Investment
Representation Certificate in the form of Exhibit F hereto.
Section 5.9 Lockup Agreement. Each of the holders of Company Common Stock
and each Optionholder under the ITI Option Plan shall have entered into a Lockup
Agreement with Parent in the form of Exhibit G hereto.
Section 5.10 Repayment of Loans. All indebtedness of the Company
stockholders to the Company shall have been repaid in full, and each of the
stockholders shall have delivered to Parent and MergerSub a certificate in the
form of Exhibit H hereto.
Section 5.11 Appointment of Representative. The Stockholders shall have
appointed Xxxxx Xxxxxxxxx, to act as the Representative.
Section 5.12 Optionholder Forbearance Agreements. Each holder of
outstanding and unexercised ITI Options at the Effective Time shall have entered
into an Optionholder Forbearance Agreement in the form annexed as Exhibit I.
Section 5.13 Indemnity and Escrow Agreement. Each of the Stockholders and
the Company shall have entered into the Indemnity and Escrow Agreement in the
form and to the effect of Exhibit K hereto.
Section 5.14 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto must be reasonably satisfactory in form and substance to Parent and
MergerSub and their counsel, and Parent and MergerSub shall have received copies
of all such documents and other evidences as it or its counsel reasonably
requested in order to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
ARTICLE VI
ACTIONS AT CLOSING BY PARENT AND MERGERSUB
35
Simultaneously herewith:
Section. 6.1 Required Approvals, Notices and Consents. Parent and
MergerSub shall have obtained or given, at no expense to the Company and the
Stockholders, and there shall not have been withdrawn or modified any notices,
consents, approvals or other actions listed on Schedules 4.3.2 hereof. Each such
consent or approval shall be in form reasonably satisfactory to counsel for the
Company and the Stockholders.
Section 6.2 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Parent and MergerSub to perform their respective obligations
under this Agreement and to consummate the transactions contemplated thereby
shall have been duly obtained, made or given and shall be in full force and
effect, and all waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
each of the Transaction Documents, shall have terminated or expired.
Section 6.3 Certified Resolutions. Each of Parent and MergerSub shall have
delivered to the Stockholders a copy of the resolutions of their respective
Boards of Directors authorizing the execution, delivery and performance this
Agreement and the transactions and other agreements contemplated thereby,
certified to by an officer of Parent or MergerSub, as the case may be.
Section 6.4 Opinions of Counsel. The Company and the Stockholders shall
have received the opinion of Xxxxx & Xxxxxxx LLP, counsel to Parent and
MergerSub, and of Xxxxx Xxxxxxx-Wertinan, general counsel of Parent, each dated
the Closing Date, substantially in the form and to the effect of Exhibits J-1
and J-2.
Section 6.5 Employment Agreements. MergerSub shall have entered into an
Employment Agreement with each of Xxxxx Xxxxxxxxx, Xxx Xxxxx, Xx Xxxxxxxx and
Xxxxx Xxxxxx in the form of Exhibit C hereto.
Section 6.6 Non-Solicitation/Non-Servicing Agreements. MergerSub and
Parent shall have entered into a Non-Solicitation/Non-Servicing Agreement with
each of Xxxxx Xxxxxxxxx, Xxx Xxxxx, Xx Xxxxxxxx and Xxxxx Xxxxxx, in the form of
Exhibit D hereto.
Section 6.7 Xxxxxx.Xxx Options. Parent shall have granted options pursuant
to the Xxxxxx.Xxx Option Plan in the amounts and to the several Company
employees listed on Schedule 6.7 hereto.
Section 6.8 Indemnity and Escrow Agreement. Parent shall have entered into
the Indemnity and Escrow Agreement in the form and to the effect of Exhibit K.
36
Section 6.9 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto must be reasonably satisfactory in form and substance to the
Stockholders, the Company and their counsel and the Stockholders shall have
received copies of all such documents and other evidences as they or their
counsel may reasonably request in order to establish the consummation of such
transaction and the taking of all proceedings in connection therewith.
ARTICLE VII
OTHER AGREEMENTS
Section 7.1 Separate Subsidiary. Parent and the Stockholders agree that
from and after the Closing Date through September 30, 2000 (the "Earn-Out
Period"), Parent shall cause the operations of the Surviving Corporation to be
conducted and managed as a separate subsidiary, in substantially the same manner
(except as modified by the provisions of Section 7.2 below) as the operations of
the Company were conducted prior to the Closing Date.
