EXECUTION COPY
MERGER AGREEMENT
BY AND AMONG
INTERSECTIONS INC.,
CMSI MERGER INC.,
CHARTERED MARKETING SERVICES, INC.,
AND
CHARTERED HOLDINGS, LLC AND OTHER SHAREHOLDERS OF
CHARTERED MARKETING SERVICES, INC.
DATED AS OF JUNE 9, 2006
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER...................................................1
1.1 The Merger.....................................................1
1.2 Closing........................................................2
1.3 Organizational Documents.......................................2
1.4 Directors and Officers.........................................2
1.5 Conversion of Capital Stock....................................2
1.6 Exchange of Certificates.......................................4
1.7 Treatment of Options...........................................5
1.8 Adjustments to Merger Consideration............................6
1.9 Escrow Amount..................................................8
1.10 Escrow Release................................................10
1.11 Adjustment for Indebtedness...................................11
1.12 Adjustment for Transaction Expenses...........................11
1.13 Appointment of Shareholder Representative.....................12
1.14 Dissenting Shares.............................................13
1.15 Shareholder Consent...........................................13
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............14
2.1 Organization and Qualification................................14
2.2 Authority Relative to this Agreement..........................15
2.3 Capital Stock.................................................15
2.4 No Subsidiaries...............................................17
2.5 Directors, Officers and Employees.............................17
2.6 No Conflicts..................................................17
2.7 Company Financial Statements; Accounting Practices............17
2.8 Books and Records; Organizational Documents...................18
2.9 Absence of Changes............................................18
2.10 No Undisclosed Liabilities....................................21
2.11 Taxes.........................................................21
2.12 Legal Proceedings.............................................24
2.13 Compliance with Laws and Orders; Permits......................24
2.14 Plans; ERISA..................................................25
2.15 Real Property.................................................26
2.16 Tangible Personal Property....................................27
2.17 Intellectual Property.........................................27
2.18 Contracts.....................................................30
2.19 Insurance.....................................................31
2.20 Affiliate Transactions........................................32
2.21 Employees; Labor Relations....................................32
2.22 Environmental Matters.........................................33
2.23 Substantial Clients, Brokers and Vendors......................33
2.24 Accounts Receivable...........................................34
2.25 Other Negotiations; Brokers; Third-Party Expenses.............34
2.26 Banks and Brokerage Accounts..................................34
2.27 Warranty Obligations..........................................35
2.28 Foreign Corrupt Practices Act.................................35
2.29 Financial Projections.........................................35
2.30 Takeover Statutes.............................................35
2.31 Disclaimer of Representations and Warranties..................35
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER...........35
3.1 Ownership of Company Common Stock.............................36
3.2 Organization..................................................36
3.3 Authority Relative to this Agreement..........................36
3.4 No Conflicts..................................................36
3.5 Other Negotiations; Brokers; Third-Party Expenses.............37
3.6 Agreements....................................................37
3.7 Legal Proceedings.............................................37
3.8 Disclaimer of Representations and Warranties..................37
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND PURCHASERSUB............................................38
4.1 Organization and Qualification................................38
4.2 Authority Relative to this Agreement..........................38
4.3 No Conflicts..................................................38
4.4 Other Negotiations; Brokers; Third-Party Expenses.............39
4.5 Legal Proceedings.............................................39
4.6 Cash Available to Fund Transaction............................39
ARTICLE 5 CONDUCT PRIOR TO THE CLOSING..................................39
5.1 Conduct of Business of the Company............................39
5.2 Exclusivity...................................................40
ARTICLE 6 ADDITIONAL AGREEMENTS.......................................41
6.1 Access to Information.........................................41
6.2 Non-Solicitation..............................................41
6.3 Confidentiality...............................................42
6.4 Expenses......................................................44
6.5 Public Disclosure.............................................44
6.6 Further Assurances............................................44
6.7 FIRPTA Compliance.............................................45
6.8 Notification of Certain Matters...............................45
6.9 Resignation of Directors......................................45
6.10 Delivery of Stock Ledger and Minute Book of the Company.......45
6.11 Director and Officer Liability................................45
6.12 Certain Tax Matters...........................................45
6.13 Employee Matters..............................................47
6.14 Company 401(k) Plan...........................................48
6.15 Owned Real Property Matters...................................48
ARTICLE 7 CONDITIONS TO CLOSING.......................................48
7.1 Conditions to Obligations of Each Party to Effect the Merger..48
7.2 Additional Conditions to Obligations of Company...............49
7.3 Additional Conditions to the Obligations of Purchaser.........49
ARTICLE 8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.............................................51
8.1 Survival of Representations and Warranties....................51
8.2 Indemnification...............................................51
8.3 Third Party Claim Indemnification Procedures..................54
8.4 Exclusive Remedy..............................................54
8.5 No Recourse...................................................55
8.6 Determination of Adverse Consequences.........................55
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER...........................55
9.1 Termination...................................................55
9.2 Effect of Termination.........................................56
9.3 Amendment.....................................................56
ARTICLE 10 MISCELLANEOUS PROVISIONS....................................57
10.1 Notices.......................................................57
10.2 Entire Agreement..............................................58
10.3 Further Assurances; Post-Closing Cooperation..................58
10.4 Waiver........................................................59
10.5 Third-Party Beneficiaries.....................................59
10.6 No Assignment; Binding Effect.................................59
10.7 Headings......................................................59
10.8 Invalid Provisions............................................59
10.9 Governing Law, Submission to Jurisdiction.....................59
10.10 WAIVER OF TRIAL BY JURY.......................................60
10.11 Construction..................................................60
10.12 Counterparts..................................................60
10.13 Specific Performance..........................................60
ARTICLE 11 DEFINITIONS.................................................60
11.1 Definitions...................................................60
11.2 Construction..................................................71
The Exhibits to this Agreement are as follows:
Exhibit A - Shareholder Consent
Exhibit B - Letter of Transmittal
[The schedules and exhibits to the Merger Agreement have been omitted.
Intersections Inc. will furnish copies of such schedules and exhibits
supplementally to the Commission upon request.]
MERGER AGREEMENT
This MERGER AGREEMENT dated as of June 9, 2006, is by and among
INTERSECTIONS INC. a Delaware corporation ("Purchaser"), CMSI MERGER INC., an
Illinois corporation ("PurchaserSub"), CHARTERED MARKETING SERVICES, INC., an
Illinois corporation (the "Company"), CHARTERED HOLDINGS, LLC, a Massachusetts
limited liability company, and the other holders of shares of common stock of
the Company and options to acquire such shares who have executed this Agreement
(each, a "SHAREHOLDER," and collectively, the "SHAREHOLDERS").
RECITALS
A. The board of directors of the Company and the board of directors of
Purchaser have each approved the terms and conditions of the acquisition of the
Company by Purchaser to be effected by the merger of PurchaserSub with and into
the Company, pursuant to the terms and subject to the conditions of this
Agreement and the Illinois Business Corporation Act of 1983, as amended (the
"IBCA").
B. The parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, representations and
warranties set forth herein, intending to be legally bound hereby, the parties
agree as follows:
ARTICLE 1 THE MERGER
1.1 THE MERGER.
(a) At the Effective Time, PurchaserSub shall be merged with and into
the Company in accordance with the terms and conditions of this Agreement and
the IBCA (the "MERGER"), at which time the separate existence of PurchaserSub
shall cease and the Company shall continue its existence. In its capacity as the
corporation surviving the Merger, the Company is sometimes referred to as the
"SURVIVING CORPORATION."
(b) On the Closing Date, the Company and PurchaserSub shall cause to
be executed, acknowledged and filed articles of merger in accordance with the
terms of this Agreement and in a form reasonably satisfactory to Purchaser (the
"ARTICLES OF MERGER") with the Secretary of State of the State of Illinois (the
"SECRETARY") and make all other filings or recordings required by Section 11.25
of the IBCA in connection with the Merger. The "EFFECTIVE TIME" shall be 11:59
p.m. on the date that the Articles of Merger are filed with the Secretary
(unless a later date and/or time is otherwise agreed upon by the parties and
specified in the Articles of Merger, in which case, the Effective Time shall be
the date and time so specified).
(c) From and after the Effective Time, the Merger shall have the
effects set forth in Section 11.50 of the IBCA and herein.
1.2 CLOSING. Unless this Agreement is earlier terminated pursuant to
Section 9.1, the closing of the Merger (the "Closing"), which is expected to
take place on or about July 1, 2006 (the "Closing Date"), will take place within
three (3) Business Days after satisfaction or waiver of all of the conditions
set forth in Article 7 (but in no event prior to July 1, 2006), at the offices
of Xxxxxxx LLP, 0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000,
unless another place, time or manner of Closing is agreed to by Purchaser and
the Company.
1.3 ORGANIZATIONAL DOCUMENTS. At the Effective Time (i) the articles
of incorporation of PurchaserSub in effect at the Effective Time shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
in accordance with applicable law, except that the name of the Surviving
Corporation shall be "Chartered Marketing Services, Inc." and (ii) the by-laws
of PurchaserSub in effect immediately prior to the Effective Time shall be the
by-laws of the Surviving Corporation until thereafter amended in accordance with
applicable law, except that the name of the Surviving Corporation shall be
"Chartered Marketing Services, Inc."
1.4 DIRECTORS AND OFFICERS. From and after the Effective Time (until
successors are duly elected or appointed and qualified), the members of the
board of directors of PurchaserSub at the Effective Time shall be the members of
the board of directors of the Surviving Corporation and the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation.
1.5 CONVERSION OF CAPITAL STOCK. At the Effective Time and by virtue
of the Merger and without any action on the part of the Company, Purchaser or
PurchaserSub or their respective equityholders:
(a) Each share of PurchaserSub's common stock outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) Except as otherwise provided in Section 1.14, each share of
Company Common Stock outstanding immediately prior to the Effective Time shall
be converted into:
(i) the right to receive the Per Share Merger Consideration less
the Per Share Escrow Portion;
(ii) the right to receive a portion of the Positive Adjustment
Amount, if any, pursuant to SECTION 1.8(e); and
(iii) the right to receive a per share Allocable Portion of the
cash distributed from the Escrow Account and the Expense Reserve Account.
The aggregate consideration to be received in respect of the Company Common
Stock as set forth above in this SECTION 1.5 is referred to herein as the "STOCK
MERGER CONSIDERATION." At the Effective Time, each such share of Company Common
Stock shall no longer be outstanding, shall automatically be canceled and
retired and shall cease to exist. Each holder of Company Common Stock so
converted shall cease to have any rights with respect thereto, except the right
to receive, without interest, the applicable portion of the Stock Merger
Consideration as described above in this SECTION 1.5. The Company, in its
capacity as paying agent, shall be entitled to deduct and withhold from the
Stock Merger Consideration otherwise payable hereunder to any Person such amount
as is equal to the amount of any loan from the Company to such Person
outstanding as of the Effective Time (such loans, collectively, the "Shareholder
Loans"), which such amount with respect to such Person shall be set forth on a
schedule in accordance with SECTION 1.5(e). Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time that is a
Dissenting Share shall be converted into the right to receive payment from the
Surviving Corporation with respect thereto in accordance with the provisions of
the IBCA.
(c) Each share of Company Common Stock held by the Company in treasury
immediately prior to the Effective Time shall automatically be canceled and
retired and shall cease to exist, and no payment shall be made in respect
thereof.
(d) For purposes of this Article 1, the following terms shall have the
meanings set forth below:
"AGGREGATE COMMON STOCK CONSIDERATIOn" means (i) the Per Share
Merger Consideration MULTIPLIED BY (ii) the number of issued and
outstanding shares of Company Common Stock immediately prior to the
Effective Time.
"AGGREGATE OPTION CONSIDERATION" means (i) the Per Share Merger
Consideration MULTIPLIED BY the number of shares of Company Common
Stock issuable upon the exercise of all Company Options outstanding
immediately prior to the Effective Time MINUS (ii) the aggregate
exercise price of such Company Options.
"ALLOCABLE PORTION" means, with respect to the share of any
Equity Holder in a particular amount, that fraction equal to (i) the
portion of the Total Escrow Amount initially funded from the Stock
Merger Consideration and Option Merger Consideration that would
otherwise have been payable to such holder OVER (ii) the Total Escrow
Amount.
"CLOSING CONSIDERATION" means an amount in cash equal to (i) $50
million MINUS (ii) the Company's Indebtedness as of the Closing Date
to the extent not paid prior to the Closing Date minus (iii) all
Transaction Expenses to the extent not paid prior to the Closing Date
PLUS (iv) the aggregate exercise price of all Company Options
outstanding immediately prior to the Effective Time PLUS (v) the
aggregate amount of the Shareholder Loans PLUS or MINUS (as the case
may be) (vi) the Estimated Working Capital Surplus or Estimated
Working Capital Deficiency, as the case may be.
"COMMON STOCK ESCROW PERCENTAGE" means (i) the Common Stock
Escrow Portion divided by (ii) the Total Escrow Amount.
"COMMON STOCK ESCROW PORTION" means (i) the Total Escrow Amount
multiplied by (ii) a fraction, (A) the numerator of which is the
Aggregate Common Stock Consideration and (B) the denominator of which
is the Aggregate Common Stock Consideration plus the Aggregate Option
Consideration.
"OPTION ESCROW PERCENTAGE" means (i) the Option Escrow Portion
DIVIDED BY (ii) the Total Escrow Amount.
"OPTION ESCROW PORTION" means the (i) Total Escrow Amount minus
(ii) the Common Stock Escrow Portion.
"PER OPTION ESCROW PORTION" means (i) the Option Escrow Portion
divided by (ii) the number of shares of Company Common Stock issuable
upon the exercise of all Company Options outstanding immediately prior
to the Effective Time.
"PER SHARE ESCROW PORTION" means an amount equal to (i) the
Common Stock Escrow Portion DIVIDED BY (ii) the number of shares of
Company Common Stock outstanding immediately prior to the Effective
Time.
"PER SHARE MERGER CONSIDERATION" means an amount equal to (i) the
Closing Consideration DIVIDED BY (ii) the sum of (A) the number of
shares of Company Common Stock outstanding immediately prior to the
Effective Time plus (B) the number of shares of Company Common Stock
issuable upon the exercise of all Company Options outstanding
immediately prior to the Effective Time.
"TOTAL ESCROW AMOUNT" means (i) the Escrow Amount plus (ii) the
amount of the Expense Reserve Account.
(e) Simultaneously with the Company's delivery of the Estimated
Closing Working Capital Statement, the Company shall deliver a schedule, in form
and substance reasonably acceptable to Purchaser, setting forth all payments due
to each Equity Holder (and the calculation thereof pursuant to the terms hereof)
and any applicable FICA withholding with respect to such Equity Holder.
1.6 Exchange of Certificates.
(a) PAYING AGENT. The Company shall act as paying agent for the
purpose of effectuating the exchange of the Stock Merger Consideration pursuant
to this Article 1 for stock certificates ("CERTIFICATES") that immediately prior
to the Effective Time represented outstanding Company Common Stock, which were
converted into the right to receive the Stock Merger Consideration pursuant to
Section 1.5. This Section 1.6 shall not apply to any Dissenting Shares.
(b) EXCHANGE PROCEDURES; LOST CERTIFICATES. Upon confirmation that the
Articles of Merger have been filed with the Secretary, Purchaser shall deposit
with the Escrow Agent the aggregate amount of Stock Merger Consideration that
Shareholders are otherwise entitled to receive pursuant to SECTION 1.5 above in
cash payable by wire transfer of immediately available funds for deposit in an
escrow account (the "CLOSING ESCROW ACCOUNT") in accordance with the terms and
conditions of the Escrow Agreement to be entered into by and among Purchaser,
the Shareholder Representative and the Escrow Agent, in form and substance
reasonably acceptable to the Company and Purchaser and consistent with the terms
hereof (the "ESCROW AGREEMENT"). Upon confirmation by the Secretary that the
Articles of Merger have been accepted by the Secretary, Purchaser and the
Shareholder Representative shall jointly deliver to the Escrow Agent a Joint
Written Notice, which JOINT WRITTEN NOTICE shall direct the Escrow Agent to make
all of the Stock Merger Consideration available from the Closing Escrow Account
to each Person that is entitled to receive the Stock Merger Consideration
pursuant to SECTION 1.5 above for exchange in accordance with the terms and
conditions of this Agreement. Upon confirmation by the Secretary that the
Articles of Merger have been accepted by the Secretary, and upon surrender to
Purchaser of Certificates representing the number of shares of Company Common
Stock held by a shareholder of the Company, together with a duly executed and
completed letter of transmittal substantially in the form of EXHIBIT A attached
hereto, such holder of such Certificates shall promptly (or as soon as
reasonably practicable thereafter if such letter of transmittal is not provided
to the Purchaser at least three (3) Business Days prior to the Effective Time)
be paid in cash by the Escrow Agent from the Closing Escrow Account, by wire
transfer to the account(s) specified in such holder's transmittal letter, in
exchange therefor the amount of the Stock Merger Consideration to which such
holder is entitled pursuant to Section 1.5 in respect of the Company Common
Stock represented by such Certificates. No holder of any shares of Company
Common Stock shall be entitled to receive any portion of the Stock Merger
Consideration until he, she or it surrenders the Certificates representing such
shares and a completed letter of transmittal in accordance with this SECTION
1.6(B). Until surrendered as contemplated by this SECTION 1.6, each Certificate
shall be deemed upon and at any time after the Effective Time to represent only
the right to receive the appropriate amount of the Stock Merger Consideration
without interest. If any portion of the Stock Merger Consideration is to be paid
to a Person other than the Person in whose name the Certificate is registered,
it shall be a condition to such payment that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer. If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact and an indemnity by the Person claiming such certificate
to be lost, stolen or destroyed, in each case in form and substance reasonably
satisfactory to the Purchaser, the Surviving Corporation will deliver in
exchange for such lost, stolen or destroyed certificate, the appropriate amount
of Stock Merger Consideration set forth herein.
(c) NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON STOCK. All Stock
Merger Consideration paid upon surrender of Certificates in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to the Company Common Stock represented thereby. As of the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers on the Company's stock
transfer books of the Company Common Stock formerly owned by the Equity Holders.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged for the
appropriate Stock Merger Consideration.
1.7 TREATMENT OF OPTIONS. At the Effective Time and by virtue of the
Merger and without any action on the part of the Company, Purchaser or
PurchaserSub with respect to the Option Holders, each outstanding Company Option
shall be cancelled and terminated and each Option Holder shall be entitled to
receive:
(a) an amount equal to (i) (A) the Per Share Merger Consideration
MINUS (B) the applicable exercise price of such Company Option PLUS the Per
Option Escrow Portion, MULTIPLIED BY (ii) the number of shares of Company Common
Stock such Option Holder could have purchased if such Option Holder had
exercised such Company Option in full immediately prior to the Effective Time;
(b) the right to receive a portion of the Positive Adjustment Amount,
if any, in accordance with SECTION 1.8(e); and
(c) the right to receive such Option Holder's Allocable Portion of the
cash distributed from the Escrow Account and the Expense Reserve Account.
The aggregate consideration to be paid to the Option Holders as provided for
above in this SECTION 1.7 is collectively referred to herein as the "OPTION
MERGER CONSIDERATION." The Company shall act as the paying agent for purposes of
effectuating the payments contemplated by SUBSECTIONS 1.7(a) and (b). The
Company, in its capacity as paying agent, shall be entitled to deduct and
withhold from the Option Merger Consideration otherwise payable hereunder to any
Person such amounts as the Company is required to deduct and withhold with
respect to the making of such payment under any provision of Federal, state or
local income tax law, including any applicable FICA withholding. To the extent
that the Company, in its capacity as paying agent, so withholds those amounts,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Option Holder in respect of which such deduction and
withholding was made. Notwithstanding anything herein to the contrary, upon
confirmation that the Articles of Merger have been filed with the Secretary,
Purchaser shall deposit with the Escrow Agent the aggregate amount of Option
Merger Consideration to be paid to the Option Holders as provided for above in
this SECTION 1.7 in cash payable by wire transfer of immediately available funds
for deposit in the Closing Escrow Account in accordance with the terms and
conditions of the Escrow Agreement. Upon confirmation by the Secretary that the
Articles of Merger have been accepted by the Secretary, Purchaser and the
Shareholder Representative shall jointly deliver to the Escrow Agent a Joint
Written Notice, which JOINT WRITTEN NOTICE shall direct the Escrow Agent to
disburse the Option Merger Consideration to the Option Holder in the manner
contemplated above.