Section 7.2 Management of the Surviving Corporation. The operations of the
Surviving Corporation shall be conducted to: (i) participate in Parent's overall
cash management program and abide by Parent's dividend and management fee
policies as from time to time in effect; (ii) comply on a timely basis with the
financial reporting and budgeting procedures of Parent as from time to time in
effect, which procedures require the approval of profit and capital expenditure
plans; and (iii) comply with Xxxxxx.Xxx's general business procedures for its
operating units.
Section 7.3 Private Placement and Registration and Listing. The Agency
Shares to be issued to the Stockholders will not be registered under the
Securities Act based upon the "private offering exemption" under the Securities
Act, in reliance on the Letters of Investment Intent to be delivered by
Stockholders at the Closing.
Section 7.4 Release of Stockholder Guarantees. Parent agrees that promptly
following the Closing, Parent will use its best efforts to execute any and all
documents reasonably necessary to fully discharge any and all Stockholders from
any and all personal guarantees or assurances made by such Stockholder(s) in
respect of any indebtedness or other obligations of the Company, to the extent
that such indebtedness or other obligation is reflected in the Balance Sheet or
otherwise disclosed in this Agreement.
Section 7.5 Autonomy.
(a) From the Closing Date through September 30, 2000 (the "Autonomy
Period"), the business of the Surviving Corporation shall be operated by the
Persons listed on Schedule 1.4.2 (for so long as they shall remain employees of
the Surviving Corporation or Parent, as the case may be), reporting to and
subject to the authority of the President, North America of
37
Parent and Boards of Directors of the Surviving Corporation and Parent.
Notwithstanding the foregoing, none of the Stockholders, individually and
collectively, shall have the power or authority to authorize any of the
following actions, and such actions shall require the affirmative authorization
of the President, North America of Parent or the Board of Directors of Parent or
such other Person as may be designated from time to time by the Chief Executive
Officer of Parent:
(i) any merger, consolidation, or acquisition of or with any other
business enterprise, or the dissolution of the Surviving Corporation;
(ii) the establishment or dissolution of any subsidiary,
partnership, corporation or any other business enterprise or the entering
into of any joint ventures;
(iii) the incurrence of any expenditure, including any capital
expenditure, in excess of amounts budgeted for such expenditure or any
aggregate expenditures in excess of amounts budgeted for such aggregate
expenditures, in budgets of the Surviving Corporation having received the
prior approval of the Board of Directors of Parent (the "Budget");
(iv) the sale of all or any substantial portion of the assets of the
Surviving Corporation
(v) the issuance or sale of capital stock of the Surviving
Corporation or any securities or instruments convertible into or
exercisable for capital stock of the Surviving Corporation;
(vi) the borrowing of funds or the issuance of bonds or other
evidence of indebtedness or the making of guarantees or the lending of
funds, but excluding travel and other advances to employees made in the
ordinary course of business;
(vii) the pledge of assets other than to secure office equipment
lease obligations or office equipment purchase money indebtedness not in
excess of the amount budgeted therefor in the Budget;
(viii) any material changes in business activities or of any changes
in place of business;
(ix) the making in any fiscal year of any commitment or the entering
into of any contract (other than employment contracts) which conflicts
with the Budget for that fiscal year or which provides for expenditures in
any future fiscal year;
(x) the leasing or purchase of any real property;
38
(xi) the making of any employment contract which has not been
approved by corporate counsel;
(xii) the amendment of the Certificate of Incorporation or the
Bylaws of the Surviving Corporation;
(xiii) providing any services to or purchasing any materials or
services from an Affiliate of any Stockholder;
(xiv) the commencement of settlement of any claims, suits or
proceedings without the approval of the general counsel of Parent;
provided that they shall be authorized to settle any dispute relating to
collections in the ordinary course of business that do not exceed $10,000
as to which no legal proceeding has commenced;
(xv) taking any action outside the ordinary course of business; and
(xvi) agreeing to do any of the foregoing.
(b) Notwithstanding anything contained in this Section 7.5 to the
contrary, Parent shall have the right in its sole discretion to cause the
business of the Surviving Corporation to be integrated into the business and
operations of Parent, subject to the provisions of Section 2.2.8 hereof and the
terms of the Stockholders' individual Employment Agreements, as applicable and
in such case the provisions of Section 7.5(a) will cease to apply.
(c) Notwithstanding anything to the contrary, during the Autonomy Period,
the President, North America of Parent and the Board of Directors of Parent or
such other Person as may be designated from time to time by the Chief Executive
Officer of Parent, acting separately, shall each have the right to terminate the
employment of any of the Surviving Corporation's employees (other than the
Stockholders whose employment will be governed by the terms of their individual
Employment Agreements) for "cause" and to cause the Surviving Corporation to
resign any account due to a conflict.
(i) For the purposes of this Section 7.5(c), the term "cause" shall
be deemed to mean and include the failure of an employee, in the judgment
of the President, North America, of Parent or other person specified
above, to adequately perform the duties, responsibilities and/or
obligations of his employment continuing for more than 15 days after
warning; dishonesty, theft, conviction of a crime, drunkenness, unethical
business conduct, nonconformance with the Surviving Corporation's or
Parent's standard business practices and policies, including without
limitation, policies against racial or sexual discrimination or
harassment, or the commission in bad faith of any act which injures or
could reasonably be expected to injure the reputation, business or
business relationships of the Surviving Corporation and/or Parent.
39
(ii) In the event that during the Measuring Period, Parent shall
require the Surviving Corporation to resign any account due to a conflict
with any client or account of Parent or any Affiliate of Parent, then the
Revenue and PBT Targets set forth on Schedule 2.2.3 and the key success
factors set forth on Schedule 2.2.7 shall be adjusted, as appropriate upon
the mutual good faith agreement of Parent and the Representative, taking
into account, historical and anticipated results in respect of such
resigned client during the remainder of the Measuring Period; provided,
however, that any such Revenues, PBT or KSF amounts attributable to such
resigned client shall be offset and reduced by the Revenue, PBT or key
success factors derived during the Measuring Period from any client or
account contributed or referred to the Surviving Corporation by Parent or
any Affiliate of Parent (other than the Surviving Corporation).
ARTICLE VIII
SURVIVAL: INDEMNITY
Section 8.1 Survival. Notwithstanding any right of any party hereto fully
to investigate the affairs of any other party, and notwithstanding any knowledge
of facts determined or determinable pursuant to such investigation or right of
investigation, each party hereto shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement and the Schedules, if any, furnished by any other
party pursuant to this Agreement, or in any certificate delivered at the Closing
by any other party. Subject to the limitations set forth in Sections 8.6.2,
8.6.3 and 8.6.5, the respective representations, warranties, covenants and
agreements of the Company, the Stockholders, Parent and MergerSub contained in
this Agreement shall survive the Closing, as provided in Sections 8.6.2 and
8.6.3.
Section 8.2 Obligation of the Stockholders to Indemnify
8.2.1 General Indemnity Subject to the limitations contained in Sections
8.6.1 and 8.6.2, each of the Stockholders hereby agree, jointly and severally,
to indemnify Parent, the Surviving Corporation and their respective affiliates,
shareholders, officers, directors, employees, agents, representatives and
successors, permitted assignees (individually an "Parent Indemnified Party" and
collectively, the "Parent Indemnified Parties") against, and to protect, save
and keep harmless Parent Indemnified Parties from, and to pay on behalf of or
reimburse Parent Indemnified Parties as and when incurred for, any and all
liabilities (including liabilities for Taxes), obligations, losses, damages,
penalties, demands, claims, actions, suits, judgments, settlements, penalties,
interest, out-of-pocket costs, expenses and disbursements (including reasonable
costs of investigation, and reasonable attorneys', accountants' and expert
witnesses' fees) of whatever kind and nature (collectively, "Losses"), that may
be imposed on or incurred by any Parent Indemnified Party as a consequence of,
in connection with, incident to, resulting from or arising out of or in any way
40
related to or by virtue of (a) any misrepresentation, inaccuracy or breach of
any warranty or representation contained in Article III.B hereof or in any
certificate delivered by the Company or either Stockholder at the Closing; (b)
any action, demand, proceeding, investigation or claim by any third party
(including any Governmental or Regulatory Authority) against or affecting any
Parent Indemnified Party which may give rise to or evidence the existence of or
relate to a misrepresentation or breach of any of the representations and
warranties of the Company or the Stockholders contained in Article III.B hereof
or in any certificate delivered by the Company or either Stockholders at the
Closing; or (c) any breach or failure by the Company or the Stockholders to
comply with perform or discharge any obligation, agreement or covenant by the
Company or the Stockholders contained in this Agreement.