1.8 Adjustments to Merger Consideration.
(a) INITIAL ADJUSTMENT. No earlier than five (5) and no later than
three (3) Business Days prior to the Closing Date, the Company shall prepare and
deliver to Purchaser (i) a good faith estimate of the balance sheet of the
Company as of 11.59 p.m. on the Closing Date (the "ESTIMATED CLOSING DATE
BALANCE SHEET"), prepared in accordance with GAAP (except for the absence of
notes and normal year-end adjustments) in a manner consistent with the Company's
past accounting practices and conventions, and (ii) a statement setting forth a
detailed calculation of the Working Capital prepared on the basis of the
Estimated Closing Date Balance Sheet (together, the "ESTIMATED CLOSING WORKING
CAPITAL STATEMENT"). If the Working Capital shown on the Estimated Closing
Working Capital Statement is less than negative Two Million Three Hundred
Thousand Dollars (-$2,300,000) (the "TARGET WORKING CAPITAL"), then the Closing
Consideration shall be reduced by the amount of such deficiency (the "ESTIMATED
WORKING CAPITAL DEFICIENCY"), and if the Working Capital shown on the Estimated
Closing Working Capital Statement is greater than the Target Working Capital,
then the Closing Consideration shall be increased by the amount of such excess
(the "ESTIMATED WORKING CAPITAL SURPLUS").
(b) FINAL ADJUSTMENT. Within sixty (60) days after the Closing Date,
Purchaser shall prepare and deliver to the Shareholder Representative (i) a
balance sheet of the Company as of 11:59 p.m. on the Closing Date (the "CLOSING
DATE BALANCE SHEET"), prepared first, in accordance with GAAP (except for the
absence of notes and normal year-end adjustments), and then, to the extent
consistent with GAAP, in a manner consistent with the Company's past accounting
practices and conventions, and (ii) a statement setting forth a detailed
calculation of the Working Capital prepared on the basis of the Closing Date
Balance Sheet (together, the "Closing Working Capital Statement"). If within
thirty (30) days following delivery of the Closing Working Capital Statement,
the Shareholder Representative does not give Purchaser written notice of their
objection thereto (which notice shall contain a statement of the basis of the
Shareholder Representative's objection), then the Closing Working Capital
Statement shall be deemed final, binding and conclusive on the parties.
(c) If the Shareholder Representative gives Purchaser a timely written
notice of objection to the Closing Working Capital Statement, then the
Shareholder Representative and Purchaser shall use commercially reasonable
efforts to resolve any such objection. If a final resolution is not obtained
within 30 days after Purchaser has received the Shareholder Representative's
written notice of objection to the Closing Working Capital Statement, the
issue(s) in dispute will be submitted to the Auditor for resolution. The Company
(as caused by Purchaser) shall, and shall cause its respective employees and
agents to, provide the Auditor reasonable access at all reasonable times to the
personnel, properties, Books and Records of the Company for the purpose of
resolving any dispute under this SECTION 1.4. The determination of the Auditor
shall be set forth in a written notice delivered to Purchaser and the
Shareholder Representative by the Auditor and will be binding and conclusive on
the parties. Purchaser, on the one hand, and the Equity Holders, on the other
hand, will each bear 50% of the fees and expenses of the Auditor for such
determination. The Equity Holders' portion of such fees and expenses will be
funded from the Expense Reserve Account.
(d) For purposes of this Agreement, "WORKING CAPITAL" means the amount
by which the current assets of the Company (including cash and cash equivalents)
exceed the current liabilities (excluding Indebtedness and liabilities relating
to Transaction Expenses to the extent that the Closing Consideration is reduced
thereby pursuant to Sections 1.5) of the Company, all as shown on the Estimated
Closing Date Balance Sheet or the Closing Date Balance Sheet, as applicable. The
calculation of Working Capital shall include accruals for the Tax benefits and
costs associated with the cash-out of the Company Options at the Effective Time
and any other payments (including any transaction bonuses) made in connection
with the transaction on the Closing Date, including an accrual with respect to
the employer's share of FICA and FUTA Taxes payable with respect to the
Aggregate Option Consideration or with respect to such other payments, and the
amount of which such other payments shall be set forth on the Estimated Closing
Working Capital Statement; provided that such calculation shall not include an
accrual for the Company's share of FICA Taxes (exclusive of the hospital
insurance portion thereof) with respect to amounts paid to individuals whose
2006 compensation would otherwise have been expected to exceed $94,200. At such
time as the Closing Working Capital Statement is finalized per the foregoing
provisions, if the Working Capital shown on the Closing Working Capital
Statement is less than the Working Capital shown on the Estimated Closing
Working Capital Statement (such deficiency, the "NEGATIVE ADJUSTMENT AMOUNT"),
then (i) the Closing Consideration shall be reduced after Closing by the amount
of the Negative Adjustment Amount, (ii) Purchaser and the Shareholder
Representative shall jointly instruct the Escrow Agent in writing to pay to
Purchaser a portion of the Working Capital Indemnity Amount equal to the
Negative Adjustment Amount, and (iii) the Escrow Agent shall pay such amount
within ten (10) Business Days after Purchaser and the Shareholder Representative
deliver such written instructions; provided, however, that if the Negative
Adjustment Amount exceeds the Working Capital Indemnity Amount, then Purchaser
and Shareholder Representative shall jointly instruct the Escrow Agent in
writing to pay to Purchaser the entire Working Capital Indemnity Amount, plus a
portion of the General Indemnity Escrow Amount equal to the amount by which the
Negative Adjustment Amount exceeds the Working Capital Indemnity Amount.
(e) At such time as the Closing Working Capital Statement is finalized
per the foregoing provisions, if the Working Capital shown on the Closing
Working Capital Statement is greater than the Working Capital shown on the
Estimated Working Capital Statement (such excess, the "POSITIVE ADJUSTMENT
AMOUNT"), then, within ten (10) Business Days after the Closing Working Capital
Statement has been so finalized:
(i) Purchaser shall pay to each holder of shares of Company
Common Stock immediately prior to the Effective Time an amount per each such
share equal to (A) the Positive Adjustment Amount, MULTIPLIED BY (B) the Common
Stock Escrow Percentage, divided by (C) the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time; and
(ii) each Option Holder shall be entitled to receive an amount
equal to (A) the Positive Adjustment Amount, MULTIPLIED BY (B) the Option Escrow
Percentage, MULTIPLIED BY (C) a fraction equal to (x) the number of shares of
Company Common Stock such Option Holder could have purchased if such Option
Holder had exercised such Company Option in full immediately prior to the
Effective Time over (y) the number of shares of Company Common Stock issuable
upon the exercise of all Company Options outstanding immediately prior to the
Effective Time.
1.9 Escrow Amount.
(a) Upon confirmation that the Articles of Merger have been filed with
the Secretary, Purchaser shall deposit with the Escrow Agent Five Million Five
Hundred Thousand Dollars ($5,500,000) (such initial escrow amount, together with
interest and earnings thereon, the "ESCROW AMOUNT") in cash payable by wire
transfer of immediately available funds for deposit in an escrow account (the
"ESCROW ACCOUNT") in accordance with the terms and conditions of the Escrow
Agreement. The Escrow Amount shall consist of an initial amount of Five Hundred
Thousand Dollars ($500,000) (such initial amount, together with interest and
earnings thereon, the "WORKING CAPITAL INDEMNITY AMOUNT") and a second initial
amount of Five Million Dollars ($5,000,000) (such second initial amount,
together with interest and earnings thereon, the "GENERAL INDEMNITY ESCROW
AMOUNT"). The Working Capital Indemnity Amount shall serve as security for the
payment, if any, of the Negative Adjustment Amount to Purchaser in accordance
with SECTION 1.8(d), and the General Indemnity Escrow Amount shall serve as
security to satisfy any Loss(es) incurred by the Purchaser Indemnified Parties
under ARTICLE 8 hereunder and any amount by which the Negative Adjustment
Amount, if any, exceeds the Working Capital Indemnity Amount, and each shall be
held and distributed by the Escrow Agent in accordance with the terms and
conditions of this Agreement and the Escrow Agreement.
(b) SUBJECT TO SECTION 1.8(d), which shall apply in the case of any
Negative Adjustment Amount, if Purchaser makes any claim on behalf of itself or
any other Purchaser Indemnified Party for indemnification by the Shareholders
pursuant to Article 8 of this Agreement, Purchaser shall deliver written notice
to the Shareholder Representative and the Escrow Agent (which notice to the
Escrow Agent shall be in accordance with Section 12 of the Escrow Agreement) (a
"CLAIM NOTICE"), which Claim Notice shall (i) describe in general terms the
facts upon which Purchaser, on behalf of itself or any other Purchaser
Indemnified Party, makes such claim and state a good faith estimate of Loss(es)
subject to the indemnification obligations of Shareholders under ARTICLE 8, and
(ii) specify the amount of the General Indemnity Escrow Amount that Purchaser
seeks to have released from escrow in connection with such claim (the "CLAIM
AMOUNT").
(c) Within thirty (30) days after receipt of a Claim Notice from
Purchaser seeking payment from the General Indemnity Escrow Amount, the
Shareholder Representative shall deliver written notice to Purchaser and the
Escrow Agent (a "RESPONSE NOTICE"), which Response Notice shall either (i) state
that the Shareholder Representative does not object to the Claim Notice and
instruct the Escrow Agent to disburse the Claim Amount to Purchaser (in which
case the Escrow Agent shall pay such Claim Amount to Purchaser within ten (10)
Business Days after the Shareholder Representative has delivered the Response
Notice), or (ii) state that the Shareholder Representative disputes the Claim
Notice. If the Response Notice states that the Shareholder Representative
disputes the Claim Notice, then the Escrow Agent shall not disburse the Escrow
Amount until the dispute is resolved in accordance with SECTION 1.9(d).
(d) If the Shareholder Representative objects to a Claim Notice, then
Purchaser and the Shareholder Representative shall negotiate in good faith to
agree upon how to handle the Claim Notice and, if successful in reaching
agreement on such Claim Notice, shall jointly deliver to the Escrow Agent a
written notice executed by Purchaser and the Shareholder Representative (a
"JOINT WRITTEN NOTICE"), which Joint Written Notice shall direct the Escrow
Agent how to act with respect to the disputed Claim Notice, and if such Joint
Written Notice includes instruction to the Escrow Agent to pay any amount to any
Purchaser Indemnified Party, then the Escrow Agent shall pay such amount within
ten (10) Business Days after Purchaser and the Shareholders Representatives have
delivered such Joint Written Notice. If Purchaser and the Shareholder
Representative are unable to agree on how to handle the disputed Claim Notice
within twenty (20) days after the date Purchaser receives the Response Notice
from the Shareholder Representative (or if the Shareholder Representative does
not deliver a Response Notice within thirty (30) days after receipt of a Claim
Notice), then either Purchaser or the Shareholder Representative shall be
entitled at any time thereafter to initiate an Action or Proceeding with respect
to such Claim Notice in accordance with and subject to this Agreement. At such
time as a final, non-appealable judgment is rendered in connection with any such
Action or Proceeding, the prevailing party in the Action or Proceeding shall
deliver to the Escrow Agent and the non-prevailing party written notice (a
"JUDICIAL DECISION NOTICE"), which Judicial Decision Notice shall notify the
Escrow Agent of the outcome of the final, non-appealable judgment and instruct
the Escrow Agent what action to take in accordance with such judgment; provided
that at any time prior to any such judgment being rendered, Purchaser and the
Shareholder Representative may settle or otherwise resolve any such Action or
Proceeding or disputed Claim Notice, and upon such settlement or other
resolution shall deliver jointly to the Escrow Agent a Joint Written Notice
directing the Escrow Agent how to act with respect to the disputed Claim Notice.
If any such Judicial Decision Notice or Joint Written Notice includes
instruction to the Escrow Agent to pay any amount to any Purchaser Indemnified
Party, the Escrow Agent shall pay such amount within ten (10) Business Days
after the prevailing party has delivered such notice.
(e) In the event of the termination of this Agreement, the Escrow
Agreement shall provide that any and all amounts in the Closing Escrow Account
will be paid and disbursed to the Purchaser.
1.10 Escrow Release.
(a) Subject to the terms and provisions of this Section 1.10, promptly
following any disbursement by the Escrow Agent from the Working Capital
Indemnity Amount pursuant to SECTION 1.8(d) (provided that the Negative
Adjustment Amount does not exceed the Working Capital Indemnity Amount), the
Escrow Agent shall disburse to the Equity Holders the remaining Working Capital
Indemnity Amount pursuant to a written instruction from the Purchaser and the
Shareholder Representative specifying the amount of the remaining Working
Capital Indemnity Amount due to each Equity Holder and payment instructions with
respect to each Equity Holder; provided, however, that the Shareholders agree
and acknowledge that the Purchaser shall have no liability in connection with,
or responsibility for, such disbursement or the allocation thereof.
(b) (i) Subject to the terms and provisions of this SECTION 1.10, on
the first anniversary of the Closing Date (the "INITIAL GENERAL INDEMNITY
RELEASE DATE"), the Escrow Agent shall disburse to the Equity Holders an amount
(the "INITIAL GENERAL INDEMNITY RELEASE AMOUNT"), if any, equal to (a) the
remaining General Indemnity Escrow Amount less (b) the sum of (A) the Retained
Amount (as defined below) and (B) the Tax Escrow Amount (as defined below). The
Escrow Agent shall make such disbursement of the Initial General Indemnity
Release Amount, if any, pursuant to a written instruction from the Purchaser and
the Shareholder Representative specifying the amount of the Initial General
Indemnity Release Amount due to each Equity Holder and payment instructions with
respect to each Equity Holder; provided, however that the Shareholders agree and
acknowledge that the Purchaser shall have no liability in connection with, or
responsibility for, such disbursement or the allocation thereof. In the event
that the Shareholder Representative has received, on or before the Initial
General Indemnity Release Date, a Claim Notice for which the Escrow Agent may be
required to disburse all or a portion of the General Indemnity Escrow Amount to
Purchaser pursuant to Section 1.9(c) or 1.9(d) above, a portion of the General
Indemnity Escrow Amount in an amount equal to the amount subject to such Claim
Notice (the "RETAINED AMOUNT") shall continue to be held by the Escrow Agent
until the Claim Amount with respect thereto has been finally resolved. As soon
as any dispute with respect to such Claim Amount has been finally resolved, the
Escrow Agent shall be instructed in accordance with SECTION 1.9(c) or 1.9(d) to
disburse such portion of the Retained Amount, if any, as is required to be
disbursed to Purchaser pursuant to SECTION 1.9(c) or 1.9(d), and the Escrow
Agent shall disburse to the Equity Holders the remaining portion of the Retained
Amount, if any, to the extent that the sum of such remaining portion plus the
Tax Escrow Amount is greater than Two Million Dollars ($2,000,000) (and any
amounts not so distributed shall be retained the by Escrow Agent and thereafter
treated for all purposes hereunder as part of the Tax Escrow Amount) pursuant to
a written instruction from the Purchaser and the Shareholder Representative
specifying the amount of such excess remaining portion due to each Equity Holder
and payment instructions with respect to each Equity Holder; provided, however
that the Shareholders agree and acknowledge that the Purchaser shall have no
liability in connection with, or responsibility for, such disbursement or the
allocation thereof. For purposes hereof, the "Tax Escrow Amount" shall mean a
portion of the General Indemnity Escrow Amount in an amount equal to the lesser
of (x) Two Million Dollars ($2,000,000) and (y) the remaining General Indemnity
Escrow Amount as of the Initial General Indemnity Release Date (less any
Retained Amount, except as otherwise contemplated hereby). The Tax Escrow Amount
shall serve as security to satisfy any Loss(es) incurred by the Purchaser
Identified Parties under Section 8.2(a)(i) arising out or resulting from any
inaccuracy in or breach of SECTION 2.11 hereof.
(ii) Subject to the terms and provisions of this SECTION 1.10, on
September 16, 2008 (the "TAX ESCROW RELEASE DATE"), the Escrow Agent shall
disburse to the Equity Holders the remaining Tax Escrow Amount. The Escrow Agent
shall make such disbursement of the Tax Escrow Amount, if any, pursuant to a
written instruction from the Purchaser and the Shareholder Representative
specifying the amount of the remaining Tax Escrow Amount due to each Equity
Holder and payment instructions with respect to each Equity Holder; provided,
however that the Shareholders agree and acknowledge that the Purchaser shall
have no liability in connection with, or responsibility for, such disbursement
or the allocation thereof. In the event, however, that the Shareholder
Representative has received, on or before the Tax Escrow Release Date, a Claim
Notice for which the Escrow Agent may be required to disburse all or a portion
of the Tax Escrow Amount to Purchaser pursuant to SECTION 1.9(c) or 1.9(d)
above, the portion of the Tax Escrow Amount subject to such Claim Notice shall
continue to be held by the Escrow Agent until the Claim Amount with respect
thereto has been finally resolved. As soon as any dispute with respect to such
Claim Amount has been finally resolved, the Escrow Agent shall be instructed in
accordance with SECTION 1.9(c) or 1.9(d) to disburse such portion of the Tax
Escrow Amount, if any, as is required to be disbursed to Purchaser pursuant to
SECTION 1.9(c) or 1.9(d), and the Escrow Agent shall disburse to the Equity
Holders the entire remaining portion of the Tax Escrow Amount, if any, pursuant
to a written instruction from the Purchaser and the Shareholder Representative
specifying the amount of the remaining Tax Escrow Amount due to each Equity
Holder and payment instructions with respect to each Equity Holder; provided,
however that the Shareholders agree and acknowledge that the Purchaser shall
have no liability in connection with, or responsibility for, such disbursement
or the allocation thereof.
1.11 ADJUSTMENT FOR INDEBTEDNESS. Not less than three (3) Business
Days prior to the Closing Date, the Company shall (a) deliver to Purchaser a
good faith written estimate of the amount of Indebtedness of the Company, if
any, that shall be outstanding as of the Closing Date and (b) designate in
writing accounts and wire transfer instructions for the repayment of such
Indebtedness upon confirmation by the Secretary that the Articles of Merger have
been accepted by the Secretary. Upon confirmation that the Articles of Merger
have been filed with the Secretary, Purchaser shall deposit with the Escrow
Agent the aggregate amount of such outstanding Indebtedness in cash payable by
wire transfer of immediately available funds for deposit in the Closing Escrow
Account in accordance with the terms and conditions of the Escrow Agreement.
Upon confirmation by the Secretary that the Articles of Merger have been
accepted by the Secretary, Purchaser and the Shareholder Representative shall
jointly deliver to the Escrow Agent a JOINT WRITTEN NOTICE, which Joint Written
Notice shall direct the Escrow Agent to shall pay such outstanding Indebtedness
from the Closing Escrow Account by wire transfer of immediately available funds
to the accounts designated by the Company pursuant to this SECTION 1.11.
1.12 ADJUSTMENT FOR TRANSACTION EXPENSES. Not less than three (3)
Business Days prior to the Closing Date, the Company shall (a) deliver to
Purchaser a good faith written estimate of all incurred and unpaid fees and
expenses of the Company and the Shareholders contemplated by SECTION 6.4 through
the Closing Date and any transaction bonuses which are or become payable to
Company Employees as a result of the Merger ("TRANSACTION EXPENSES") and (b)
designate in writing accounts and wire transfer instructions for the payment of
such Transaction Expenses upon confirmation by the Secretary that the Articles
of Merger have been accepted by the Secretary. Upon confirmation that the
Articles of Merger have been filed with the Secretary, Purchaser shall deposit
with the Escrow Agent the aggregate amount of such outstanding fees and expenses
in cash payable by wire transfer of immediately available funds for deposit in
the Closing Escrow Account in accordance with the terms and conditions of the
Escrow Agreement. Upon confirmation by the Secretary that the Articles of Merger
have been accepted by the Secretary, Purchaser and the Shareholder
Representative shall jointly deliver to the Escrow Agent a JOINT WRITTEN NOTICE,
which Joint Written Notice shall direct the Escrow Agent to shall pay such
outstanding fees and expenses from the Closing Escrow Account by wire transfer
of immediately available funds to the accounts designated by the Company
pursuant to this Section 1.12.
1.13 APPOINTMENT OF SHAREHOLDER REPRESENTATIVE. Upon approval of this
Agreement and the Escrow Agreement by the shareholders of the Company in
accordance with the IBCA, Xxxxxxx X. Xxxxxxxx (the "SHAREHOLDER REPRESENTATIVE")
is appointed the attorney-in-fact of the Equity Holders, with full power and
authority, acting in the name of and for and on behalf of such holders (a) to
amend or waive any provision of this Agreement, (b) to execute and deliver the
Escrow Agreement, to have all of the rights and perform all of the obligations
of the Shareholder Representative as set forth in the Escrow Agreement, to
direct the distribution of the Escrow Account and to pursue, defend and settle
any claims relating thereto, (c) to withhold a portion of the Stock Merger
Consideration and the Option Merger Consideration (in an amount reasonably
acceptable to the Purchaser) to fund the expenses of the Shareholder
Representative, including expenses incurred in connection with determining the
Working Capital and defending any indemnification claims, and to establish
reserve account (the "EXPENSE RESERVE ACCOUNT") to hold such funds until such
time as the Shareholder Representative deems appropriate, (d) following the
Effective Time, to have the exclusive right, power and authority, on behalf of
the Equity Holders, to pursue, defend, and settle any indemnification claims
pursuant to ARTICLE 8 and to do all things and to take all other actions the
Shareholder Representative may consider necessary or proper to resolve any
indemnification claims after the Effective Time, and (e) to do all other things
and to take all other action under or related to this Agreement that the
Shareholder Representative may consider necessary or proper to effectuate the
transactions contemplated hereby and to resolve any dispute with the Purchaser
over any aspect of this Agreement and on behalf of the Equity Holders to enter
into any agreement to effectuate any of the foregoing which shall have the
effect of binding each Equity Holder as if such holder had personally entered
into such an agreement; PROVIDED, that all actions taken or decisions made by
the Shareholder Representative on behalf of the Equity Holders shall be taken or
made in a manner which is ratably and equitably amongst all Equity Holders. This
appointment and power of attorney shall be deemed as coupled with an interest
and all authority conferred hereby shall be irrevocable and shall not be subject
to termination by operation of law, whether by the death or incapacity or
liquidation or dissolution of any Equity Holder or the occurrence of any other
event or events. The Shareholder Representative shall be held harmless by the
Equity Holders from any and all loss, damage or liability and expenses
(including legal fees) which such Equity Holder may sustain as a result of any
action taken in good faith by the Shareholder Representative. Upon the death,
disability or resignation of a Shareholder Representative, the successor shall
be appointed by the shareholders receiving a majority of the Stock Merger
Consideration and Option Merger Consideration.
1.14 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary in this Agreement, any
holder of shares of outstanding Company Common Stock who has exercised such
holder's dissenters' rights in accordance with the IBCA, and who, as of the
Effective Time, has not effectively withdrawn or lost such dissenters' rights
("DISSENTING SHARES"), shall not have the right to have such Dissenting Shares
converted into or represent a right to receive the amounts provided in Section
1.5 but the holder of the Dissenting Shares shall be entitled only to such
rights as are granted by applicable law.
(b) Notwithstanding the provisions of SECTION 1.14, if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
or otherwise) such holder's dissenters' rights under applicable law, then, as of
the later of the Effective Time or the occurrence of such event, each of such
holder's outstanding Company Common Stock shall automatically be converted into
and represent only the right to receive the amounts provided in SECTION 1.5.
(c) The Company shall give Purchaser (i) prompt notice of any exercise
of dissenters' rights, withdrawal or loss of such dissenters' rights, and any
other instruments served or otherwise delivered pursuant to the IBCA and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to the exercise of dissenters' rights
under the IBCA. Unless required by applicable Law or with the prior written
consent of Purchaser, the Company shall not voluntarily make any payment with
respect to any exercise of dissenters' rights or offer to settle any such
exercise of dissenters' rights.
(d) Each Shareholder hereby waives any applicable dissenters' rights
under the IBCA with respect to the Merger.
1.15 SHAREHOLDER CONSENT.
(a) Each Shareholder hereby consents to the resolution approving the
Merger attached hereto as EXHIBIT B which consent shall only become effective on
the fifth (5th) day after a notice of the Merger in accordance with the IBCA
(the "MERGER NOTICE") is delivered to all of the shareholders of the Company who
have not executed this Agreement in accordance with the IBCA, which such Merger
Notice shall be delivered as soon as practicable, but in no event later than two
(2) Business Days after the date hereof. Each Shareholder hereby waives any
notice required to be delivered under the IBCA with respect to the approval of
the Merger by such Shareholder.
(b) At any meeting of the holders of Company Common Stock, and at
every adjournment thereof, and on every action or approval by written consent of
the holders of Company Common Stock, each Shareholder shall vote or cause to be
voted all of his, her or its shares of Company Common Stock, in favor of any
matter that could reasonably be expected to facilitate the Merger and the
transactions contemplated hereby and against any matter that could reasonably be
expected to hinder, impede or delay the consummation of the Merger or the
transactions contemplated hereby.
(c) Each Shareholder agrees not (A) to sell, transfer, pledge,
encumber, assign or otherwise dispose of (collectively, "TRANSFER"), or enter
into any contract, option or other arrangement or understanding with respect to
the Transfer by such Shareholder of, any Company Common Stock held by or
issuable to him, her or it or offer any interest thereof to any Person other
than pursuant to the terms of the Merger or (B) to enter into any voting
arrangement or understanding, whether by proxy, power of attorney, voting
agreement, voting trust or otherwise with respect to the Company Common Stock
held by or issuable to him, her or it other than as expressly contemplated
hereunder and agrees not to commit or agree to take any of the foregoing
actions.
(d) Effective as of the Effective Time, each Shareholder agrees that
the following documents shall be terminated and be of no further force or
effect: (i) that certain Right of First Refusal Agreement dated as of September
9, 1998 by and among Xxxxx X. Xxxxxxx, individually and as the trustee of the
Xxxxx X. Xxxxxxx Trust dated May 13, 1992 as Amended and Restated November 18,
1996, by Chartered Holdings, LLC, Spectrum Equity Xxxxxxxxx XX, X.X., XXX 0000
XX, X.X. and TA/Advent Investors LLC and the Company, (ii) that certain Investor
Rights Agreement, dated September 9, 1998 by and among the Company, Chartered
Holdings, LLC, Spectrum Equity Xxxxxxxxx XX, X.X., XXX 0000 XX, X.X. and
TA/Advent Investors LLC, (iii) that certain Right of First Refusal Agreement,
dated August 31, 1999 among the Company, Chartered Holdings, LLC and the
Management Holders listed on the signature pages thereof, and (iv) that certain
Investor Rights Agreement, dated August 31, 1999, among the Company, Chartered
Holdings, LLC and the Management Holders listed on the signature pages thereto.
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows as
of the date hereof and as of the Closing Date:
2.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Illinois and has full corporate power and authority to conduct its business as
now conducted and to own, use, license and lease its Assets and Properties. The
Company is duly qualified, licensed or admitted to do business and is in good
standing as a foreign corporation in each jurisdiction in which the ownership,
use, licensing or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for such failures to be so duly qualified, licensed or admitted and in
good standing that would not reasonably be expected to have a Material Adverse
Effect on the Company. Schedule 2.1 sets forth each jurisdiction where the
Company is so qualified, licensed or admitted to do business as a foreign
corporation.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and authority to execute and deliver this Agreement and the
other agreements which are attached (or forms of which are attached) as exhibits
hereto or which or otherwise delivered by any party in connection herewith (the
"ANCILLARY AGREEMENTS") to which the Company is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement and the Ancillary Agreements to which the Company is or will
become a party and the consummation by the Company of the transactions
contemplated hereby and thereby, and the performance by the Company of its
obligations hereunder and thereunder, have been duly and validly authorized by
the Board of Directors of the Company, who have recommended that the Company's
shareholders approve the Merger, this Agreement and the transactions
contemplated hereby, and no further corporate action on the part of the Company
other than the effectiveness of the consent set forth in SECTION 1.15 is
required to authorize the execution, delivery and performance of this Agreement
and the Ancillary Agreements to which the Company is or will become a party and
the consummation by the Company of the transactions contemplated hereby and
thereby, which consent shall automatically become effective on the 5th day
following the date of delivery of the Merger Notice in accordance with Section
1.15. This Agreement and the Ancillary Agreements to which the Company is or
will become a party have been or will be, as applicable, duly and validly
executed and delivered by the Company and, assuming the effectiveness of the
consent set forth in SECTION 1.15 and the due authorization, execution and
delivery hereof (and, in the case of the Ancillary Agreements to which Purchaser
is a party, thereof) by Purchaser and each other party thereto, each constitutes
or will constitute, as applicable, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors' rights generally and by general principles of
equity. By executing this Agreement, each Shareholder consents to the resolution
approving the Merger attached hereto as EXHIBIT B, which consents constitute the
only vote of the holders of Company Common Stock necessary to approve this
Agreement and the transactions contemplated hereby, including the Merger.
2.3 CAPITAL STOCK.
(a) The authorized capital stock of the Company consists of (i)
15,000,000 shares of common stock, $1.00 par value per share (the "COMPANY
COMMON STOCK"), of which 989,812.5 shares of Company Common Stock are issued and
outstanding and 260,832 shares of Company Common Stock are reserved for issuance
upon exercise of outstanding, unexercised Company Options issued under the
Company Option Plan and (ii) One Million (1,000,000) shares of preferred stock,
$10.00 par value per share, with fifty-four of such shares of authorized
preferred stock designated as "Series A Convertible Preferred Stock" and with
another fifty-four of such shares of authorized preferred stock designated as
"Series B Redeemable Preferred Stock," of which no shares of such authorized
preferred stock are issued and outstanding. No Company Options have been granted
outside the Option Plan. All of the issued and outstanding shares of Company
Common Stock are validly issued, fully paid and non-assessable, have not been
issued in violation of any applicable Laws, including without limitation any
federal or state securities Laws, and are owned beneficially and of record by
Shareholders. Contemporaneous with the execution of this Agreement, the Company
has delivered to Purchaser a letter dated as of the date hereof (the "COMPANY
LETTER"). The Company Letter sets forth a schedule containing a true and
complete list of all of the shareholders of record of the Company by shareholder
name, address and number of shares of Company Common Stock held. The Company
Letter sets forth for each outstanding Company Option the name of the holder of
such Company Option, the address of such holder, the number, class and series of
shares of Company capital stock subject to such Company Option, the exercise
price of such Company Option and the vesting schedule therefor, including the
extent vested to date and whether the exercisability of any such Company Option
will be accelerated by reason of the transactions contemplated by this Agreement
and the extent to which each such Company Option will be exercisable after
taking into account the transactions contemplated by this Agreement.
(b) Except as disclosed in SCHEDULE 2.3(b), no Company Common Stock
has been issued subject to a repurchase option or buy back agreement on the part
of the Company.
(c) Except as disclosed in SCHEDULE 2.3(a), there are no outstanding
Company Options or other Equity Equivalents or any agreements, arrangements or
understandings to which the Company is a party (written or oral) to issue any
Company Options or other Equity Equivalents. Except as disclosed in SCHEDULE
2.3(a), there is no stock option or similar plan of the Company pursuant to
which Company Options or other Equity Equivalents are issued and outstanding or
are available for issuance.
(d) Except as disclosed in SCHEDULE 2.3(d), there are no preemptive
rights or agreements, arrangements or understandings to grant preemptive rights
with respect to the issuance or sale of Company Common Stock created by statute,
the articles of incorporation or bylaws of the Company, or any agreement or
other arrangement to which the Company is a party (written or oral) or to which
it is bound, and there are no agreements, arrangements or understandings to
which the Company is a party (written or oral) pursuant to which the Company has
the right to elect to satisfy any Liability by issuing Company Common Stock or
Equity Equivalents.
(e) Except as disclosed in SCHEDULE 2.3(e), the Company is not a party
or subject to any agreement or understanding, and, to the Knowledge of the
Company, there is no agreement, arrangement or understanding between or among
any Persons which affects, restricts or relates to voting, giving of written
consents, dividend rights or transferability of shares with respect to the
Company Common Stock, including any voting trust agreement or proxy.
2.4 NO SUBSIDIARIES. The Company has no Subsidiaries and does not
otherwise hold any equity, membership, partnership, joint venture or other
ownership interest or Investment Assets in any Person.
2.5 DIRECTORS, OFFICERS AND EMPLOYEES. The names of each director and
officer of the Company on the date hereof, and his or her position with the
Company are listed in Schedule 2.5. No claims for indemnification by any current
or former director, officer or other employee of the Company are currently
outstanding, and, to the Knowledge of the Company, none are threatened.
2.6 NO CONFLICTS. The execution and delivery by the Company of this
Agreement and the Ancillary Agreements to which the Company is or will be a
party do not, and the performance by the Company of its obligations under this
Agreement and the Ancillary Agreements to which the Company is or will be a
party and the consummation of the transactions contemplated hereby and thereby
do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the articles of incorporation or bylaws of
the Company;
(b) subject to obtaining the Approvals disclosed in SCHEDULE 2.6(d),
if any, result in a violation or breach of, or a conflict with, any Law or Order
applicable to the Company or any of the Company's Assets and Properties; or
(c) subject to obtaining the Approvals disclosed in SCHEDULE 2.6(c),
(i) result in a violation or breach of or conflict with, (ii) constitute a
default (or an event that, with or without notice or lapse of time or both,
would constitute a default) under, (iii) require the Company to obtain any
consent, approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, (iv) result in or give to any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon the Company or any of the
Company's Assets and Properties under or (vii) result in the loss of any
material benefit under, any of the terms, conditions or provisions of any
Material Contract or Company Permit.
(D) Schedule 2.6(d) contains a list of all Approvals of Governmental
or Regulatory Authorities and of all Persons other than Governmental or
Regulatory Authorities required in connection with the execution, delivery and
performance by the Company of this Agreement and the Ancillary Agreements to
which the Company is a party and the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
2.7 COMPANY FINANCIAL STATEMENTS; ACCOUNTING PRACTICES. SCHEDULE 2.7
sets forth (a) the audited balance sheets of the Company as at December 31,
2003, December 31, 2004, and December 31, 2005 (such balance sheet as at
December 31, 2005, the "DECEMBER BALANCE SHEET") and the related statements of
operations and statements of cash flows for the fiscal years ended December 31,
2003, December 31, 2004 and December 31, 2005, and (b) the unaudited balance
sheet of the Company as at March 31, 2006 (the "MOST RECENT BALANCE SHEET DATE")
and the related statement of operations and statement of cash flows for the
three (3) months ended March 31, 2006 (collectively, the "Company Financials").
The Company Financials have been prepared in accordance with GAAP except as
otherwise expressly noted therein and except that the interim financial
statements lack footnotes and are subject to normal year-end adjustments, are
complete and correct in all material respects, are in accordance with the Books
and Records of the Company and present fairly, in all material respects, the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein.
2.8 BOOKS AND RECORDS; ORGANIZATIONAL DOCUMENTS. Copies of the minute
books reflecting minutes of the meetings of the Company's board of directors and
stockholders since the incorporation of the Company and the stock record books
of the Company in possession of the Company have been provided or made available
to Purchaser or its counsel prior to the execution of this Agreement. The minute
books of the Company reflecting minutes of the meetings of the Company's board
of directors and shareholders and the stock record books of the Company since
September 9, 1998 are complete and correct in all material respects, and such
minute books contain a true and complete record the resolutions adopted at such
meetings and by all written consents in lieu of meetings of the directors,
shareholders and committees of the board of directors of the Company from such
date through the date hereof, in each case that were material to the operation
of the business as then conducted.
2.9 ABSENCE OF CHANGES. Since December 31, 2005, (the "Company
Financials Date"), there has not been any event which has had or is reasonably
expected to have any Material Adverse Effect on the Company. Without limiting
the generality of the foregoing sentence, since the Company Financials Date:
(a) the Company has not entered into any material Contract or License,
other than with Purchaser or its Affiliates, commitment or transaction or
incurred any Liabilities outside of the ordinary course of business;
(b) except for customary non-disclosure agreements from potential
purchasers of the Company, the Company has not entered into any Contract or
License, other than with Purchaser and its Affiliates, as part of a Business
Combination;
(c) the Company has not altered or entered into any Contract or other
commitment to alter its interest in any corporation, association, joint venture,
partnership or business entity in which the Company directly or indirectly holds
any interest on the date hereof;
(d) except as set forth on SCHEDULE 2.9(d), the Company has not
entered into any strategic alliance, joint development or joint marketing
Contract;
(e) except as set forth on SCHEDULE 2.9(e), there has not been any
material amendment or other material modification (or agreement to do so) or
violation of the terms of, any Material Contract;
(f) the Company has not entered into any material transaction with any
officer, director, shareholder, Affiliate or Associate of the Company, other
than pursuant to any Contract disclosed to Purchaser pursuant to SCHEDULE
2.20(a) or other than pursuant to any Contract of employment listed pursuant to
SCHEDULE 2.18(a);
(g) the Company has not entered into or amended any Contract or
License pursuant to which any other Person is granted production, marketing,
distribution, licensing or similar rights of any type or scope with respect to
any products or services of the Company or Company Intellectual Property, other
than as disclosed on SCHEDULE 2.9(d);
(h) no Action or Proceeding has been commenced or, to the Knowledge of
the Company, has been threatened, by or against the Company;
(i) the Company has not declared or set aside or paid any dividends on
or made any other distributions (whether in cash, stock or property) in respect
of any Company Common Stock or Equity Equivalents, or effected or approved any
split, combination or reclassification of any Company Common Stock or Equity
Equivalents, or issued or authorized the issuance of any other securities in
respect of, in lieu of or in substitution for shares of Company Common Stock or
Equity Equivalents, or repurchased, redeemed or otherwise acquired, directly or
indirectly, any shares of Company Common Stock or Equity Equivalents;
(j) (i) the Company has not issued, granted, delivered, sold or
authorized or proposed to issue, grant, deliver or sell, or purchased or
proposed to purchase, any shares of Company Common Stock or Equity Equivalents,
(ii) the Company has not modified or amended the rights of any holder of any
outstanding shares of Company Common Stock or Equity Equivalents, and (iii)
there have not been any agreements, arrangements, plans or understandings
obligating the Company to make any such modification or amendment;
(k) there has not been any amendment to the Company's articles of
incorporation or bylaws;
(l) there has not been any transfer (by way of a Contract, License or
otherwise) to any Person of rights to any Company Intellectual Property;
(m) the Company has not made or agreed to make any disposition or sale
of, waiver of rights to, license or lease of, or incurrence of any Lien on, any
material Assets and Properties of the Company, other than dispositions of
inventory, or nonexclusive licenses of Assets and Properties in the ordinary
course of business of the Company;
(n) the Company has not made or agreed to make any purchase of any
Assets and Properties of any Person other than (i) acquisitions of supplies or
inventory, or licenses of Assets or Properties, in the ordinary course of
business of the Company, and (ii) other acquisitions in an amount not exceeding
Twenty-Five Thousand Dollars ($25,000) in the case of any individual item or
Fifty Thousand Dollars ($50,000) in the aggregate;
(o) the Company has not made or agreed to make any capital
expenditures or commitments for additions to property, plant or equipment of the
Company constituting capital assets in the aggregate in an amount exceeding the
Company's budget for capital expenditures through June 30, 2006;
(p) except as set forth on SCHEDULE 2.9(p), the Company has not made
or agreed to make any write-off or write-down, any determination to write off or
write-down, or revalue, any of the Assets and Properties of the Company, or
change any reserves or Liabilities associated therewith, in the aggregate in an
amount exceeding Twenty-Five Thousand Dollars ($25,000);
(q) the Company has not made or agreed to make payment, discharge or
satisfaction, in an amount in excess of Five Thousand Dollars ($5,000), in any
one case, or Twenty-Five Thousand Dollars ($25,000) in the aggregate, of any
claim, Liability or obligation (whether absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of Liabilities reflected or
reserved against in the Company Financials and other than Liabilities incurred
in the ordinary course of business since the Company Financials Date;
(r) the Company has not failed to pay or otherwise satisfy any
Liabilities presently due and payable of the Company (other than delays in the
ordinary course of the Company's business that will not have a Material Adverse
Effect on the Company), except such Liabilities which are being contested in
good faith by appropriate means or procedures and which, individually or in the
aggregate, are immaterial in amount;
(s) the Company has not incurred any Indebtedness or guaranteed any
Indebtedness of any other Person, and has not issued or sold any debt securities
of the Company or guaranteed any debt securities of others;
(t) except as set forth in SCHEDULE 2.9(t), the Company has not
granted any severance or termination pay to any director, officer, employee or
consultant of the Company;
(u) except as set forth in the Company Letter, the Company has not (i)
granted or approved any increase in salary, rate of commissions, rate of
consulting fees or any other compensation of any current or former officer,
director, shareholder, employee, independent contractor or consultant of the
Company other than general salary increases with respect to employees (other
than officers and directors) in the ordinary course of business, or (ii) paid or
agreed or made any commitment to pay any discretionary or stay bonus;
(v) except as set forth in the Company Letter, the Company has not
paid or approved the payment of any consideration of any nature whatsoever
(other than salary, commissions or consulting fees and customary benefits paid
to any current or former officer, director, shareholder, employee or consultant
of the Company in the ordinary course of business) to any current or former
officer, director, shareholder, employee, independent contractor or consultant
of the Company;
(w) except changes required under SECTION 2.14 below, the Company has
not adopted, entered into, amended, modified or terminated (partially or
completely) any Plan;
(x) the Company has not made any change in accounting policies,
principles, methods, practices or procedures (including for bad debts,
allocation of corporate expenses, contingent liabilities or otherwise,
respecting capitalization or expense of research and development expenditures,
depreciation or amortization rates or timing of recognition of income and
expense);
(y) the Company has not commenced or terminated or made any material
change in any line of business;
(z) there has been no physical damage, destruction or other casualty
loss (whether or not covered by insurance) affecting any of the real or personal
property or equipment of the Company in the aggregate in an amount exceeding
Fifty Thousand Dollars ($50,000); and
(aa) except as set forth in SCHEDULE 2.9(aa), neither the Company, nor
any Shareholder, nor any of their respective Affiliates has entered into or
approved any contract, arrangement or understanding to do, engage in or cause or
having the effect of any of the foregoing by the Company, including with respect
to any Business Combination not otherwise restricted by the foregoing
paragraphs.