8.2.2 Special Indemnity. Subject to the limitations contained in Sections
8.6.1 and 8.6.2, each of the Stockholders hereby severally and not jointly
agrees to indemnify Parent Indemnified Parties against, and to protect, save and
keep harmless Parent Indemnified Parties from, and to assume liability for, the
payment of all Losses that may be imposed on or incurred by any Parent
Indemnified Party as a consequence of or in connection with, incident to,
resulting from or arising out of or in any way related to or by virtue of: (a)
any misrepresentation, inaccuracy or breach of a representation or warranty by
any Stockholder contained in Article III.A hereof; and (b) any action, demand,
proceeding, investigation or claim by any third party (including any
Governmental or Regulatory Authority) against or affecting any Parent
Indemnified Party which may give rise to or evidence the existence of or relate
to a misrepresentation or breach of any of the representations and warranties of
any Stockholder contained in Article III.A hereof or in any certificate
delivered by any Stockholder at the Closing. Any claim for indemnity made under
this Section 8.2.2 shall not be construed as a claim under Section 8.2.1 hereof
even if an Parent Indemnified Party could have made a claim under Section 8.2.1
hereof in respect of the same matters.
8.2.3 Clarification of the term "Losses". The term "Losses" as used in
this Agreement is not limited to matters asserted by third parties against an
Parent Indemnified Party, but includes Losses incurred or sustained by an Parent
Indemnified Party in the absence of third party claims. For purposes of
clarification, any liabilities (including liabilities for Taxes), obligations,
losses, damages, penalties, demands, claims, actions, suits, judgments,
settlements, penalties, interest, out-of-pocket costs, expenses and
disbursements (including reasonable costs of investigation, and reasonable
attorneys', accountants' and expert witnesses' fees) of whatever kind and nature
suffered by the Surviving Corporation by virtue of a state of facts which
constitutes a misrepresentation, inaccuracy or breach of a warranty or
representation by the Company or any Stockholder shall be deemed to have been
suffered by Parent.
Section 8.3 Obligation of Parent to Indemnify. Subject to the limitations
set forth in Section 8.6.3 hereof, Parent hereby agrees to indemnify the
Stockholders against, and to protect, save and keep harmless the Stockholders
from, and to pay on behalf of or reimburse the
41
Stockholders as and when incurred for, any and all Losses that may be imposed on
or incurred by either Stockholder as a consequence of, in connection with,
incident to, resulting from or arising out of or in any way related to or by
virtue of: (a) any misrepresentation, inaccuracy or breach of any warranty or
representation contained in Article IV hereof or in any certificate delivered by
MergerSub or Parent at the Closing; (b) any action, demand, proceeding,
investigation or claim by any third party (including any Governmental or
Regulatory Authority) against or affecting any Stockholder which may give rise
to or evidence the existence of or relate to a misrepresentation or breach of
any of the representations and warranties contained in Article IV hereof or in
any certificate delivered by MergerSub or Parent at the Closing; or (c) any
breach or failure by MergerSub or Parent to comply with, perform or discharge
any obligation, agreement or covenant by MergerSub or Parent contained in this
Agreement.