2.10 NO UNDISCLOSED LIABILITIES. There are no Liabilities of the
Company or affecting any of the Company's Assets and Properties except for (i)
Liabilities reflected or reserved against in the Company Financials (including
the notes thereto), (ii) Liabilities reflected or reserved on the Closing Date
Balance Sheet and taken into account in determining Working Capital pursuant to
SECTIONS 1.8(b) and (c), (iii) Liabilities which have arisen after the Most
Recent Balance Sheet Date in the ordinary course of business which would not
have a Material Adverse Effect on the Company, (iv) Liabilities under this
Agreement or incurred as expressly contemplated hereby, (v) Liabilities arising
under the express terms of any Contract (excluding any liabilities or
obligations arising out of any breach or violation by the Company of the terms
and conditions of any such Contract), (vi) Liabilities that would not be
required to be reflected on a balance sheet prepared in accordance with GAAP
consistently applied with the Company Financials or (vii) Liabilities which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
2.11 TAXES.
(a) Except as set forth on SCHEDULE 2.11(a), (i) the Company has
properly prepared and timely filed all Tax Returns required to have been filed
by it; (ii) all such Tax Returns are true, accurate and complete in all material
respects; (iii) all Taxes owed by the Company (whether or not shown on any Tax
Return) have been paid except for Taxes not yet due or accrued on the Company
Financials; (iv) the Company is not currently the beneficiary of any extension
of time within which to file any Tax Return; (v) no unresolved claim has ever
been made by any Governmental or Regulatory Authority in any jurisdiction where
the Company does not file Tax Returns that the Company is or may be subject to
taxation by that jurisdiction; and (vi) there are no security interests on any
of the issued and outstanding Company Common Stock or Assets and Properties of
the Company that arose in connection with any failure (or alleged failure) to
pay any Tax other than any security interest for Taxes not yet due.
(b) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third party. None of the
Stock Merger Consideration constitutes wages or other compensation for services
to employees or former employees of the Company that is subject to federal,
state or local income or employment tax withholding.
(c) There is no dispute or claim concerning any Tax Liability of the
Company either (i) claimed or raised by any Governmental or Regulatory Authority
or (ii) to the Knowledge of the Company based upon contact with any agent of any
such Governmental or Regulatory Authority. SCHEDULE 2.11(c) lists all federal,
state, local, and foreign income Tax Returns filed with respect to the Company
for taxable periods ended on or after December 31, 2002, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Company has delivered or made available to
Purchaser true, correct and complete copies of all federal income Tax Returns,
Tax examination reports and statements of Tax deficiencies assessed against or
agreed to, by or on behalf of the Company, that have been filed or received
since January 1, 2003. The Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Internal Revenue Code.
(d) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) The Company is not a party to or bound by (and will not prior to
the Closing become a party to or bound by) any Tax indemnity, Tax allocation,
Tax sharing or gain recognition agreement (whether written, unwritten or arising
under operation of federal law as a result of being a member of a group filing
consolidated Tax Returns, under operation of state Laws as a result of being a
member of a unitary group, or under comparable Laws of other states or foreign
jurisdictions). The Company has not been, and will not be, required to include
any item of income in, or exclude any item of deduction from, taxable income for
any Tax period (or portion thereof) ending on or after the Closing Date as a
result of (A) any change in method of accounting for a Tax period ending on or
prior to the Closing Date under Section 481 of the Internal Revenue Code (or any
corresponding or similar provision of state, local or foreign income Tax Law);
(B) any "closing agreement" as described in Section 7121 of the Internal Revenue
Code (or any corresponding or similar provision of state, local or foreign
income Tax Law) executed on or prior to the Closing Date; (C) any deferred
intercompany gain or any excess loss account described in the Treasury
Regulations under Section 1502 of the Internal Revenue Code (or any
corresponding or similar provision of state, local or foreign income Tax Law);
(D) any installment sale or open transaction disposition made on or prior to the
Closing Date; (E) any prepaid amount received on or prior to the Closing Date;
or (F) the application of Section 263A of the Internal Revenue Code (or any
corresponding or similar provision of state, local or foreign income Tax Law)
with respect to a Tax period ending on or prior to the Closing Date.
(f) The Company (A) has never been a member of an "affiliated group"
(within the meaning of Section 1504(a) of the Internal Revenue Code) filing a
consolidated federal income Tax Return, and (B) has no Liability for the Taxes
of any Person other than the Company (i) under Treasury Regulation ss.1.1502-6
(or any similar provision of state, local or foreign Law), (ii) as a transferee
or successor, (iii) by Contract, or (iv) otherwise.
(g) The Company has not made any payments, is not obligated to make
any payments, and is not a party to any Contract, agreement or arrangement
covering any current or former employee or consultant of the Company that under
certain circumstances could require it to make or give rise to any payments that
are not fully deductible as a result of the provisions set forth in Sections
162(m) or 280G of the Internal Revenue Code or the Treasury Regulations
thereunder (or any corresponding provisions of state, local or foreign Tax Law)
or would result in an excise Tax to the recipient of any such payment under
Section 4999 of the Internal Revenue Code or Tax to the recipient under Internal
Revenue Code Section 409A(a)(1).
(h) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Internal Revenue Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Internal Revenue Code.
(i) The Company has not executed any power of attorney, which is
currently in effect, with respect to any matter relating to Taxes of the
Company.
(j) The Company has not filed any consent or entered into any
agreement pursuant to Section 341(f) of the Internal Revenue Code with respect
to any of its Assets and Properties.
(k) The unpaid Taxes of the Company (A) did not, as of the Most Recent
Balance Sheet Date, exceed the reserve for Tax Liabilities (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the most recent balance sheet
(rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in filing its Tax Returns.
(l) The unpaid Taxes of the Company will not, as of the Closing Date,
exceed the reserve for Tax Liabilities (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Closing Date Balance Sheet (rather than in any notes
thereto). Since the Most Recent Balance Sheet Date, the Company has not incurred
any Liability for Taxes arising from extraordinary gains or losses, as that term
is used in GAAP, except in the ordinary course of the Company's business and in
a manner that is consistent with past practice and custom.
(m) The Company is not party to or bound by any written ruling or
agreement, or to the Knowledge of the Company any other agreement, with any
Governmental or Regulatory Authority which would have continuing effect in any
Tax period of the Company for which a Tax Return has not yet been filed.
(n) The Company is not engaged in business, nor does it have a
permanent establishment, outside of the United States.
(o) The Company is not party to any joint venture, partnership, or
other arrangement or Contract that would be treated as a partnership for federal
income Tax purposes.
(p) The Company has not distributed stock of another Person, nor has
the Company's stock been distributed by another Person, in a transaction that
was purported or intended to be governed in whole or in part by Section 355 or
Section 361 of the Internal Revenue Code.
(q) The Company has not "participated," within the meaning of Treasury
Regulation Section 1.6011-4(c), or been a "material advisor" or "promoter" (as
those terms are defined in Section 6111 of the Internal Revenue Code and the
Treasury Regulations promulgated thereunder) in (i) any "reportable transaction"
within the meaning of Section 6011 of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder, (ii) any "confidential corporate tax
shelter" within the meaning of the Treasury Regulations promulgated under
Section 6111 of the Internal Revenue Code, (iii) any "potentially abusive tax
shelter" within the meaning of the Treasury Regulations promulgated under
Section 6112 of the Internal Revenue Code or (iv) any transactions subject to
the list maintenance requirements under Section 6112 of the Internal Revenue
Code and the Treasury Regulations promulgated thereunder.
2.12 LEGAL PROCEEDINGS. SCHEDULE 2.12 sets forth all Actions or
Proceedings against or affecting, or, to the Knowledge of the Company,
threatened against, the Company, or any of its Assets and Properties. Except as
set forth in SCHEDULE 2.12:
(a) there are no Actions or Proceedings pending or, to the Knowledge
of the Company, threatened, against or adversely affecting the Company, or any
of the Company's Assets and Properties, or that might have the effect of
enjoining, restraining, or prohibiting the consummation of the transactions
contemplated by this Agreement or any Ancillary Agreement or making illegal or
otherwise prohibiting the transactions contemplated hereby or by any Ancillary
Agreement; and
(b) the Company has not received notice of, nor, to the Knowledge of
the Company do there exist any Orders outstanding against the Company.
2.13 COMPLIANCE WITH LAWS AND ORDERS; PERMITS.
(a) The operation of the business of the Company as currently
conducted does not violate any Law or Order applicable to the Company or any of
the Company's Assets and Properties, including without limitation the federal
Fair Credit Reporting Act, the federal Xxxxx-Xxxxx-Blilely Act, other federal or
state Laws governing privacy, insurance or financial products, the Telephone
Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse
Prevention Act, the Controlling the Assault of Non-Solicited Pornography and
Marketing Act, and other Laws or regulations governing marketing, promotion
and/or sales of goods or services. Except as set forth on SCHEDULE 2.13(a),
neither the Company nor any of its directors, officers, Affiliates or employees
or, to the Knowledge of the Company, agents has violated or is currently in
default or violation under, any Law or Order applicable the Company or any of
the Company's Assets and Properties, including without limitation the federal
Fair Credit Reporting Act, the federal Xxxxx-Xxxxx-Blilely Act, other federal or
state Laws governing privacy, insurance or financial products, the Telephone
Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse
Prevention Act, the Controlling the Assault of Non-Solicited Pornography and
Marketing Act, and other Laws or regulations governing marketing, promotion
and/or sales of goods or services. The Company has timely filed with the proper
authorities all statements and reports required by all Laws or Orders to which
the Company and its Assets and Properties and business are subject. To the
Knowledge of the Company, there exists no claim of violation, or any actual
violation, of any such Laws and Orders by the Company. There is not pending or,
to the Knowledge of the Company, threatened, any action or other proceeding or,
to the Knowledge of the Company, any investigation or complaint by or before any
Governmental or Regulatory Authority relating to or arising out of the
advertising or marketing practices or other business activities of the Company
or to revoke, cancel, suspend, modify or refuse to renew, or otherwise relating
to, any of the Permits.
(b) The Company has all Permits required by any Law or any
Governmental or Regulatory Authority for the conduct of the Company's business
as presently conducted. Each of such Permits is in full force and effect and the
Company is in compliance with the terms and requirements thereof, and no such
Permit is subject to any conditions or limitations other than those applicable
TO PERMITS OF THAT KIND GENERALLY. ALL PERMITS OF COMPANY ARE LISTED ON Schedule
2.13(b) (the "COMPANY PERMITS") and the Company has made available to Purchaser
a true and correct copy of each such Permit. No loss or expiration of any Permit
is pending or, to the Knowledge of the Company, threatened (including, without
limitation, as a result of the transactions contemplated hereby) other than
expiration in accordance with the terms thereof, which terms do not expire as a
result of the consummation of the transactions contemplated hereby.
2.14 PLANS; ERISA.
(a) All of the Plans of the Company and its ERISA Affiliates, or under
which the Company or any ERISA Affiliate has or may reasonably be expected in
the future to have any liability, are listed on SCHEDULE 2.14(a). Copies of all
such Plans have been furnished to Purchaser, along with annual reports (Forms
5500) required for any Plan for the last three (3) years, summary plan
descriptions and any trusts, insurance policies or other funding arrangements.
To the extent applicable, each Plan has been maintained and administered, in all
material respects, in accordance with its terms and all applicable Laws,
including but not limited to the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder ("ERISA")
and the Internal Revenue Code. Any Plan intended to be qualified under Section
401(a) of the Internal Revenue Code or Section 501(a) of the Internal Revenue
Code is so qualified and is subject to a current opinion or determination letter
from the Internal Revenue Service regarding such qualification, which has been
furnished to Purchaser. No Plan, in operation, is in violation of Internal
Revenue Code Section 409A. No Plan is covered by Title IV of ERISA or Section
412 of the Internal Revenue Code. Neither the Company nor any of its Affiliates
has been a contributing employer to any multiemployer plan as defined under
Section 4001 of ERISA. Neither the Company nor any officer or director of the
Company has incurred any Liability or penalty under Section 4971 through 4980G
of the Internal Revenue Code or Title 1 of ERISA. None of the Plans promises or
provides retiree medical or other retiree welfare benefits to any person except
as required by applicable Law, including but not limited to, Sections 601 to 608
of ERISA and Section 4980B of the Internal Revenue Code. No Action or Proceeding
(excluding claims for benefits incurred in the ordinary course of Plan
activities) has been brought, or to the Knowledge of the Company, is threatened,
against or with respect to any such Plan. All contributions, reserves or premium
payments required to be made or accrued as of the date hereof to the Plans have
been made or accrued. All reports, returns, forms and notices required to be
filed with any Governmental or Regulatory Authority or furnished to participants
or beneficiaries with respect to the Plans, by the Internal Revenue Code, ERISA
or any other applicable Law, have been so filed and furnished. Neither the
Company nor any of its Affiliates is under a legal or contractual obligation to
continue any of the Plans and may terminate any or all of the Plans at any time
in accordance with the terms of the Plans and applicable Law without incurring
any Liability.
(b) Except for the acceleration of vesting of all options upon the
consummation of the transaction contemplated hereby, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment or increased benefit (including without
limitation severance, unemployment compensation, bonus or otherwise) becoming
due to any current or former director, officer, employee or consultant of the
Company under any Plan or otherwise, (ii) result in a payment or benefit
becoming due to any director, officer or employee of the Company under any Plan
or otherwise which will be characterized as a "parachute payment" within the
meaning of Section 280G of the Internal Revenue Code (but without regard to
clause (b)(2)(A)(ii) thereof), (iii) increase any benefits otherwise payable
under any Plan, or (iv) result in the acceleration of the time of payment or
vesting of any such benefits.
(c) To the extent applicable, the Company and its Affiliates have
complied in all material respects with the continuation health care coverage
requirements of Section 4980B of the Internal Revenue Code and Sections 601
through 608 of ERISA with respect to "qualifying events," as defined in Internal
Revenue Code Section 4980B and ERISA Section 603, which occur on or before the
Closing with respect to any current or former employees of the Company and their
respective "qualified beneficiaries," as defined in Internal Revenue Code
Section 4980B and ERISA Section 603, and with the requirements of the Health
Insurance Portability and Accountability Act and other applicable health
insurance requirements in Section 4980D of the Internal Revenue Code and
Sections 701 through 734 of ERISA.
2.15 REAL PROPERTY.
(a) SCHEDULE 2.15(a) contains a true and correct list of (i) each
parcel of real property owned by the Company (the "OWNED REAL PROPERTY") and
(ii) all Liens relating to or affecting any parcel of real property referred to
in clause (i). SCHEDULE 2.15(a)contains a true and correct list of (i) each
parcel of real property, other than Owned Real Property, that is leased,
utilized and/or operated by the Company (as lessor or lessee or otherwise) (the
"Leased Real Property") and (ii) all Liens relating to or affecting any parcel
of real property referred to in clause (i) to which the Company is a party. True
and correct copies of the documents under which the Leased Real Property is
leased, subleased (to or by the Company or otherwise), utilized, and/or operated
(the "LEASE DOCUMENTS") have been made available to Purchaser, and such Lease
Documents are unmodified and in full force and effect. The Company does not own
any real property other than the Owned Real Property and Company owned leasehold
improvements, if any, on Leased Real Property.
(b) With respect to Owned Real Property, except as set forth on
SCHEDULE 2.15(a) or the title commitment provided to Purchaser, the Company has
good and marketable title to the Owned Real Property, free and clear of any
security interest, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent and recorded easements,
covenants, and other restrictions which do not impair the current use,
occupancy, or value, or the marketability of title, of the property subject
thereto. Subject to the terms of the Lease Documents, the Company has a valid
and subsisting leasehold estate in and the right to quiet enjoyment of each of
the Leased Real Properties for the full term of the leases (including renewal
periods) relating thereto. Each Lease Document referred to in Section 2.15(a) is
a legal, valid and binding agreement, enforceable against the Company and, to
the Knowledge of the Company, of each other Person that is a party thereto, in
each case in accordance with its terms in all material respects, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights generally and by general principles of equity, and the Company
is not in default, and to the Knowledge of the Company, there is not any
condition or event which, after notice or lapse of time or both, would result in
the lessor being in default thereunder. The Company does not owe brokerage
commissions or finders fees with respect to any such Leased Real Property.
(c) Except as would not reasonably be expected to have a Material
Adverse Effect on the Company, all improvements on the Owned Real Property and
the Leased Real Property comply with and are owned and operated in accordance
with applicable Laws (including Environmental Laws). Except as set forth on
schedule 2.15(c), all such improvements are in all material respects in good
operating condition, in a state of good maintenance and repair, ordinary wear
and tear excepted, and are in all material respects adequate for the purposes
for which they are presently being used and there are no condemnation or
appropriation proceedings pending or, to the Knowledge of the Company,
threatened against any of such real property or the improvements thereon.
(d) With respect to the Owned Real Property, (i) there are no leases,
subleases, licenses, concessions, or other agreements, written or oral, granting
to any party or parties the right of use or occupancy of any portion of the
Owned Real Property, (ii) there are no outstanding options or rights of first
refusal to purchase the Owned Real Property, or any portion thereof or interest
therein, (iii) there are no parties (other than the Company) in possession of
the Owned Real Property, (iv) all facilities located on the Owned Real Property
are supplied with utilities and other services reasonably necessary for the
operation of such facilities.
2.16 TANGIBLE PERSONAL PROPERTY. The Company is in possession of and
has good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use, all tangible personal property presently used in
the conduct of its business, including all tangible personal property reflected
on the Company Financials and tangible personal property acquired since the date
of the Company Financials, other than property disposed of since such date for
fair consideration and in the ordinary course of business. Except for purchase
money liens on equipment purchases or product purchases in the ordinary course
of the Company's business for which the purchase price is not yet due and
payable, all such tangible personal property (including plant, property and
equipment) is owned by the Company free and clear of all Liens and is adequate
in all material respects for the conduct by the Company of its business as
presently conducted, and is in good working order and condition in all material
respects, ordinary wear and tear excepted, and its use complies in all material
respects with all applicable Laws.
2.17 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.17(a) lists all Company Registered Intellectual
Property as well as all material Company Intellectual Property that is not
registered and lists any Actions or Proceedings pending as of the date hereof
before any Governmental or Regulatory Authority (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property or the
other material Company Intellectual Property.
(b) Except as set forth on SCHEDULE 2.17(b), (i) the Company has all
right, title and interest in or valid and enforceable rights under Contracts or
Licenses to use all Intellectual Property that is necessary for the Company to
conduct its business in the ordinary course; and (ii) the Company owns
exclusively all Company Registered Intellectual Property and all identified
Company Intellectual Property listed in SCHEDULE 2.17(a) in its own name, free
and clear of any Liens except as disclosed in SCHEDULE 2.17(a), and no other
Person has any claim of ownership or co-ownership of or in the Company
Registered Intellectual Property, the Company Intellectual Property, or any
portion thereof.
(c) Except as set forth on SCHEDULE 2.17(c), the Company has obtained
ownership of, and is the exclusive owner of, all Company Intellectual Property,
including, without limitation, any Company Intellectual Property created,
developed, modify, enhanced, or invented by Company's employees (current and
former), consultants, developers or contractors, by operation of law or by valid
assignment of any such rights.
(d) The Company has not transferred ownership of or granted any
License of or other right to use or authorized the retention of any rights to
use any Intellectual Property that is or was Company Intellectual Property to
any other Person.
(e) The Company Intellectual Property, together with the licensed
software and information technology and other Intellectual Property identified
in Schedule 2.17(l), constitutes all the Intellectual Property materially used
in and/or materially necessary to the conduct of the Company's business as
currently conducted, including the design, development, distribution, marketing,
manufacture, use, import, license, and sale of the products, technology and
services of the Company and the infrastructure, networks, and systems necessary
to conduct same.