Section 8.4 Indemnification Procedure for Claims. In the event that any
Person entitled to indemnification under this Agreement (an "Indemnified Party")
asserts a claim for indemnification or receives notice of the assertion of any
claim or of the commencement of any action or proceeding by any Person who is
not a party to this Agreement or an affiliate of a party to this Agreement (a
"Third Party Claim") against such Indemnified Party, against which a party to
this Agreement is required to provide indemnification under this Agreement (an
"Indemnifying Party"), the Indemnified Party shall give written notice together
with a statement of any available information regarding such claim to the
Indemnifying Party within 30 days after learning of such claim (or within such
shorter time as may be necessary to give the Indemnifying Party a reasonable
opportunity to respond to such claim). The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party (the "Defense Notice")
within 15 days after receipt from the Indemnified Party of notice of such claim,
which notice by the Indemnifying Party shall specify the counsel it will appoint
to defend such claim ("Defense Counsel"), to conduct at its expense the defense
against such claim in its own name, or if necessary in the name of the
Indemnified Party; provided, however, that the Indemnified Party shall have the
right to approve the Defense Counsel, which approval shall not be unreasonably
withheld or delayed, and in the event the Indemnifying Party and the Indemnified
Party cannot agree upon such counsel within 10 days after the Defense Notice is
provided, then the Indemnifying Party shall propose an alternate Defense
Counsel, which shall be subject again to the Indemnified Party's approval which
approval shall not be unreasonably withheld or delayed. If the parties still
fail to agree on the Defense Counsel, then, at such time, they shall mutually
agree in good faith on a procedure to determine the Defense Counsel.
(a) In the event that the Indemnifying Party shall fail to give the
Defense Notice within such 15 day period, it shall be deemed to have
elected not to conduct the defense of the subject claim, and in such event
the Indemnified Party shall have the right to conduct the defense and to
compromise and settle the claim with prior consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed, and
the Indemnifying Party will be liable for all reasonable costs,
42
expenses, settlement amounts or other Losses paid or incurred in
connection therewith.
(b) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim, the
Indemnifying Party shall be entitled to have the exclusive control over
the defense and settlement of the subject claim and the Indemnified Party
will cooperate with and make available to the Indemnifying Party such
assistance and materials as it may reasonably request, all at the expense
of the Indemnifying Party; the Indemnified Party shall have the right at
its expense to participate in the defense assisted by counsel of its own
choosing. In such an event, the Indemnifying Party will not settle the
subject claim without the prior written consent of the Indemnified Party,
which consent will not be unreasonably withheld or delayed.
(c) Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive relief or specific
performance would be imposed against the Indemnified Party, or (ii) such
settlement or cessation would lead to liability or create any financial or
other obligation on the part of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder.
(d) If an Indemnified Party refuses to consent to a bona fide offer
of settlement which provides for a full release of the Indemnified Party
and its affiliates and solely for a monetary payment which the
Indemnifying Party wishes to accept, the Indemnified Party may continue to
pursue such matter, free of any participation by the Indemnifying Party,
at the sole expense of the Indemnified Party. In such an event, the
obligation of the Indemnifying Party shall be limited to the amount of the
offer of settlement which the Indemnified Party refused to accept plus the
costs and expenses of the Indemnified Party incurred prior to the date the
Indemnifying Party notified the Indemnified Party of the offer of
settlement.
(e) Notwithstanding clause (b) above, the Indemnifying Party shall
not be entitled to control, but may participate in, and the Indemnified
Party shall be entitled to have sole control over, the defense or
settlement of any claim (i) that seeks a temporary restraining order, a
preliminary or permanent injunction or specific performance against the
Indemnified Party, (ii) to the extent such claim involves criminal
allegations against the Indemnified Party, (iii) that if unsuccessful,
would set a precedent that would materially interfere with, or have a
material adverse effect on, the business or financial condition of the
Indemnified Party or (iv) if such claim would impose liability on the part
of the Indemnified Party for which the Indemnified Party is not entitled
to indemnification hereunder. In such an event, the Indemnifying Party
will still have all of its obligations hereunder provided that the
Indemnified
43
Party will not settle the subject claim without the prior written consent
of the Indemnifying Party, which consent will not be unreasonably withheld
or delayed.
(f) Any final judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
(g) A failure by an Indemnified Party to give timely, complete or
accurate notice as provided in this Section 8.4 will not affect the rights
or obligations of any party hereunder except and only to the extent that,
as a result of such failure, any party entitled to receive such notice was
deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise directly and materially damaged as a
result of such failure to give timely notice.
[Section 8.5 Intentionally omitted.]
Section 8.6 Limitations on and Other Matters Regarding Indemnification.