(f) Except as disclosed in SCHEDULE 2.17(f), the operation of the
business of the Company as currently conducted, including the design,
development, use, import, manufacture, marketing, and sale of the products,
technology or services (including products, technology or services currently
under development) of the Company, does not to the Knowledge of the Company
infringe, violate, or misappropriate the Intellectual Property of any Person,
and, to the Knowledge of the Company, the Company has not received notice from
any Person claiming that such operation or any act, product, technology or
service (including products, technology or services currently under development)
of the Company infringes, violates, or misappropriates the Intellectual Property
of any Person or constitutes unfair competition or trade practices under any
Law, including notice of infringement of third-party patent or other
Intellectual Property rights from a potential licensor of such rights.
(g) Each item of Company Registered Intellectual Property which has
actually been registered is valid and subsisting, and all necessary
registration, maintenance, renewal fees, annuity fees and taxes due or payable
as of the Closing in connection with such Registered Intellectual Property have
been paid and all necessary documents and certificates in connection with such
Registered Intellectual Property and due as of the Closing have been filed with
the relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property.
(h) To the Knowledge of the Company, there are no Contracts or
Licenses between the Company and any other Person with respect to Company
Intellectual Property under which there is any dispute (or, to the Knowledge of
the Company, facts that may reasonably lead to a dispute) regarding the scope of
such Contract or License, or performance under such Contract or License,
including with respect to any payments to be made or received by the Company
thereunder.
(i) To the Knowledge of the Company, no Person is infringing,
violating, or misappropriating any Company Intellectual Property.
(j) To the Knowledge of the Company, no Company Intellectual Property
is subject to any Contract, Order, Action or Proceeding that restricts, or that
is reasonably expected to restrict in any manner, the use, marketing, transfer
or licensing of any Company Intellectual Property by the Company or that may
affect the validity, use or enforceability of such Company Intellectual
Property.
(k) The Company does not believe, nor has it received any complaint or
allegation, that any (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company, or (iii) conduct
or statement of Company constitutes obscene material, a defamatory statement or
material, false advertising or otherwise materially violates any Law applicable
to the advertising and marketing of the Company's products or services,
including without limitation the federal Fair Credit Reporting Act, the federal
Xxxxx-Xxxxx-Blilely Act, other federal or state Laws governing privacy,
insurance or financial products, the Telephone Consumer Protection Act, the
Telemarketing and Consumer Fraud and Abuse Prevention Act, the Controlling the
Assault of Non-Solicited Pornography and Marketing Act.
(l) SCHEDULE 2.17(l) sets forth a list of all software, information
technology (and related services), and other Intellectual Property that the
Company has licensed from any third party which is used by the Company in and
necessary for the Company to conduct its business. The Company has all rights
necessary to the use of such software, information technology (and related
services), and other Intellectual Property. To the Knowledge of the Company, the
Company is not in breach in any material respect of the third party software
license, database, or information technology agreements, customer agreements and
the other agreements to which Company is or has been a party and to the
Knowledge of the Company, such third parties have not claimed breach in any
material respect or sent notice of termination with respect to such agreements.
Except as disclosed on SCHEDULE 2.17(l), the Company does not utilize any open
source software.
(m) The products and services of the Company comply in all material
respects with all applicable standards and with the feature specifications and
performance standards set forth in the product data sheets and/or marketing
materials of the Company. There are no material outstanding claims or, to the
Knowledge of the Company, threatened claims for breach of warranties by the
Company in connection with the foregoing. All material product or service
performance comparisons heretofore furnished by the Company to customers or
Purchaser are accurate in all material respects as of the dates so furnished.
2.18 CONTRACTS.
(a) SCHEDULE 2.18(a) contains a true and complete list of the
following categories of Contracts to which the Company is a party or by which
any of its Assets and Properties are bound (true and complete copies of which,
together with all amendments and supplements thereto and all waivers of any
terms thereof, have been made available to Purchaser prior to the execution of
this Agreement) (the "Material Contracts"):
(i) any Contract with the twenty (20) largest Clients of the
Company on the basis of revenues collected or accrued for the 12-month period
ended March 31, 2006;
(ii) any Contract constituting agency agreements with insurance
companies;
(iii) any Contract with respect to provision of telemarketing
services to the Company;
(iv) any Contract with respect to material Indebtedness of the
Company;
(v) any Contract (other than contracts listed in SCHEDULE
2.18(a)(i), (ii), (iii) and (iv)) with the fifteen (15) largest vendors of the
Company on the basis of cost of goods or services purchased for the 12-month
period ended March 31, 2006;
(vi) any Contract for the lease of real or personal property to
or from any Person providing for annual lease payments in excess of Five
Thousand Dollars ($5,000) per annum;
(vii) any Contract for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result in
a material loss to the Company, or involve consideration in excess of Fifty
Thousand Dollars ($50,000) (other than agreements with Clients, brokers,
telemarketing service providers and other vendors listed in SCHEDULES
2.18(a)(vi));
(viii) any Contract concerning confidentiality or noncompetition,
other than confidentiality agreements entered into with customers of the Company
in the ordinary course of business and confidentiality agreements entered into
with potential purchasers of the Company;
(ix) any Contract for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of Seventy-Five Thousand Dollars ($75,000) or providing severance
benefits;
(x) any Contract for the development or licensing of software or
information technology;
(xi) Any Contract pursuant to which the Company has an obligation
to pay any royalties to any third party after Closing; and
(xii) any other material Contract other than a Contract with a
Client with annual payment obligations in excess of $250,000.
(b) Each Contract to which the Company is a party or by which any of
its Assets and Properties are bound is in full force and effect and constitutes
a legal, valid and binding agreement, enforceable against the Company and, to
the Knowledge of the Company, each other Person that is a party thereto, in each
case in all material respects in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights generally and by general principles of equity. Except as
disclosed in Schedule 2.18(b), there is no event of default or event or
condition that, after notice or lapse of time or both, would constitute a
material violation, breach or event of default under any such Contract on the
part of the Company or, to the Knowledge of the Company, any other party
thereto.
(c) The Company is not a party to any Government Contract.
2.19 INSURANCE. SCHEDULE 2.19 contains a true and complete list of all
insurance policies (by policy number, insurer, expiration date and type, amount
and scope of coverage) held by the Company relating to the Assets and Properties
of the Company, copies of which have been provided or made available to
Purchaser. In the three (3) year period ending on the date hereof, the Company
has not received any notice from, or on behalf of, any insurance carrier
relating to or involving any adverse change or any change other than in the
ordinary course of business, or any refusal to issue an insurance policy or
non-renewal of a policy. Except as set forth on SCHEDULE 2.19, the insurance
coverage provided by the policies listed in SCHEDULE 2.19 will not terminate or
lapse by reason of any of the transactions contemplated by this Agreement or any
of the Ancillary Agreements. Each policy listed in SCHEDULE 2.19 is valid and
binding and in full force and effect, all premiums due thereunder have been paid
and neither the Company nor the Person to whom such policy has been issued has
received any notice of cancellation or termination in respect of any such policy
or is in default thereunder. The Company has not received written notice of
cancellation of such policies or of any threatened termination of, or material
premium increase with respect to, any of such policies. The insurance policies
listed in SCHEDULE 2.19 are in amounts and have coverages as required by any
Material Contract to which the Company is a party or by which any of its Assets
and Properties is bound. SCHEDULE 2.19 contains a list of all claims in excess
of Ten Thousand Dollars ($10,000) made under any insurance policies covering the
Company in the last two years. The Company has not received notice that any
insurer under any policy listed in Schedule 2.19 is denying, disputing or
questioning liability with respect to a claim thereunder or defending under a
reservation of rights clause.
2.20 AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE 2.20,
neither any Shareholder, nor any officer, director, Affiliate or Associate of
Company or any Shareholder, is presently, or within the past three (3) years has
been, a party to any transaction with Company, including without limitation, any
Contract or other arrangement (i) providing for the furnishing of services by
(other than as officers, directors or employees of Company); (ii) providing for
the rental of real or personal property; or (iii) otherwise requiring payments
to (other than for services or expenses as directors, officers or employees of
Company in the ordinary course of business consistent with past practice), any
such individual or any corporation, partnership, trust or other entity in which
any such individual has any interest, including without limitation, as a
shareholder, officer, director, trustee or partner. Other than Contracts listed
on SCHEDULE 2.20, Company does not have any outstanding Contract or other
arrangement or commitment with any Shareholder or any officer, director,
Affiliate or Associate of Company or any Shareholder. Except as set forth on
SCHEDULE 2.20 or the Shareholder Loans which are set forth on the Company
Letter, the Assets and Properties of Company do not include any receivable or
other obligation from any Shareholder or any officer, director, Affiliate or
Associate of Company or any Shareholder and the liabilities of Company do not
include any payable or other obligation or commitment to any such Person.
2.21 EMPLOYEES; LABOR RELATIONS.
(a) Neither the Company nor any of its Affiliates is a party to any
collective bargaining agreement or other Contract with any group of employees,
labor organization or other representative of any of the employees of Company or
any of its Affiliates and, to the Knowledge of the Company, there are no
activities or proceedings of any labor union or other party to organize or
represent such employees. There has not occurred nor, to the Knowledge of the
Company, has there been threatened any strike, slow-down, picketing,
work-stoppage, or other similar labor activity with respect to any such
employees. The Company and each of its Affiliates is in compliance in all
material respects with all Laws relating to employment or the workplace,
including, without limitation, provisions relating to wages, hours, collective
bargaining, safety and health, work authorization, equal employment opportunity,
immigration and the withholding of income Taxes, unemployment compensation,
worker's compensation, employee privacy and right to know and social security
contributions. There are no unresolved labor controversies (including unresolved
grievances and age or other discrimination claims), if any, between the Company
or any of its Affiliates and Persons employed by or providing services to the
Company.
(b) Except as set forth on SCHEDULE 2.21(b)(i), each Person who is an
employee of the Company or any of its Affiliates is employed at will. No
employee of the Company or any of its Affiliates is represented by a union. Each
Person who is an independent contractor of the Company is classified as an
independent contractor for purposes of all employment related Laws and all Laws
concerning the status of independent contractors applicable to the Company. The
Company Letter includes a schedule which sets forth, individually and by
category, the name of each Person employed by or providing services to the
Company, together with such Person's position or function, current annual base
salary for 2006 or wage and bonus paid to such Person with respect to 2005. To
the Knowledge of the Company, no employee of the Company shall have any
continuing employment obligation or other obligation to provide services to any
Person other than the Company, including without limitation to any Shareholder
or any Affiliate of any Shareholder, following the Closing. To the Knowledge of
the Company, no current employee of the Company has given notice that he or she
will terminate his or her employment relationship with the Company for any
reason, including because of the consummation of the transactions contemplated
by this Agreement. Except as set forth on SCHEDULE 2.22(b)(ii), the Company is
not a party to any agreement for the provision of labor from any outside agency.
To the Knowledge of the Company, there have been no claims against the Company
by employees of such outside agencies, if any, with regard to employees assigned
to work for the Company, and no claims by any Governmental or Regulatory
Authority with regard to such employees.
(c) To the Knowledge of the Company, neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business as
presently conducted nor any activity of the officers, employees or consultants
of the Company in connection with the carrying on of the Company's business as
presently conducted, will conflict with or result in a breach of the terms,
conditions or provisions of, constitute a default under, or trigger a condition
precedent to any rights under any Contract or other agreement under which any of
such officers, employees or consultants is now bound, except as set forth on the
Company Letter.
2.22 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the Company, no Hazardous Material is present
in, on, under or adjacent to any property that the Company has at any time
owned, operated, occupied, leased or used (including both the land and
improvements thereon) by the Company. The Company has not transported, stored,
used, manufactured, disposed of, sold, released or exposed its employees or any
other Person to any Hazardous Material, or arranged for the disposal, discharge,
storage or release of any Hazardous Material, and does not currently engage in
any of the foregoing activities, in violation of any applicable Environmental
Law or other Law.
(b) No Approvals are required to be obtained by the Company under any
Environmental Laws, and the Company has been and is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder.
(c) No Action or Proceeding is pending, or to the Knowledge of the
Company, threatened concerning any Environmental Law, Hazardous Material or any
Hazardous Materials activity of the Company.
2.23 SUBSTANTIAL CLIENTS, BROKERS AND VENDORS. SCHEDULE 2.23 lists the
twenty (20) largest Clients of the Company on the basis of revenues collected or
accrued for the 12-month period ended March 31, 2006. SCHEDULE 2.23 lists the
twenty (20) largest brokers of the Company on the basis of fees or commissions
paid for the 12-month period ended March 31, 2006. SCHEDULE 2.23 lists the
fifteen (15) largest vendors (other than Clients and brokers) of the Company on
the basis of cost of goods or services purchased for the 12-month period ended
March 31, 2006. Except as disclosed in SCHEDULE 2.23, (i) no such customer or
supplier has ceased its business relationship with the Company or materially
reduced its purchases from or sales or provision of services to the Company
since Xxxxx 00, 0000, (xx) neither the Company nor any Shareholder has received
notice (written or oral) from any such customer or supplier of its intent to
cease its business relationship with the Company, or to materially reduce its
purchases from or sales or provision of services to the Company, after the date
hereof and (iii) to the Knowledge of the Company, no such customer or supplier
has threatened to cease its business relationship with the Company, or to
materially reduce its purchases from or sales or provision of services to the
Company, after the date hereof.
2.24 ACCOUNTS AND NOTES RECEIVABLE. Except as set forth in SCHEDULE
2.24, each of the accounts receivable and notes receivable of the Company
reflected on the Company Financials, and each of the accounts receivable and
notes receivable arising subsequent to the Company Financials Date, (a) arose
from bona fide sales transactions in the ordinary course of business, consistent
with past practice, and are payable on ordinary trade terms, (b) is a legal,
valid and binding obligation of its debtor enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
Laws relating to the enforcement of creditors' rights generally and by general
principles of equity, (c) is not subject to any valid set-off or counterclaim,
(d) has been collected or is fully collectible before the date that is ninety
(90) days after the date of invoice with respect thereto, net of (x) reserves
shown on the finalized Closing Date Balance Sheet and (y) any amounts included
in the calculation of the Merger Consideration, or taken into account in the
determination of Working Capital, and which had the effect of reducing the
Merger Consideration, and (e) does not represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement other than customers' rights to inspect goods
upon receipt and reject nonconforming goods.
2.25 OTHER NEGOTIATIONS; BROKERS; THIRD-PARTY EXPENSES. Except as
disclosed in Schedule 2.25, neither the Company nor any Shareholder, nor any of
their respective officers, directors, managers, employees, agents, shareholders,
members or Affiliates (nor any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of the
Company, any Shareholder or any such Person) (a) has entered into any Contract
that conflicts with any of the transactions contemplated by this Agreement or
(b) has entered into any Contract or arrangement with any Person regarding any
transaction involving the Company which is likely to result in Purchaser, the
Company or any officer, director, employee, agent or Affiliate of any of them
being subject to any claim for Liability to said Person as a result of entering
into this Agreement or the Ancillary Agreements or consummating the transactions
contemplated hereby and thereby. Except as set forth in SCHEDULE 2.25, no
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or similar fee or commission in
connection with this Agreement and the transactions contemplated hereby based on
arrangements made by or on behalf of the Company or any Shareholder, and
following the Closing neither the Company nor the Purchaser shall have any
obligation with respect to any such broker's, finder's, financial advisor's or
similar fee or commission.
2.26 BANKS AND BROKERAGE ACCOUNTS. SCHEDULE 2.26 sets forth (a) a true
and complete list of the names and locations of all banks, trust companies,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship, (b) a true and complete list and description of each such
account, box and relationship, indicating in each case the account number and
the names of the respective officers, employees, agents or other similar
representatives of the Company having signatory power with respect thereto and
(c) a list of each Investment Asset, the name of the record and beneficial owner
thereof, the location of the certificates, if any, therefor, and any stock or
bond powers or other authority for transfer granted with respect thereto.
2.27 WARRANTY OBLIGATIONS. The Company has not entered into any
warranties, indemnification obligations, guarantees or written warranty policies
in respect of any of the Company's products and services (the "WARRANTY
OBLIGATIONS") other than those normal and customary in the conduct of its
business. The Company is not subject to any dispute or, to the Knowledge of the
Company, threatened material dispute relating to such Warranty Obligations.
2.28 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor, to the
Knowledge of the Company, any agent, employee or other Person acting on behalf
of the Company has, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment.
2.29 FINANCIAL PROJECTIONS. The Company has made available to
Purchaser certain financial projections with respect to the Company's business
as of January 18, 2006, a copy of which are attached hereto as SCHEDULE 2.29,
which projections were prepared for internal use only and were not prepared in
accordance with GAAP. Such projections were prepared in good faith and were
based on assumptions believed by the Company to be reasonable as of January 18,
2006, speak only as of such date, and have not been updated to reflect the
operations of the Company business since such date or for any of the matters
disclosed in writing to Purchaser in the course of Purchaser's due diligence.
The Company makes no representation as to the future performance of the Company
by virtue of the foregoing representation and actual results of the Company may
be materially different from those contained in the projections.
2.30 TAKEOVER STATUTES. No Takeover Statute applicable to the Company
is applicable to the Merger or the other transactions contemplated hereby.
2.31 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Except as expressly
set forth in this Article 2, the Company makes no representation or warranty,
express or implied, at law or in equity, in respect of the Company, or any of
its assets, liabilities, or operations.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER
Each Shareholder hereby represents and warrants to Purchaser, only as
to such Shareholder, as follows as of the date hereof and as of the Closing
Date:
3.1 OWNERSHIP OF COMPANY COMMON STOCK. Such Shareholder owns of record
and beneficially all of the issued and outstanding shares of Company Common
Stock set forth below such Shareholder's name on such Shareholder's signature
page hereto. Such shares are, and when delivered by such Shareholder to
Purchaser pursuant to this Agreement will be free and clear of any and all
Liens.
3.2 ORGANIZATION. With respect to each Shareholder which is not a natural
Person, such Shareholder is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. With respect to each Shareholder
which is not a natural Person, (i) such Shareholder has full power and authority
to execute and deliver this Agreement and the Ancillary Agreements to which such
Shareholder is a party, to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby, (ii) the
execution and delivery by such Shareholder of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by such Shareholder of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action of such Shareholder, and no other action on
the part of such Shareholder is required to authorize the execution, delivery
and performance of this Agreement and the Ancillary Agreements to which it is a
party and the consummation by such Shareholder of the transactions contemplated
hereby and thereby, (iii) this Agreement and the Ancillary Agreements to which
such Shareholder is or will become a party have been or will be, as applicable,
duly and validly executed and delivered by such Shareholder. Assuming the due
authorization, execution and delivery hereof (and, in the case of the Ancillary
Agreements to which Purchaser is a party, thereof) by, and enforceability
against, Purchaser, each constitutes or will constitute, as applicable, a legal,
valid and binding obligation of such Shareholder enforceable against it in
accordance with its respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws relating to the enforcement of creditors'
rights generally and by general principles of equity. Such Shareholder's consent
set forth in SECTION 1.15 is irrevocable.
3.4 NO CONFLICTS. The execution and delivery by such Shareholder of this
Agreement and the Ancillary Agreements to which it is a party does not, and the
performance by such Shareholder of its obligations under this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(a) with respect to each Shareholder which is not a natural Person,
conflict with or result in a violation or breach of any of the terms, conditions
or provisions of the articles of organization, bylaws or operating agreement (or
similar organizational documents) of such Shareholder;
(b) conflict with or result in a violation or breach of any Law or
Order applicable to such Shareholder or any of the issued and outstanding
Company Common Stock held by such Shareholder; or
(c) except as would not have a Material Adverse Effect on the Company,
(i) conflict with or result in a violation or breach of, (ii) constitute a
default (or an event that, with or without notice or lapse of time or both,
would constitute a default) under, (iii) require any Shareholder to obtain any
consent, approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, (iv) result in or give to any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the issued and outstanding
Company Common Stock held by such Shareholder or any of such Shareholder's
Assets and Properties under or (vii) result in the loss of any material benefit
under, any of the terms, conditions or provisions of any Contract to which such
Shareholder is a party or by which any of such Shareholder's Assets and
Properties is bound.
3.5 OTHER NEGOTIATIONS; BROKERS; THIRD-PARTY EXPENSES. Neither such
Shareholder nor any of its officers, directors, employees, agents, Subsidiaries
or Affiliates (nor any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of Purchaser)
(a) has entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement or (b) has entered into any Contract or
arrangement with any Person regarding any transaction involving Purchaser which
is likely to result in Purchaser, the Company or any general partner, limited
partner, manager, officer, director, employee, agent or Affiliate of any of them
being subject to any claim for Liability to said Person as a result of entering
into this Agreement or consummating the transactions contemplated hereby. Except
as set forth in SCHEDULE 2.24, no broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of Purchaser, and
following the Closing neither the Company nor the Purchaser shall have any
obligation with respect to any such broker's, finder's, financial advisor's or
similar fee or commission.
3.6 AGREEMENTS. No Shareholder (other than Xxxxxx Xxxxx or an Affiliate of
Chartered Holdings, LLC) owns, directly or indirectly, on an individual or joint
basis, any material interest in, or serves as an officer or director of, any
customer, competitor or supplier of the Company, or any organization which has a
material contract or arrangement with the Company.
3.7 LEGAL PROCEEDINGS. There are no Actions or Proceedings against or
affecting, or, to the actual knowledge of such Shareholder, threatened against,
such Shareholder or any of the issued and outstanding Company Common Stock set
forth below such Shareholder's name on such Shareholder's signature page hereto,
that might have the effect of enjoining, restraining, or prohibiting the
consummation of the transactions contemplated by this Agreement or any Ancillary
Agreement or making illegal or otherwise prohibiting the transactions
contemplated hereby or by any Ancillary Agreement.
3.8 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Except as expressly set
forth in this Article 3, each Shareholder makes no representation or warranty,
express or implied, at law or in equity, in respect of such Shareholder, or any
of such Shareholder's assets, liabilities, or operations.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
PURCHASERSUB
Purchaser and PurchaserSub represent and warrant to the Company and
Shareholders as follows as of the date hereof and as of the Closing Date:
4.1 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. PurchaserSub is a corporation duly organized a validly existing and in
good standing under the Laws of the State of Illinois. Purchaser and
PurchaserSub have full corporate power and authority to conduct its business as
now conducted and as currently proposed to be conducted and to own, use and
lease its Assets and Properties. Purchaser and PurchaserSub are duly qualified,
licensed or admitted to do business and are in good standing in each
jurisdiction in which the ownership, use, licensing or leasing of its Assets and
Properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so duly
qualified, licensed or admitted and in good standing that could not reasonably
be expected to have a Material Adverse Effect on Purchaser.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Purchaser and PurchaserSub have
full corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by Purchaser and PurchaserSub of this
Agreement and the Ancillary Agreements to which Purchaser and/or PurchaserSub is
a party and the consummation by Purchaser and PurchaserSub of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate actions of Purchaser and PurchaserSub, and no other
corporate action on the part of Purchaser or PurchaserSub is required to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which it is a party and the consummation by Purchaser
and PurchaserSub of the transactions contemplated hereby and thereby. This
Agreement and the Ancillary Agreements to which Purchaser and/or PurchaserSub is
or will become a party have been or will be, as applicable, duly and validly
executed and delivered by Purchaser and/or PurchaserSub, as applicable, and,
assuming the due authorization, execution and delivery hereof (and in the case
of the Ancillary Agreements to which the Company and/or each Shareholder is a
party, thereof) by, and enforceability against, Company and/or each Shareholder,
each constitutes or will constitute, as applicable, a legal, valid and binding
obligation of Purchaser and/or PurchaserSub, enforceable against Purchaser
and/or PurchaserSub, as applicable, in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
4.3 NO CONFLICTS. The execution and delivery by Purchaser and PurchaserSub
of this Agreement and the Ancillary Agreements to which it is a party does not,
and the performance by Purchaser or PurchaserSub of its obligations under this
Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby do not and will
not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
Purchaser or PurchaserSub; or
(b) conflict with or result in a violation or breach of any Law or
Order applicable to Purchaser or PurchaserSub.
4.4 OTHER NEGOTIATIONS; BROKERS; THIRD-PARTY EXPENSES. Neither Purchaser
nor PurchaserSub nor any of their respective officers, directors, employees,
agents, Subsidiaries or Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of Purchaser) (a) has entered into any Contract that conflicts with any
of the transactions contemplated by this Agreement or (b) has entered into any
Contract or arrangement with any Person regarding any transaction involving
Purchaser or PurchaserSub which is likely to result in any Shareholder, the
Company or any general partner, limited partner, manager, officer, director,
employee, agent or Affiliate of any of them being subject to any claim for
Liability to said Person as a result of entering into this Agreement or
consummating the transactions contemplated hereby. No broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or similar fee or commission in connection with this
Agreement and the transactions contemplated hereby based on arrangements made by
or on behalf of Purchaser or PurchaserSub.
4.5 LEGAL PROCEEDINGS. There are no Actions or Proceedings pending or, to
the knowledge of the Purchaser, threatened, against the Purchaser or
PurchaserSub that might have the effect of enjoining, restraining, or
prohibiting the consummation of the transactions contemplated by this Agreement
or any Ancillary Agreement or making illegal or otherwise prohibiting the
transactions contemplated hereby or by any Ancillary Agreement.
4.6 CASH AVAILABLE TO FUND TRANSACTION. Purchaser's cash, available lines
of credit or other sources of immediately available funds will be sufficient
to (a) pay the Stock Merger Consideration and the Option Merger Consideration,
(b) to make all other necessary payments by it and the Surviving Corporation in
connection with the Merger, and (c) to pay all fees and expenses related thereto
ARTICLE 5 CONDUCT PRIOR TO THE CLOSING
5.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of (a) the termination of this
Agreement and (b) the Closing, the Company agrees (unless the Company is
otherwise required to take such action pursuant to this Agreement or Purchaser
shall otherwise give its prior consent in writing, which consent shall not be
unreasonably withheld or delayed) (i) to carry on its business substantially in
the usual, regular and ordinary course substantially consistent with past
practice, (ii) to pay its Liabilities and Taxes consistent with the Company's
past practices, to pay or perform other obligations when due consistent with the
Company's past practices (other than Liabilities, Taxes and other obligations,
if any, contested in good faith and for which adequate reserves have been
established), (iii) maintain in full force and effect all Permits used in the
conduct of its business as presently conducted and otherwise conduct all
activities related to its Assets and Properties and business in accordance with,
and perform in all obligations and duties imposed by all Laws or Orders of any
Governmental or Regulatory Authority, including without limitation by timely
filing all required reports or other submissions, and (iv) to the extent
consistent with such business, to use commercially reasonable efforts to
preserve substantially intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees,
independent contractors and other Persons having business dealings with it, all
with the express purpose and intent of preserving substantially unimpaired its
goodwill and ongoing businesses at and after the Closing. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Purchaser (which consent shall not be unreasonably withheld,
conditioned or delayed), take or agree in writing or otherwise to take, any
action that would result in the occurrence of any of the changes described in
Section 2.9 or any other action that would make any of its representations or
warranties contained in this Agreement untrue or incorrect when made in any
material respect (or, with respect to those representations and warranties that
are by their terms qualified by a standard of materiality, untrue or incorrect
when made in any respect).
5.2 EXCLUSIVITY. Until the earlier of the Closing or the date of
termination of this Agreement pursuant to the provisions of SECTION 9.1,
neither any Shareholder nor the Company nor any of their respective Subsidiaries
or Affiliates will take, nor will any Shareholder or the Company permit any of
their representatives to take, any of the following actions with any Person
other than Purchaser and its designees: (a) solicit, encourage or initiate any
proposals or offers from, or participate in or conduct discussions with or
engage in negotiations with, any Person relating to any offer or proposal, oral,
written or otherwise, formal or informal, with respect to any possible Business
Combination with the Company (a "COMPETING PROPOSED TRANSACTION"), (b) provide
information with respect to the Company to any Person, other than Purchaser,
relating to (or which any Shareholder or the Company believes would be used for
the purpose of formulating an offer or proposal with respect to), or otherwise
assist, cooperate with, facilitate or encourage any effort or attempt by any
such Person with regard to, any possible Business Combination with the Company,
(c) agree to, enter into a Contract with any Person, other than Purchaser,
providing for, or approve a Business Combination with the Company or (d)
authorize or permit any Shareholder's or the Company's representatives to take
any such action. Each Shareholder and the Company and their respective
Affiliates (and their officers, directors, employees, agents, advisors or other
representatives) immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Proposed Transaction. Each Shareholder and the Company agrees not
to release any third party from, or waive any provision of, any confidentiality
or standstill agreement to which it or any of its Subsidiaries is a party. Each
party hereto acknowledges that this SECTION 5.2 was a significant inducement for
Purchaser to enter into this Agreement and the absence of such provision would
have resulted in either (i) a material reduction in consideration to be paid to
the Equity Holders or (ii) a failure to induce Purchaser to enter into this
Agreement.
ARTICLE 6 ADDITIONAL AGREEMENTS
6.1 ACCESS TO INFORMATION. Between the date of this Agreement and the
earlier of the Closing or the termination of this Agreement, upon reasonable
notice, the Company shall (a) give Purchaser and its officers, appropriate
employees, accountants, and counsel reasonable access, upon reasonable prior
notice during normal business hours, to all buildings, offices, and other
facilities and to all Books and Records of the Company, whether located on the
premises of the Company or at another location; (b) furnish Purchaser such
financial, operating, technical and product data and other information with
respect to the business and Assets and Properties of the Company as Purchaser
from time to time may reasonably request, including financial statements and
schedules; (c) allow Purchaser the opportunity to interview such customers,
suppliers, prime contractors (when the Company is a subcontractor on a
Contract), employees and other personnel and Affiliates of the Company with the
Company's prior consent, which consent shall not be unreasonably withheld or
delayed; and (d) assist and cooperate with Purchaser in the development of
cooperation plans for implementation by Purchaser and the Company following the
Closing; provided, however, that no investigation made prior to the date of this
Agreement or made pursuant to this Section 6.1 shall affect or be deemed to
modify any representation or warranty made by the Company herein. Subject to
Section 6.3 and the agreements referenced therein, materials furnished to
Purchaser pursuant to this Section 6.1 will be subject to the provisions of
Section 6.3, may be used by Purchaser for strategic and integration planning
purposes relating to accomplishing the transactions contemplated hereby and will
not be used for any purpose unrelated to the consummation of the transactions
contemplated hereunder.
6.2 NON-SOLICITATION.
(a) For a period commencing upon the Closing and ending on May 16,
2009, no Shareholder or Affiliate of any such Shareholder (other than Xxxxxx
Xxxxx or a portfolio Company of an Affiliate of Chartered Holdings, LLC) shall,
directly or indirectly, solicit, hire or employ, or cause any other Person to
solicit, hire or employ, any employee or contractor then retained or employed by
the Company or retained or employed by the Company within the one-year period
immediately prior to such solicitation, hiring or employment, except with the
prior written consent of the Purchaser.
(b) For a period commencing upon the date hereof and ending on May 16,
2009, if this Agreement is terminated pursuant to SECTION 9.1, neither Purchaser
nor any Affiliate of Purchaser shall, directly or indirectly, solicit, hire or
employ, or cause any other Person to solicit, hire or employ any employee or
contractor then retained or employed by the Company or retained or employed by
the Company within the one-year period immediately prior to such solicitation,
hiring or employment, except with the prior written consent of the Company.
(c) Each of the covenants in this SECTION 6.2 is severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that any specific covenant or the scope or time
thereof are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
6.3 CONFIDENTIALITY.
(a) Purchaser. Purchaser acknowledges and agrees that it has had in
the past, currently has, and in the future may possibly have, access to (i)
certain information of the business of the Company that has not been disclosed
to the public and which constitutes confidential and proprietary business
information (the "Confidential Information of the Company"), and (ii) certain
information of the Shareholders that does not relate to the business of the
Company, has not been disclosed to the public and which constitutes confidential
and proprietary business information (the "Other Confidential Information of
Shareholders"), including but not limited to, in each case, client and customer
lists, software, data, formulae, processes, inventions, trade secrets, marketing
information and plans, business strategies and other information about products
and services offered or developed or planned to be offered or developed.
Notwithstanding the foregoing, Confidential Information of the Company and Other
Confidential Information of Shareholders does not include any information (A)
that is or becomes publicly available, other than as a result of a disclosure by
Purchaser or any of its Affiliates in violation of this Agreement, (B) which
must be disclosed by Purchaser or any of its Affiliates under applicable Laws or
by order of any Governmental or Regulatory Authority, or (C) which Purchaser
reasonably believes is required to be disclosed in connection with the defense
of a lawsuit against Purchaser or any of its Affiliates. In the event Purchaser
or any of its Affiliates is requested or required (including, without
limitation, by oral questions, interrogatories, requests for information or
documents in a legal proceeding, subpoena, civil investigative or other similar
process) to disclose any Confidential Information of the Company (only with
respect to any request or requirement to disclose prior to Closing) or Other
Confidential Information of Shareholders as described in subpart (B) or subpart
(C) of the immediately preceding sentence, Purchaser shall provide the
Shareholders with prompt written notice of any such request or requirement so
that the Shareholders may seek a protective order or other appropriate remedy,
at the Shareholders' sole expense, and/or waive compliance with the provisions
of this Agreement. If, in the absence of a protective order or other remedy or
the receipt of a waiver from the Shareholders, Purchaser or any of its
Affiliates is nonetheless, in the written opinion of counsel, legally compelled
to disclose Confidential Information of the Company or Other Confidential
Information of Shareholders to any tribunal or else stand liable for contempt or
suffer other censure or penalty, Purchaser or its Affiliate may, without
liability hereunder, disclose to such tribunal only that portion of the
Confidential Information of the Company or Other Confidential Information of
Shareholders, as the case may be, which such counsel advises Purchaser is
legally required to be disclosed, provided that Purchaser exercises its best
efforts to preserve the confidentiality of such information, including, without
limitation, by cooperating with the Shareholders to obtain an appropriate
protective order, at the Shareholders' sole expense, or other reliable assurance
that confidential treatment will be accorded such information by such tribunal.
Purchaser agrees, on behalf of itself and each of its Affiliates, that, without
the prior written consent of the Shareholders, (I) from and after the date
hereof until the Closing if the transactions contemplated hereby are
consummated, and from and after the date hereof for a period of five (5) years
if this Agreement is terminated pursuant to SECTION 9.1, neither it nor its
Affiliates shall in any manner directly or indirectly disclose any Confidential
Information of the Company to any Person, except to authorized representatives
of Purchaser and to its counsel and other advisors (provided, however, that such
advisors, other than counsel, agree to the confidentiality provisions of this
SECTION 6.3(a)), or use, except in connection with the consummation of the
transactions contemplated hereby, any Confidential Information of the Company
for any purpose or reason; and (II) from and after the date hereof for a period
of five (5) years, neither it nor its Affiliates shall in any manner directly or
indirectly disclose to any Person or use any Other Confidential Information of
Shareholders for any purpose or reason.
(b) SHAREHOLDERS AND COMPANY. Each Shareholder and the Company
acknowledges and agrees that it has had in the past, currently has, and in the
future may possibly have, access to (i) Confidential Information of the Company,
and (ii) certain information of Purchaser that has not been disclosed to the
public and which constitutes confidential and proprietary business information
(the "CONFIDENTIAL INFORMATION OF PURCHASER"), including but not limited to, in
each case, client and customer lists, software, data, formulae, processes,
inventions, trade secrets, marketing information and plans, business strategies
and other information about products and services offered or developed or
planned to be offered or developed. Notwithstanding the foregoing, Confidential
Information of the Company and Confidential Information of Purchaser does not
include any information (A) that is or becomes publicly available, other than as
a result of a disclosure by a Shareholder or any of its Affiliates in violation
of this Agreement, (B) which must be disclosed by a Shareholder or any of its
Affiliates under applicable Laws or by order of any Governmental or Regulatory
Authority, or (C) which a Shareholder reasonably believes is required to be
disclosed in connection with the defense of a lawsuit against such Shareholder
or any of its Affiliates. In the event any Shareholder or any of its Affiliates
is requested or required (including, without limitation, by oral questions,
interrogatories, requests for information or documents in a legal proceeding,
subpoena, civil investigative or other similar process) to disclose any
Confidential Information of the Company or Confidential Information of Purchaser
as described in subpart (B) or subpart (C) of the immediately preceding
sentence, such Shareholder shall provide Purchaser with prompt written notice of
any such request or requirement so that Purchaser may seek a protective order or
other appropriate remedy, at Purchaser's sole expense, and/or waive compliance
with the provisions of this Agreement. If, in the absence of a protective order
or other remedy or the receipt of a waiver from Purchaser, any Shareholder or
any of their Affiliates is nonetheless, in the written opinion of counsel,
legally compelled to disclose Confidential Information of the Company or
Confidential Information of Purchaser to any tribunal or else stand liable for
contempt or suffer other censure or penalty, such Shareholder or such Affiliate
may, without liability hereunder, disclose to such tribunal only that portion of
the Confidential Information of the Company or Confidential Information of
Purchaser, as the case may be, which such counsel advises such Shareholder is
legally required to be disclosed, provided that such Shareholder exercises its
best efforts to preserve the confidentiality of such information, including,
without limitation, by cooperating with Purchaser to obtain an appropriate
protective order, at Purchaser's sole expense, or other reliable assurance that
confidential treatment will be accorded such information by such tribunal. Each
Shareholder agrees that, on behalf of itself and each of its Affiliates, without
prior written consent of Purchaser, (I) from and after the date hereof for a
period of five (5) years if the transactions contemplated hereby are consummated
or until this Agreement is terminated pursuant to SECTION 9.1 if the
transactions contemplated hereby are not consummated, neither it nor its
Affiliates shall in any manner directly or indirectly disclose any Confidential
Information of the Company to any Person, except to authorized representatives
of such Shareholder and to counsel and other advisors in connection with the
consummation of the transactions contemplated hereby (provided, however, that
such advisors, other than counsel, agree to the confidentiality provisions of
this SECTION 6.3(b)), or use any Confidential Information of the Company for any
purpose or reason except in connection with the consummation of the transactions
contemplated hereby; and (II) from and after the date hereof, no Shareholder nor
any of their respective Affiliates shall in any manner directly or indirectly
disclose to any Person or use any Confidential Information of Purchaser for any
purpose or reason.
6.4 EXPENSES. All fees and expenses incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby, including without limitation all accounting, legal,
investment banking and other fees and expenses of third parties engaged by the
Company, shall be the obligation of the Company whether or not this Agreement is
terminated pursuant to SECTION 9.1. The Company shall have no obligation to pay
the fees and expenses of the Shareholders unless and to the extent such expenses
have been approved for payment by the Shareholder Representative and included in
the Transaction Expenses. All fees and expenses incurred by Purchaser in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby, including without limitation all accounting, legal,
investment banking and other fees and expenses of third parties, shall be the
obligation of Purchaser.
6.5 PUBLIC DISCLOSURE. Promptly after execution of this Agreement,
Purchaser and the Company shall issue a joint press release relating to this
Agreement to be prepared jointly by Purchaser and the Company. Thereafter,
unless otherwise required by Law (including federal and state securities Laws
and the rules and regulations of The Nasdaq National Market), no disclosure
(whether or not in response to any inquiry) of the existence of any subject
matter of, or the terms and conditions of, this Agreement shall be made by any
party hereto unless (a) such information has been publicly disclosed through no
fault of, or breach of this Agreement by, such party or (b) otherwise approved
by all other parties hereto prior to release; provided, however, that such
approval shall not be unreasonably withheld or delayed.
6.6 FURTHER ASSURANCES. All parties hereto shall give any notices that
any other party hereto may reasonably request in connection with the Merger or
that are otherwise required or contemplated hereunder. The parties hereto shall
use commercially reasonable efforts to execute and deliver such instruments and
do and perform such acts and things as may be required in connection with the
Merger, including all action reasonably necessary to seek and obtain all
Approvals from Governmental or Regulatory Authorities or any other Persons or
under any of the Contracts or Permits of the Company as may be required in
connection with the Merger, so as to preserve all rights of and benefits to the
Company thereto and thereunder and each party shall provide the other with such
assistance and information as is reasonably required to obtain such Approvals
and to cause the conditions set forth in ARTICLE 7 to be satisfied where the
satisfaction of such conditions depends on actions or forbearance from action by
such party; provided that neither the Company nor Purchaser shall be required to
pay any consent fees or other costs or expenses in connection with obtaining the
consent or forbearance of such Person, except as expressly contemplated by
SECTION 7.3(g) hereof. Neither the Company or any Shareholder, on the one hand,
nor the Purchaser, on the other hand, shall take or agree in writing or
otherwise to take any action intended to, or that would, prevent the Company or
any Shareholder, or the Purchaser, respectively, from performing (or cause the
Company or any Shareholder, or the Purchaser, respectively, not to perform) its
respective agreements and covenants hereunder or intended to, or that would,
cause any condition to the other party's closing obligations in Article 7 not to
be satisfied in any material respect.
6.7 FIRPTA COMPLIANCE. On or prior to the Closing, the Company shall
deliver to Purchaser a properly executed statement in a form reasonably
acceptable to Purchaser for purposes of Treasury Regulation Section
1.1445-2(c)(3).