8.6.1 Indemnity Cushion and Cap. Subject to Section 8.6.5 below, the
Stockholders shall have no liability to any Parent Indemnified Party with
respect to Losses arising out of any of the matters referred to in Sections
8.2.1 or 8.2.2 until such time as the amount of such liability shall exceed
$70,000 in the aggregate (in which case the Stockholders shall be liable for all
Losses up to and in excess of $70,000); provided, however, that this Section
8.6.1 shall not apply to Losses relating to a breach of a representation or
warranty contained in Section 3.26 or 3.2.7 (for which there is no cushion).
Subject to Section 8.6.5 below, the maximum liability of the Stockholders for
indemnity payments under Sections 8.2.1 and 8.2.2 shall be limited to and shall
be paid solely from the Escrow Fund in accordance with the terms and provisions
of the Indemnity and Escrow Agreement.
8.6.2 Termination of Indemnification Obligations of the Stockholders. The
obligation of the Stockholders to indemnify under Section 8.2 hereof shall
terminate on April 30, 2001, except (a) as to matters as to which Parent
Indemnified Party has made a claim for indemnification on or prior to such date
and (b) with respect to any claim for Losses pertaining to a misrepresentation
or a breach of representation or warranty under Sections 3.11 or 3.19 or any
other Section of Article III of this Agreement relating to Taxes. The obligation
to indemnify referred to in:
(i) the preceding clause (a) shall survive the expiration of such period
until such claim for indemnification is finally resolved and any
obligations with respect thereto are fully satisfied; and
44
(ii) the preceding clause (b) shall terminate 120 days after the
expiration of the relevant Federal, state or local statute of limitations
(taking into account any extensions or waivers thereof), except as to
matters as to which any Indemnified Party has made a claim for
indemnification on or prior to such date, in which case the right to
indemnification with respect thereto shall survive the expiration of any
such period until such claim for indemnification is finally resolved and
any obligations with respect thereto are fully satisfied.
8.6.3 Termination of Indemnification Obligations of Parent . The
obligations of Parent to indemnify under Section 8.3 hereof shall terminate on
April 30, 2001, except as to matters as to which a Stockholder has made a claim
for indemnification on or prior to such date, in which case the right to
indemnification with respect thereto shall survive such period until such claim
for indemnification is resolved and any obligations with respect thereto are
fully satisfied.
8.6.4 Treatment. Any indemnity payments by an Indemnifying Party to an
Indemnified Party under this Article VIII shall be treated by the parties as an
adjustment to the Purchase Price.
8.6.5 Exceptions. Each of the limitations set forth above in this Section
8.6 shall in no event (a) apply to any Losses incurred by a Parent Indemnified
Party which relate, directly or indirectly, to (i) any fraudulent acts committed
by the Company or the Stockholders (including without limitation, fraud in
connection with the transaction contemplated hereby and any fraudulent acts by
any officer, director, employee, agent or stockholder of the Company); (ii) any
indemnification obligation under Section 8.2.1(c); and (iii) the Company's and
the Stockholders' obligations set forth in Section 9.1 to pay certain expenses;
(iv) the claims and potential claims by Modem Media set forth on Schedule 3.10,
for which Losses the Stockholders shall be jointly and severally liable and
shall not be paid from the Escrow Fund; (v) the 2Q1998 tax penalty and any
payroll taxes or related amounts owed with respect to the Company's 1998 stock
incentive plan as described on Schedule 3.11, for which Losses the Stockholders
shall be jointly and severally liable and shall not be paid from the Escrow
Fund; or (b) apply to any Losses incurred by a Stockholder which relate,
directly or indirectly, to (i) any indemnification obligation under Section
8.3(c); and (ii) Parent's and MergerSub's obligations set forth in Section 9.1
to pay certain expenses.
45
such entity and unless otherwise stated, such knowledge that would have been
discovered by such executive officers after reasonable inquiry.
Section 9.5 "Affiliate" Defined. As used in this Agreement, an "affiliate"
or "Affiliate" of any Person, shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with such Person.
Section 9.6 "Material Adverse Effect" Defined. For purposes of this
Agreement, "Material Adverse Effect" shall mean any material and adverse effect
on the financial condition, results of operations, assets, properties, prospects
or business of the Company.
Section 9.7 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 9.8 Publicity. Subject to the provisions of the next sentence, no
party to this Agreement shall, and the Stockholders shall insure that no
representative of the Company shall, issue any press release or other public
document or make any public statement relating to this Agreement or the matters
contained herein without obtaining the prior approval of Parent and the
Stockholders. Notwithstanding the foregoing, the foregoing provision shall not
apply to the extent that Parent is required to make any announcement relating to
or arising out of this Agreement by virtue of the federal securities laws of the
United States or the rules and regulations promulgated thereunder, or rules of
any stock exchange, or any announcement by any party or the Company pursuant to
applicable law or regulations.
Section 9.9 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand or courier, (b) three days after the
date of deposit in the mails, postage prepaid, if mailed by certified or
registered mail, or (c) the next business day if sent by facsimile transmission
(if receipt is electronically confirmed) or by a prepaid overnight courier
service, and in each case at the respective addresses or numbers set forth below
or such other address or number as such party may have fixed by notice:
If to Parent or MergerSub, addressed to:
Xxxxxx.Xxx, Ltd.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Fax:(000) 000-0000
47
with a copy to:
Xxxxx Xxxxxxx-Xxxxxxx
Xxxxxx.Xxx Ltd.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax:(000) 000-0000
If to the Stockholders or to the Company, addressed to the Representative:
Xxxxx Xxxxxxxxx
c/o i-traffic
000 Xxxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax:(000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
1290 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. X. Xxxxxxx, Esq.
Fax:(000) 000-0000
Section 9.10 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. Any purported such transfer, assignment, pledge, or hypothecation (other
than by operation of law) shall be void and ineffective. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
Section 9.11 Severability. In the event any provision of this Agreement is
found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
Section 9.12 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
Section 9.13 Entire Agreement. This Agreement, including the other
documents referred to herein and the Exhibits and Schedules hereto which form a
part hereof, contains the entire understanding of the parties hereto with
respect to the subject matter contained herein
48
and therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
Section 9.14 Amendments. This Agreement may not be amended, supplemented
or modified orally, but only by an agreement in writing signed by each of the
parties hereto.
Section 9.15 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto and their respective
successors and assigns as permitted under Section 9.9.
Section 9.16 Use of Terms. Whenever the context so requires or permits,
all references to the masculine herein shall include the feminine and neuter,
all references to the neuter herein shall include the masculine and feminine,
all references to the plural shall include the singular and all references to
the singular shall include the plural.
49
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal, on the day and year first above written.
XXXXXX.XXX LTD.
By: /s/ Xxxxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxx
Title:
ITI ACQUISITION INC.
By: /s/ Xxxxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxx
Title:
INTERACTIVE TRAFFIC, INC.
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: CEO
THE STOCKHOLDERS:
/s/ Xxxxxx Xxxxxxxx
--------------------------------------
Xx Xxxxxxxx
/s/ Xxxxx Xxxxxxxxx
--------------------------------------
Xxxxx Xxxxxxxxx
/s/ Xxx Xxxxx
--------------------------------------
Xxx Xxxxx
/s/ Xxxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx
50
ANNEX I
Xx Xxxxxxxx
000 Xxxx 00xx Xxxxxx, Xxx. 0
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxxxx
000 Xxxxxxxxx Xxxxxx, Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
Xxx Xxxxx
000 Xxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxxx
0000 X Xxxxxxx Xxxxx
Xxxxx, Xxx Xxxx 00000
INDEX OF DEFINED TERMS
A
Accountants ............................................................ 11
Adjusted Net Worth Amount .............................................. 10
Affiliate .............................................................. 46
Agency Shares .......................................................... 3
Agreement .............................................................. 1
B
Balance Sheet .......................................................... 16
Balance Sheet Date ..................................................... 17
C
cause .................................................................. 39
Certificate of Merger .................................................. 2
Closing ................................................................ 13
Closing Balance Sheet .................................................. 11
Closing Date ........................................................... 13
Company ................................................................ 1
Company Common Stock ................................................... 3
Contracts .............................................................. 15
Convened Options ....................................................... 9
D
Defense Counsel ........................................................ 42
Defense Notice ......................................................... 41
Determination .......................................................... 7
E
Earn-Out Period ........................................................ 36
Effective Time ......................................................... 2