6.8 NOTIFICATION OF CERTAIN MATTERS. Shareholders and the Company
shall give prompt notice to Purchaser, and Purchaser shall give prompt notice to
Shareholders and the Company, of (a) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of any Shareholder or the Company or Purchaser, as
the case may be, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing (except for those representations
and warranties that are by their terms qualified by a standard of materiality,
with respect to which notice shall be given of the occurrence or non-occurrence
of any event, the occurrence or non-occurrence of which is likely to cause any
such representation or warranty of any Shareholder or the Company or Purchaser,
as the case may be, contained in this Agreement to be untrue or inaccurate in
any respect at or prior to the Closing) and (b) any failure of any Shareholder
or the Company or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it in any
material respect hereunder; provided, however, that the delivery of any notice
pursuant to this SECTION 6.8 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
6.9 RESIGNATION OF DIRECTORS. The Company shall obtain and deliver to
Purchaser at the Closing the resignation of each director and officer of the
Company.
6.10 DELIVERY OF STOCK LEDGER AND MINUTE BOOK OF THE COMPANY. The
Company shall deliver the Company's stock ledgers and minute books to Purchaser
at the Closing.
6.11 DIRECTOR AND OFFICER LIABILITY. The Purchaser shall, and shall
cause the Company to, do the following:
(a) For six (6) years after the Closing Date, the Surviving
Corporation shall cause the indemnification or limitation of liability language
set forth in the articles of incorporation or bylaws of the Company, in each
case as amended and currently in effect on the date hereof, to continue to be
applicable with respect to the present and former officers and directors of the
Company (each an "Indemnified Person") in respect of acts or omissions occurring
prior to the Closing.
(b) The Surviving Corporation shall purchase a "run-off" or "tail"
directors' and officers' liability insurance policy to the current policy of the
Company for a six year period commencing at the Effective Time, with respect to
matters occurring prior to or at the Effective Time and having the same coverage
limits and other terms and conditions no less favorable to each Indemnified
Person than the terms and conditions of the current policy of the Company.
6.12 CERTAIN TAX MATTERS. The following provisions shall govern the
allocation of responsibility as between Purchaser and Shareholders for certain
Tax matters following the Closing:
(a) STRADDLE PERIOD. In the case of any taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"), the amount of any
Taxes based on or measured by income or receipts of the Company attributable to
that portion of the Straddle Period ending on the Closing Date shall be
determined based on an interim closing of the books as of the close of business
on the Closing Date (and for such purpose, the taxable period of any partnership
or other pass-through entity in which the Company holds a beneficial interest
shall be deemed to terminate at such time) and the amount of other Taxes of the
Company for a Straddle Period attributable to that portion of the Straddle
Period ending on the Closing Date shall be deemed to be the amount of such Tax
for the entire taxable period multiplied by a fraction the numerator of which is
the number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in such Straddle Period.
(b) RESPONSIBILITY FOR FILING CERTAIN TAX RETURNS. Purchaser shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company that are filed after the Closing Date. To the extent relating to
a taxable period ending on or before the Closing Date (a "PRE-CLOSING TAX
PERIOD") or a Straddle Period, Purchaser shall permit the Shareholder
Representative to review and comment on each Tax Return, including any amended
Tax Return, and shall not file any such Tax Return without the written consent
(not to be unreasonably withheld, delayed or conditioned) of the Shareholder
Representative.
(c) TAX REFUNDS. Except to the extent taken into account in
calculating Working Capital, any Tax refunds that are received by Purchaser or
the Company, and any credits against Tax to which the Purchaser or the Company
become entitled, that relate to Pre-Closing Tax Periods or that portion of the
Straddle Period that ends on the Closing Date, shall reduce any amount payable
by the Shareholders under 8.2(a)(i) arising out of or resulting from any
inaccuracy in or breach of Section 2.11 hereof.
(d) COOPERATION ON TAX MATTERS.
(i) Purchaser, the Company and Shareholders shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns for all periods that begin before the
Closing and any audit, litigation or other Action or Proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other Action or Proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Purchaser, the Company and
Shareholders agree (A) to retain all Books and Records with respect to Tax
matters pertinent to the Company relating to any taxable period beginning before
the Closing until the expiration of the statute of limitations (and, to the
extent notified by Purchaser or Shareholders, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such Books and Records and, if the other party so requests, Purchaser, the
Company or Shareholders, as the case may be, shall allow the other party to take
possession of such Books and Records.
(ii) Purchaser and Shareholders further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
Governmental or Regulatory Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed with respect to the
Company or the transaction contemplated hereby.
(iii) Purchaser and Shareholders further agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to Section 6043 or Section 6043A of the Internal Revenue Code
and all Treasury Regulations promulgated thereunder.
(e) TAX SHARING AGREEMENTS. All Tax sharing agreements or similar
agreements with respect to or involving the Company and any Shareholder or any
of their respective Affiliates shall be terminated as of the Closing Date and,
after the Closing Date, the Company shall not be bound thereby or have any
Liability or be entitled to any benefit thereunder.
(f) CERTAIN OTHER TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by the party
legally responsible therefore when due, and such party will, at their or its own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other such
Taxes and fees, and, if required by applicable Law, each of Purchaser, the
Company and Shareholders will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
(g) TAX ELECTIONS AND RETURNS. The Company shall not, without the
prior written consent of Purchaser, permit the Company to make any Tax election
other than in the ordinary course of business and consistent with past practice,
change any Tax election, adopt any Tax accounting method other than in the
ordinary course of business and consistent with past practice, change any Tax
accounting method, file any Tax Return (other than any estimated Tax Returns,
payroll Tax Returns or sales Tax Returns), enter into any closing agreement
relating to taxes, settle any Tax claim or assessment, or consent to any Tax
claim or assessment.
6.13 EMPLOYEE MATTERS. The Purchaser shall cause service with the
Company prior to Closing to be recognized as service for purposes of all
employee benefit and compensation plans and arrangements applicable to employees
of the Company (the "COMPANY EMPLOYEES") after the Closing (except for purposes
of benefit accrual in a pension plan), to the extent such service was credited
under comparable plans and arrangements of the Company prior to the Closing.
From and after the Closing Date, to the extent the respective insurance carriers
will permit on a commercially reasonable basis, in the case of any employee
benefit plan of the Purchaser that is an employee health plan and in which
employees of the Company become eligible to participate (any such plan, a
"PURCHASER WELFARE PLAN"), the Purchaser shall cause such Purchaser Welfare Plan
to (i) waive any pre-existing conditions of any such employee that were covered
under the Company Employee Benefit Plan in which such employee was a participant
immediately prior to commencement of participation in the Purchaser Welfare Plan
and (ii) recognize any deductibles or out-of-pocket expenses paid by any such
employee pursuant to the Company Employee Benefit Plan in which such employee
was a participant immediately prior to commencement of participation in the
Purchaser Welfare Plan in the calendar year in which such commencement of
participation occurs. Nothing in this Section 6.13 shall change the "at-will"
status of Company Employees.
6.14 COMPANY 401(k) PLAN. The Company shall amend Article IV of the
Standardized Adoption Agreement for its 401(k) Plan to the satisfaction of
Purchaser prior to Closing to add the "Class Exclusion" reflected in C3 thereof
for "Individuals who become Employees as a result of a "Code Section
410(b)(6)(C) transaction."
6.15 OWNED REAL PROPERTY MATTERS.
(a) With respect to the Owned Real Property, the Company shall obtain,
prior to the Closing Date, an ALTA Owner's Policy of Title Insurance reasonably
acceptable to the Purchaser issued Chicago Title Insurance Company, in such
amount as the Purchaser reasonably may determine to be the fair market value of
the Owned Real Property (including all improvements located thereon), insuring
title to such real property to be in the Company as of the Closing. Such title
insurance policy shall (A) insure title to the real property and all recorded
easements benefiting such Owned Real Property, (B) contain an "extended coverage
endorsement" insuring over the general exceptions contained customarily in such
policies, (C) contain an ALTA Zoning Endorsement 3.1 (or equivalent), (D)
contain an endorsement insuring that the real property described in the title
insurance policy is the same real estate as shown on the Survey delivered with
respect to such property, (E) contain an endorsement insuring that each street
adjacent to the real property is a public street and that there is direct and
unencumbered pedestrian and vehicular access to such street from the real
property, (F) if the Owned Real Property consists of more than one record
parcel, contain a "contiguity" endorsement insuring that all of the record
parcels are contiguous to one another, and (G) contain a "non-imputation"
endorsement to the effect that title defects known to the officers, directors,
and stockholders of the owner prior to the Closing shall not be deemed "facts
known to the insured" for purposes of the policy.
(b) With respect to the Owned Real Property, the Company shall
procure, prior to the Closing, a current survey of the real property certified
to, and reasonably acceptable to, the Purchaser, prepared by a licensed surveyor
and conforming to current ALTA Minimum Detail Requirements for Land Title
Surveys, disclosing the location of all improvements, easements, party walls,
sidewalks, roadways, utility lines, and other matters shown customarily on such
surveys, and showing access affirmatively to public streets and roads (the
"Survey"). The Survey shall not disclose any survey defect or encroachment from
or onto the Owned Real Property which has not been cured or insured over prior
to the Closing.
ARTICLE 7 CONDITIONS TO CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. The approvals from the
Governmental or Regulatory Authorities necessary for consummation of the Merger
and listed on SCHEDULE 7.1(a) shall have been obtained.
(b) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or other Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any Law or
Order enacted, entered, enforced or deemed applicable to the Merger or the other
transactions contemplated by the terms of this Agreement that would (i) enjoin,
restrain, or prohibit the consummation of the transactions contemplated by this
Agreement or any Ancillary Agreement, (ii) have the effect of making illegal or
otherwise prohibiting the transactions contemplated hereby or by any Ancillary
Agreement, or (iii) adversely affect, including through the imposition of any
requirement to divest or hold separate any Assets and Properties or segments of
the business of Company, Purchaser or any of Purchaser's Affiliates, the right
of Purchaser following the Closing to own the issued and outstanding Company
Common Stock or the right of Purchaser and Company to operate Company's business
as currently operated.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations
of Company to consummate the Merger shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
set forth in ARTICLE 4 of this Agreement shall be true and correct (without
giving effect to any qualifications as to "materiality" or to a "Material
Adverse Effect") as of the Closing (except to the extent that such
representation or warranty expressly speaks as of an earlier date), except, in
either case, where the failure of such representations and warranties to be so
true and correct (without giving effect to any qualifications as to
"materiality" or to a " Material Adverse Effect") would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) PERFORMANCE. Purchaser shall have performed and complied with in
all material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
(c) CLOSING CERTIFICATE. Purchaser shall have delivered to the Company
a certificate, dated the date of the Closing and executed by a duly authorized
officer, to the effect that the conditions specified in SECTIONS 7.2(a) and (b)
above are satisfied in all respects.
(d) ANCILLARY AGREEMENTS. Purchaser and the Escrow Agent shall have
executed and delivered to the Shareholder Representative the Escrow Agreement
and the Purchaser shall have executed and delivered to the Company the Articles
of Merger.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company in ARTICLE 2 and the Shareholders in Article 3 shall be true and
correct (without giving effect to any qualifications as to "materiality" or to a
"Material Adverse Effect") at and as of the Closing (except to the extent that
such representation or warranty expressly speaks as of an earlier date), except,
in either case, where the failure of such representations and warranties to be
so true and correct (without giving effect to any qualifications as to
"materiality" or to a " Material Adverse Effect") would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) PERFORMANCE. The Company and the Shareholders shall have performed
and complied with in all material respects each agreement, covenant or
obligation required by this Agreement to be so performed or complied with by the
Company or the Shareholders, as the case may be, at or before the Closing.
(c) CLOSING CERTIFICATE. The Company and the Shareholders'
Representative on behalf of the Shareholders shall have delivered to Purchaser
certificates, each dated the date of the Closing, to the effect that the
conditions specified in Sections 7.3(a), (b), (f), (g) and (i) are satisfied in
all respects.
(d) ANCILLARY AGREEMENTS. The Shareholder Representative and the
Escrow Agent shall have executed and delivered to Purchaser the Escrow
Agreement, and the Company shall have executed and delivered to Purchaser the
Articles of Merger.
(e) APPROVALS. Approvals from any Persons listed on Schedule 7.3(e) in
form and substance reasonably satisfactory to Purchaser shall have been
obtained.
(f) DISSENTERS' RIGHTS. Holders of more than one percent (1%) of the
outstanding shares of Company Common Stock shall not have exercised, nor shall
they have any continued right to exercise, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(g) PAYOFF LETTERS. The Company shall have delivered to Purchaser
appropriate payoff letters from the holders of Indebtedness to be paid at
Closing, including arrangements for such holders of such Indebtedness to deliver
all related releases of any and all Liens with respect to such Indebtedness,
including the mortgage with respect to the Owned Real Property, and termination
of UCC-1 financing statements and such mortgage to the Purchaser at, or as soon
as practical after, the Closing, in form and substance reasonably satisfactory
to the Purchaser.
(h) LEGAL OPINION. The Purchaser shall have received a legal opinion
from XxXxxxxxx Will & Xxxxx LLP dated as of the Closing Date, in form and
substance reasonably satisfactory to Purchaser and Purchaser's counsel, to the
effect that (i) the Merger and this Agreement have been duly authorized and
approved by all necessary and required action of the Company's board of
directors and Equity Holders and (ii) the Merger will become effective under the
IBCA in accordance with the terms of the Articles of Merger and this Agreement
upon the filing of the Articles of Merger with the Secretary.
(i) EMPLOYMENT AGREEMENTS. The Employment Agreement dated as of August
23, 2005 by and between the Company and Xxxxxxx Xxxxxxxxx, as amended as of the
date of this Agreement, and the Non-Competition and Non-Solicitation Agreement
dated as of September 3, 1998 by and between the Company and Xxxxx Xxxxxxxx, as
amended as of the date of this Agreement, and the Invention and Non-Disclosure
Agreement executed by Xxxxx Xxxxxxxx on August 25, 1998 and by the Company on
August 29, 1998, as amended as of the date of this Agreement, are each in full
force and effect and have not been amended or otherwise modified in any respect
since the date of this Agreement.
(j) TITLE INSURANCE AND SURVEY. The Company shall have delivered to
Purchaser (i) the ALTA Owner's Policy of Title Insurance reasonably acceptable
to the Purchaser issued Chicago Title Insurance Company, in such amount as the
Purchaser reasonably may determine to be the fair market value of the Owned Real
Property (including all improvements located thereon), described in SECTION 6.14
and (ii) the Survey described in SECTION 6.14.
(k) MATERIAL ADVERSE EFFECT. There shall have not have occurred any
Material Adverse Effect on the Company since the date of the December Balance
Sheet.
ARTICLE 8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties set forth in SECTIONS 2.2, 3.3 and 4.2 (which
shall survive the Closing and continue until the third anniversary of the
Closing Date) and SECTIONS 2.3, 2.11, 2.14, 2.22 and 3.1 (which shall survive
the Closing and continue until the applicable statute of limitations has
expired), all of the representations and warranties contained in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Closing and continue until the first anniversary of the Closing Date. Except in
the event an "Indemnified Party" (as defined below) makes a written claim for
indemnification against an "Indemnifying Party" (as defined below) prior to such
expiration, no Action or Proceeding may be instituted to enforce, or seek
damages or other remedies with respect to the breach of, any representation or
warranty after the expiration of the period of survival for such representation
or warranty as described above.
8.2 INDEMNIFICATION.
(a) After the Closing, the Shareholders, severally but not jointly,
shall indemnify and hold harmless the Purchaser, its Affiliates (including,
after the Closing, the Company), and their respective officers, directors,
agents, successors and assigns (collectively, "PURCHASER INDEMNIFIED PARTIES")
from and against any and all Liabilities, losses, damages of any kind, claims,
costs, expenses, fines, fees, deficiencies, interest, awards, judgments, amounts
paid in settlement and penalties (including, without limitation, attorneys',
consultants' and experts' fees and expenses and other costs of defending,
investigating or settling claims) actually suffered or incurred by them
(including, without limitation, in connection with any action brought or
otherwise initiated by any of them) (hereinafter, "LOSS(ES)"), arising out of or
resulting from:
(i) any inaccuracy in or breach of any representation or warranty
of the Company or any Shareholder contained in this Agreement or in the
Ancillary Agreements or any other instrument delivered pursuant to this
Agreement;
(ii) any breach of any covenant or agreement made by the Company
or any Shareholder in this Agreement or in the Ancillary Agreements or any other
instrument delivered pursuant to this Agreement, other than any covenant or
agreement to be performed by the Company after the Closing;
(iii) any exercise by any Company Equity Holder of dissenters'
rights;
(iv) any Indebtedness or Transaction Expenses to the extent such
amounts are not included in the calculation of the Merger Consideration or taken
into account in the determination of Working Capital;
(v) the matters described in Schedule 2.12, to the extent any
Losses arising out of or resulting from such matters exceed the liability
thereof accrued on the Closing Date Balance Sheet; or
(vi) the matters described in SCHEDULE 8.2(a)(vi).
provided, however, that the Shareholders shall not have any liability
pursuant to Section 8.2(a)(i) above with respect to Loss(es) in connection with
the representation of the Company in Section 2.29 to the extent that any
Purchaser Knowledge Party believed that the assumptions as to which the
projections were based, were not reasonable or that the projected results would
not be achieved.
(b) After the Closing, Purchaser shall indemnify and hold harmless the
Shareholders, their Affiliates, and their respective officers, directors,
agents, successors and assigns (collectively, "SHAREHOLDER INDEMNIFIED PARTIES")
from and against any and all Losses arising out of or resulting from:
(i) any inaccuracy in or breach of any representation or warranty
of Purchaser, as of the date of this Agreement, contained in this Agreement or
in the Ancillary Agreements or any other instrument delivered pursuant to this
Agreement; or
(ii) any breach of any covenant or agreement made by Purchaser in
this Agreement or in the Ancillary Agreements or any other instrument delivered
pursuant to this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, except with respect to claims by a Purchaser Indemnified Party under
SECTION 8.2(a)(i) above based on a breach or inaccuracy of a representation or
warranty set forth in SECTION 2.2, 2.3, 3.1 or 3.3, the maximum aggregate amount
of indemnifiable Losses arising out of or resulting from the causes enumerated
in SECTIONS 8.2(a)(i), 8.2(a)(ii) (except for obligations in connection with the
Closing and except for covenants to be performed after the Closing, all of which
shall have no limitation) or 8.2(a)(iii), 8.2(a)(iv) 8.2(a)(v), or 8.2(a)(vi),
that may be recovered from the General Indemnity Escrow Amount and the
Shareholders shall not exceed $5,000,000, and the maximum aggregate amount of
indemnifiable Losses arising out of or resulting from the causes enumerated in
SECTIONS 8.2(b)(i) or 8.2(b)(ii) (except for obligations in connection with the
Closing and except for covenants to be performed after the Closing, all of which
shall have no limitation), that may be recovered from the Purchaser shall not
exceed $5,000,000. No Shareholder shall be liable for Losses arising out of or
resulting from a breach or inaccuracy of a representation or warranty set forth
in SECTION 2.2, 2.3, 3.1 or 3.3 that exceed such Shareholder's Allocable Portion
of Fifty Million Dollars ($50,000,000).
(d) Except with respect to any indemnifiable loss under SECTION
8.2(a)(i) above arising out of or resulting from a breach or inaccuracy of a
representation or warranty set forth in SECTION 3.1 or 3.3 or under SECTION
8.2(a)(ii) above arising out of or resulting from a breach of the obligations in
connection with the Closing or a breach of a covenant required to be performed
after the Closing, the General Indemnity Escrow Amount shall be the sole and
exclusive source of funds for satisfaction of any indemnifiable Losses arising
out of or resulting from the causes enumerated in SECTION 8.2(a)(i), 8.2(a)(ii),
8.2(a)(iii), 8.2(a)(iv) or 8.2(a)(v); provided that with respect to any
indemnifiable Loss under SECTION 8.2(a)(i) above arising out of or resulting
from a breach or inaccuracy of a representation or warranty set forth in SECTION
2.2, 2.3, 2.11, 2.14 or 2.22, the General Indemnity Escrow Amount shall be the
sole and exclusive source of funds for satisfaction of any indemnifiable Losses
only until the earlier of (i) first anniversary of the Closing Date or (ii) such
time as the General Indemnity Escrow Amount is equal to zero, in each case after
which the Shareholders shall be liable for the Allocable Portion of such
indemnifiable Losses as set forth in this Article 8; and provided, further, that
with respect to any indemnifiable Loss under SECTION 8.2(a)(i) above arising out
of or resulting from a breach or inaccuracy of a representation or warranty set
forth in SECTION 2.11, the Tax Escrow Amount shall be the sole and exclusive
source of funds for satisfaction of any indemnifiable Losses only until the
earlier of (i) September 16, 2008 or (ii) such time as the Tax Escrow Amount is
equal to zero, in each case after which the Shareholders shall be liable for the
Allocable Portion of such Indemnifiable Losses as set forth in this ARTICLE 8.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no obligation of the Shareholders or Purchaser, as the case may be
(each, an "Indemnifying Party"), with respect to any indemnifiable Loss
otherwise payable by such Indemnifying Party under SECTION 8.2(a)(i) or
8.2(b)(i), as the case may be, shall be payable until such time as all
indemnifiable Losses payable by such Indemnifying Party shall exceed Five
Hundred Thousand Dollars ($500,000) (the "Indemnification Basket"), at which
time such Indemnifying Party shall be liable for Five Hundred Thousand Dollars
($500,000) and all Losses above the Indemnification Basket it is required to
indemnify (subject to SECTION 8.2(c)); provided, however, that the limitations
set forth in this SECTION 8.2(e) shall not apply to indemnification claims
arising from any inaccuracy or breach of any representation or warranty of the
Company, the Shareholders or Purchaser contained in SECTIONS 2.2, 2.3, 3.1, 3.3
or 4.2.