Environmental Laws and Orders .......................................... 23
ERISA .................................................................. 24
ERISA Affiliate ........................................................ 25
Estimated Closing Balance Sheet ........................................ 10
G
GAAP ................................................................... 6
Governmental or Regulatory Authority ................................... 15
I
Indemnified Party ...................................................... 41
Indemnifying Party ..................................................... 41
Indemnity Escrow ....................................................... 3
Independent Auditors ................................................... 7, 11
Intellectual Property .................................................. 22
Intellectual Property of the Companies ................................. 22
ITI Option ............................................................. 9
ITI Option Plan ........................................................ 9
ii
K
Knowledge .............................................................. 46
L
Laws ................................................................... 15
Liabilities ............................................................ 21
Licenses ............................................................... 15
Liens .................................................................. 17
Losses ................................................................. 40
M
Material Adverse Effect ................................................ 46
Measuring Period ....................................................... 5
Merger ................................................................. 1
MergerSub .............................................................. 1
MergerSub Common Stock ................................................. 4
N
Net Worth Amount ....................................................... 10
0
Orders ................................................................. 15
P
Parent ................................................................. 1
Parent Indemnified Parties ............................................. 40
Payment Acceleration Event ............................................. 3
PBGC ................................................................... 26
PBT .................................................................... 6
PBT Target ............................................................. 5
Person ................................................................. 45
Plan ................................................................... 25
Preferred Stock ........................................................ 3
Processes .............................................................. 30
R
Real Property Leases ................................................... 18
Reconciled Purchase Price .............................................. 10
Reconciliation Period .................................................. 11
Related Group .......................................................... 27
Representative ......................................................... 4,13
Revenue Target ......................................................... 5
Revenues ............................................................... 6
S
Securities Act ......................................................... 3
Special Determination .................................................. 11
Stockholder ............................................................ 1
Surviving Corporation .................................................. 2
Surviving Corporation Common Stock ..................................... 4
T
Tangible Net Worth ..................................................... 11
ii
Taxes .................................................................. 20
Third Party Claim ...................................................... 41
Title IV Plan .......................................................... 26
Transaction Expenses ................................................... 45
Y
Year 2000 Compliant .................................................... 30
iii
EXHIBITS AND SCHEDULES
Exhibits
--------
Exhibit A Certificate of Incorporation of the Surviving Corporation
Exhibit B By-Laws of the Surviving Corporation
Exhibit C Form of Executive Employment Agreement with MergerSub
Exhibit D Form of Non-Solicitation/Non-Servicing Agreement
Exhibit E Opinion of Xxxxxxxx & Xxxxxxxx LLP, counsel to the Company and the
Stockholders
Exhibit F Investment Representation Certificate
Exhibit G Lockup Agreement with Parent signed by each of the Company
Stockholders and Optionholders
Exhibit H Certificate of Repayment of Stockholder Indebtedness
Exhibit I Optionholder Forbearance Agreement
Exhibits J-1 and J-2 Opinions of counsel to Parent and MergerSub.
Exhibit K Indemnity and Escrow Agreement
Schedules
---------
Schedule 1.4.1 Directors of Surviving Corporation
Schedule 1.4.2 Officers of Surviving Corporation
Schedule 2.2.3 Revenue and Profit Targets
Schedule 2.2.7 Key Success Factors
Schedule 2.6 Wire Transfer Instructions
Schedule 3.2 List of Jurisdictions
Schedule 3.3.2 Options and Rights
Schedule 3.4 Financial Statements and No Material Changes.
Schedule 3.4.1 Exceptions to GAAP
Schedule 3.5 Books and Records
Schedule 3.6 Liens
Schedule 3.7.2 Real Property Leases
Schedule 3.8 Contracts
Schedule 3.9.2 Approvals and Consents
Schedule 3.10 Litigation
Schedule 3.11 Taxes
Schedule 3.13 Insurance
Schedule 3.14 Registrations
Schedule 3.16 Clients
Schedule 3.19.1 List of Plans
Schedule 3.19.2 Severance
Schedule 3.20 Interests in Customers, Suppliers
Schedule 3.21 Bank Accounts and Powers of Attorney
Schedule 3.22 Compensation of Employees
Schedule 3.23 Changes since Balance Sheet Date
Schedule 3.26 Brokers
Schedule 3.27 Year 2000 Compliance
Schedule 4.3.2 Approvals and Consents
Schedule 6.7 Xxxxxx.Xxx Options