(f) The indemnification obligations of each of the Shareholders
concerning the representations and warranties in ARTICLE 2 and ARTICLE 3 and the
respective covenants of the Company and the Shareholders contained herein are
several obligations. With respect to the representations and warranties of the
Company in ARTICLE 2 or the covenants of the Company, this means that each
Shareholder will be solely responsible to the extent provided in this Article 8
only for its Allocable Portion of the Losses that the Purchaser may suffer as a
result of any breach thereof by the Company. With respect to the representations
and warranties of the Shareholders in ARTICLE 3 or the covenants of the
Shareholders, this means that each Shareholder making the representation,
warranty, or covenant will be solely responsible to the extent provided in this
ARTICLE 8 only for the Losses that the Purchaser may suffer as a result of a
breach thereof by such Shareholder and not by any other Shareholder.
8.3 THIRD PARTY CLAIM INDEMNIFICATION PROCEDURES.
(a) The obligations and Liabilities of an Indemnifying Party under
this Article 8 with respect to Losses arising from claims of any third party
which are subject to the indemnification provided for in this ARTICLE 8 ("THIRD
PARTY CLAIMS") shall be governed by and contingent upon the terms and conditions
set forth in this SECTION 8.3. If any Person entitled to indemnification
pursuant to SECTIONS 8.2(a) or 8.2(b) (an "Indemnified Party") shall receive
notice of any Third Party Claim, the Indemnified Party shall give the
Indemnifying Party notice of such Third Party Claim within ten (10) days of the
receipt by the Indemnified Party of such notice; provided, however, that the
failure to provide such notice shall not release the Indemnifying Party from any
of its respective obligations under this Article 8 except to the extent that the
Indemnifying Party is materially prejudiced by such failure. The notice of claim
shall describe in reasonable detail the facts known to the Indemnified Party
giving rise to such indemnification claim, and the amount or good faith estimate
of the amount arising therefrom.
(b) The Indemnifying Party shall be entitled to assume and control the
defense of a Third Party Claim at its expense and through counsel of its choice
(such counsel to be reasonably acceptable to the Indemnified Party) if it gives
notice of its intention to do so to the Indemnified Party within fifteen (15)
days after the receipt of such notice from the Indemnified Party. In the event
that the Indemnifying Party exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the Indemnifying Party
shall conduct the defense of the Third Party Claim actively and diligently and
the Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party at the Indemnifying Party's
expense, all witnesses, pertinent records, materials and information in the
Indemnified Party's possession or under the Indemnified Party's control relating
thereto as is reasonably required by the Indemnifying Party. Similarly, in the
event the Indemnified Party is, directly or indirectly, conducting the defense
against any such Third Party Claim, the Indemnifying Party shall cooperate with
the Indemnified Party in such defense and make available to the Indemnified
Party, at the Indemnifying Party's expense, all such witnesses, records,
materials and information in the Indemnifying Party's possession or under the
Indemnifying Party's control relating thereto as is reasonably required by the
Indemnified Party. No such Third Party Claim may be settled by any party
conducting the defense against such claim without the prior written consent of
the other party, which consent shall not be unreasonably delayed or withheld.
8.4 EXCLUSIVE REMEDY. Except with respect to claims based on fraud or
intentional misrepresentation, the terms, conditions and limitations of SECTIONS
1.8, 1.9, this ARTICLE 8 and the Escrow Agreement shall apply to and shall be
the exclusive remedy of any Indemnified Party for any liability of any other
party under and pursuant to this Agreement, the transactions provided for herein
or contemplated hereby, whether for the inaccuracy or breach of any
representation or warranty, the breach of any covenant or otherwise.
8.5 NO RECOURSE. Notwithstanding any provision in this Agreement to
the contrary, each Shareholder hereby irrevocably waives, effective upon the
Closing, any and all claims and right to recourse against the Company, or any of
the Company's respective officers, directors and employees, with respect to any
misrepresentation or breach of any representation, warranty or indemnity, or
noncompliance with any conditions, covenants or agreements, given or made by
each Shareholder or the Company in this Agreement, the Ancillary Agreements or
any other agreements and documents executed or to be executed in order to
consummate the Merger. No Shareholders shall be entitled to contribution from,
subrogation to or recovery against the Company with respect to any Liability of
any of the Shareholders, including any such Liability that may arise under or
pursuant to this Agreement, the Ancillary Agreements or any other agreements or
documents executed or to be executed by the parties hereto in connection
herewith.
8.6 DETERMINATION OF ADVERSE CONSEQUENCES.
(a) If any Losses for which indemnification is provided under this
ARTICLE 8 are covered by applicable policies of insurance held by the
Indemnified Party and the Indemnified Party actually receives a full or partial
recovery under such insurance policies, the Indemnified Party shall not be
entitled to recover from the Indemnifying Party (and shall refund amounts
received from the Indemnifying Party up to the amount of indemnification
actually received from the Indemnifying Party) with respect to such Losses to
the extent Indemnified Party receives any insurance payment under such polices
of insurance with respect to such Loss (net of (a) any costs of collecting such
insurance payment, including the amount of any co-payment or deductible, (b) an
amount equal to the amount of Loss for which indemnification was not received by
reason of the application of SECTION 8.2(c) and (c) that portion of any premium
increase in the next policy period of the applicable insurance policy or
replacement insurance policy that results directly from the assertion of such
claim, as determined by correspondence from the insurance carrier or insurance
broker to the Indemnified Party, a copy of which shall have been provided to the
Indemnifying Party).
(b) The amount of any indemnification payable under this Agreement
shall be net of any Tax benefits actually realized by the Indemnified Party by
reason of such Losses.
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. Except as provided in Section 9.2, this Agreement may
be terminated and the Merger abandoned at any time prior to the Closing:
(a) by mutual agreement of the Company and Purchaser;
(b) by Purchaser or the Company if: (i) the Closing has not occurred
before 5:00 p.m. (Eastern Time) on September 30, 2006 (provided, however, that
the right to terminate this Agreement under this SECTION 9.1(b)(i) shall not be
available to any party whose failure, or the failure of any of such party's
Subsidiaries or Affiliates, to fulfill any obligation hereunder has been the
cause of, or resulted in the failure of the Closing to occur on or before such
date); (ii) there shall be a final nonappealable Order of a federal or state
court in effect preventing consummation of the Merger; (iii) there shall be any
Law or Order enacted, promulgated or issued by any Governmental or Regulatory
Authority that would make consummation of the Merger illegal; or (iv) following
one or more rejections of the Articles of Merger by the Secretary after the
filing thereof, the Purchaser and the Company determine in good that the
Articles of Merger are irreparably defective.
(c) by Purchaser if there shall be any Law or Order enacted,
promulgated or issued or deemed applicable to the Merger, by any Governmental or
Regulatory Authority, which would: (i) prohibit Purchaser's ownership or
operation of all or any portion of the business of the Company or (ii) compel
Purchaser to dispose of or hold separate all or any portion of the Assets and
Properties of the Company as a result of the Merger;
(d) by Purchaser if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the Company or the Shareholders and
(i) the Company and Shareholders are not using commercially reasonable efforts
to cure such breach, or has not cured such breach within thirty (30) days, after
notice of such breach to the Company and Shareholders (provided, however, that,
no cure period shall be available for a breach which by its nature cannot be
cured) and (ii) as a result of such breach any of the conditions set forth in
SECTION 7.1 or SECTION 7.3, as the case may be, would not be satisfied prior to
the date specified in SECTION 9.1(b)(i); and
(e) by the Company if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Purchaser and (i) Purchaser is not
using its commercially reasonable efforts to cure such breach, or has not cured
such breach within thirty (30) days, after notice of such breach to Purchaser
(provided, however, that no cure period shall be available for a breach which by
its nature cannot be cured), and (ii) as a result of such breach any of the
conditions set forth in SECTION 7.1 or SECTION 7.2, as the case may be, would
not be satisfied as of the date specified in SECTION 9.1(b)(i).
9.2 EFFECT OF TERMINATION. In the event of a valid termination of this
Agreement as provided in SECTION 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation with respect hereto; provided,
however, that each party shall remain liable for any breaches of this Agreement
in accordance with its terms prior to its termination; and provided further
that, the provisions of SECTION 6.2(b), SECTION 6.3 (except for the obligations
of the Shareholders and their Affiliates under SECTIONS 6.3(b) with respect to
Confidential Information of the Company), 6.4, 6.5, 9.2, and ARTICLE 10
(exclusive of SECTION 10.3) and the applicable definitions set forth in ARTICLE
11 shall remain in full force and effect and survive any termination of this
Agreement.
9.3 AMENDMENT. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by the Purchaser and,
prior to the Effective Time, the Company and the Shareholder Representative on
behalf of the Shareholders or, after the Effective Time, the Shareholder
Representative on behalf of the Shareholders.
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission against facsimile confirmation or mailed
by a nationally recognized overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
If to Purchaser or the Company (after the Closing) to:
Intersections Inc.
00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: General Counsel
with a copy (which shall not constitute notice) to:
Xxxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
If to the Company (prior to the Closing) to:
Chartered Marketing Services, Inc.
000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxxx
If to the Shareholder Representative (after the Closing) to:
Spectrum Equity Investors
Xxx Xxxxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx
with a copy (which shall not constitute notice) to:
XxXxxxxxx Will & Xxxxx LLP
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to the Shareholders (after the Closing) to the addresses of the
Shareholders set forth on each Shareholder's signature page.
with a copy (which shall not constitute notice) to:
XxXxxxxxx Will & Xxxxx LLP
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
All such notices, requests and other communications will (a) if
delivered personally to the address as provided in this SECTION 10.1, be deemed
given upon delivery, (b) if delivered by facsimile transmission to the facsimile
number as provided for in this Section 10.1, be deemed given upon facsimile
confirmation, and (c) if delivered by overnight courier to the address as
provided in this SECTION 10.1, be deemed given on the earlier of the first
Business Day following the date sent by such overnight courier or upon receipt
(in each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice is to be delivered
pursuant to this SECTION 10.1). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto.
10.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
hereto and the Escrow Agreement constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof (including specifically, without
limitation, that certain letter agreement among the Purchaser, the Company and
Chartered Holdings, LLC dated May 4, 2006).
10.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or from time
to time after the Closing, each party shall execute and deliver to the other
parties such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to
cooperate in causing the conditions to its obligations to consummate the Merger
to be satisfied.
10.4 WAIVER. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
10.5 THIRD-PARTY BENEFICIARIES. Except as expressly provided herein, the
terms and provisions of this Agreement are intended solely for the benefit of
each party hereto and their respective successors or permitted assigns, and it
is not the intention of the parties to confer third-party beneficiary rights on
any Person other than the Company, the Purchaser and the Equity Holders, and
this Agreement does not confer any such rights, upon any other Person other than
any Person entitled to indemnity under Article 8 and the Indemnified Persons to
the extent provided in SECTION 6.11.
10.6 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
10.7 HEADINGS. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
10.8 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
10.9 GOVERNING LAW, SUBMISSION TO JURISDICTION.
(a) This Agreement, any Ancillary Agreements and any other closing
documents shall be governed by and construed in accordance with the laws of the
State of Delaware as applied to contracts entered into by Delaware residents and
performed entirely in Delaware, without giving effect to its principles or rules
regarding conflicts of laws, other than such principles directing application of
the laws of Delaware.
(b) Each party hereto irrevocably agrees that any legal action or
proceeding with respect to this Agreement or for recognition and enforcement of
any judgment in respect hereof brought by another party hereto or its successors
or assigns shall be brought and determined by either a state court or federal
court sitting in the State of Delaware and each party hereto hereby irrevocably
submits with regard to any such action or proceeding for itself and in respect
to its property, generally and unconditionally, to the nonexclusive jurisdiction
of the aforesaid courts. Each party hereto hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counter claim or otherwise, in
any action or proceeding with respect to this Agreement, (a) any claim that it
is not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to serve process in accordance with this SECTION
10.9, (b) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (c) to the fullest extent
permitted by applicable Law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
10.10 WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING ARISING
HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR
THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.
10.11 CONSTRUCTION. The parties hereto agree that this Agreement is
the product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto, but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
10.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
10.13 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Notwithstanding Section 10.9, it is agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity. Nothing in Article
8 shall be construed or interpreted to limit this SECTION 10.13.
ARTICLE 11 DEFINITIONS
11.1 DEFINITIONS. As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"ACTIONS OR PROCEEDINGS" means any action, suit, complaint, subpoena,
petition, investigation, proceeding, arbitration, mediation,
litigation or Governmental or Regulatory Authority investigation,
audit, document request or other proceeding, whether civil or
criminal, in law or in equity, or before any arbitrator or
Governmental or Regulatory Authority.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with,
that Person. For the purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether
through ownership of voting securities or by contract or otherwise.
"AGGREGATE COMMON STOCK CONSIDERATION" shall have the meaning set
forth in Section 1.5(d).
"AGGREGATE OPTION CONSIDERATION" shall have the meaning set forth in
Section 1.5(d).
"AGREEMENT" means this Merger Agreement, including (unless the context
otherwise requires) the Exhibits, the Schedules and the certificates
and instruments delivered in connection herewith, or incorporated by
reference, as the same may be amended or supplemented from time to
time in accordance with the terms hereof.
"ALLOCABLE PORTION" shall have the meaning set forth in Section
1.5(d).
"ANCILLARY AGREEMENTS" shall have the meaning set forth in Section
2.2.
"APPROVAL" means any approval, authorization, consent, novation,
Permit, qualification or registration, or any waiver of any of the
foregoing, required to be obtained from or made with, or any notice,
statement or other communication required to be filed with or
delivered to, any Governmental or Regulatory Authority or any other
Person.
"ARTICLES OF MERGER" shall have the meaning set forth in Section
1.1(b).
"ASSETS AND PROPERTIES" of any Person means all assets and properties
of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute,
accrued, contingent, fixed or otherwise and wherever situated),
including the goodwill related thereto, operated, owned, licensed or
leased by such Person, including cash, cash equivalents, Investment
Assets, accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, real estate, equipment, inventory,
Permits, goods and Intellectual Property.
"ASSOCIATE" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or
partner or is the beneficial owner, directly or indirectly, of ten
percent (10%) or more of any class of equity securities, any trust or
estate in which such Person has a substantial beneficial interest or
as to which such Person serves as a trustee or in a similar capacity
and any relative or spouse of such Person, or any relative of such
spouse, who has the same home as such Person.
"AUDITOR" shall mean Xxxxx Xxxxxxxx LLP, or such other independent
public accounting firm of national standing mutually agreed upon by
Purchaser and the Shareholder Representative.
"BOOKS AND RECORDS" means all files, documents, instruments, papers,
books and records relating to the Company, including financial
statements, internal reports, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, Contracts, Licenses, customer lists,
computer files and programs (including data processing files and
records), retrieval programs, operating data and plans and
environmental studies and plans, excluding, however, in all cases any
materials that contain any confidential information of any third party
(other than the Company or Purchaser) that is restricted by agreement
or applicable Law from being disclosed to Purchaser and/or any other
Persons.
"Business Combination" means, with respect to any Person, (a) any
merger, consolidation, share exchange, reorganization or other
business combination transaction to which such Person is a party, (b)
any sale, or other disposition of all or substantially all of the
capital stock or other equity interests of such Person (except for
issuances of common stock upon conversion of preferred stock
outstanding on the date hereof or the exercise of options or warrants
outstanding on the date hereof or issued in accordance with this
Agreement), (c) any tender offer (including a self tender), exchange
offer, recapitalization, restructuring, liquidation, dissolution or
similar or extraordinary transaction, (d) any sale, dividend or other
disposition of all or a substantial portion of the Assets and
Properties of such Person (including by way of exclusive license or
joint venture formation) other than sales of inventory and the
granting of licenses in the ordinary course of such Person's business,
or (e) the entering into of any agreement or understanding, the
granting of any rights or options, or the acquiescence of such Person,
to do any of the foregoing.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day on
which banks located in the State of Illinois are authorized or
obligated to close.
"CERTIFICATES" shall have the meaning set forth in Section 1.6.
"CLAIM AMOUNT" shall have the meaning set forth in Section 1.9(b).
"CLAIM NOTICE" shall have the meaning set forth in Section 1.9(b).
"CLIENT" shall mean any Person who or which has customers to whom or
which the Company markets products or services.
"CLOSING" shall have the meaning set forth in Section 1.2.
"CLOSING CONSIDERATION" shall have the meaning set forth in Section
1.5(d).
"CLOSING DATE" shall have the meaning set forth in Section 1.2.
"CLOSING DATE BALANCE SHEET" shall have the meaning set forth in
Section 1.8(b).
"CLOSING ESCROW ACCOUNT" shall have the meaning set forth in Section
1.6(b).
"CLOSING WORKING CAPITAL STATEMENT" shall have the meaning set forth
in Section 1.8(b).
"COMMON STOCK ESCROW PERCENTAGE" shall have the meaning set forth in
Section 1.5(d).
"COMMON STOCK ESCROW PORTION" shall have the meaning set forth in
Section 1.5(d).
"COMPANY" shall have meaning set forth in the Preamble of this
Agreement.
"COMPANY COMMON STOCK" shall have the meaning set forth in Section
2.3(a).
"COMPANY EMPLOYEES" shall have the meaning set forth in Section 6.12.
"COMPANY FINANCIALS DATE" shall have the meaning set forth in Section
2.9.
"COMPANY FINANCIALS" shall have the meaning set forth in Section 2.7.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by the Company.
"COMPANY LETTER" shall have the meaning set forth in Section 2.3(a).
"COMPANY OPTION PLAN" means the Company's 2002 Non-Qualified Stock
Option Plan, as amended.
"COMPANY OPTIONS" means any Option to purchase or otherwise acquire
Company Common Stock or any other capital stock of the Company.
"COMPANY PERMITS" shall have the meaning set forth in Section 2.13(b).
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all Registered
Intellectual Property owned by the Company.
"COMPETING PROPOSED TRANSACTION" shall have the meaning set forth in
Section 5.2.
"CONFIDENTIAL INFORMATION OF THE COMPANY" shall have the meaning set
forth in Section 6.3(a).
"CONFIDENTIAL INFORMATION OF PURCHASER" shall have the meaning set
forth in Section 6.3(b).
"CONTRACT" means any note, bond, mortgage, contract, license, lease,
sublease, covenant, commitment, power of attorney, proxy, indenture,
or other agreement or arrangement, whether oral or written.
"DECEMBER BALANCE SHEET" shall have the meaning set forth in Section
2.7.
"DISSENTING SHARES" shall have the meaning set forth in Section
1.14(a).
"EFFECTIVE TIME" shall have the meaning set forth in Section 1.1(b).
"ENVIRONMENTAL LAW" means any federal, state, local or foreign
environmental, health and safety or other Law relating to Hazardous
Materials, including the Comprehensive, Environmental Response
Compensation and Liability Act, the Clean Air Act, the Federal Water
Pollution Control Act, the Solid Waste Disposal Act, the Federal
Insecticide, Fungicide and Rodenticide Act.
"EQUITY EQUIVALENTS" means securities (including Company Options)
which, by their terms, are or may be exercisable, convertible or
exchangeable for or into common stock, preferred stock or other
securities of the Company at the election of the holder thereof.
"EQUITY HOLDERS" shall mean the holders of all of the outstanding
shares of Company Common Stock immediately prior to the Effective Time
and all holders of Company Options immediately prior to the Effective
Time. "ERISA" shall have the meaning set forth in Section 2.14(a).
"ESCROW ACCOUNT" shall have the meaning set forth in Section 1.6(b).
"ESCROW AGENT" means SunTrust Bank, a Georgia banking corporation, or
such other commercial bank, trust company or financial institution as
is mutually agreed upon by Purchaser and the Company.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 1.9(a).
"ESCROW AMOUNT" shall have the meaning set forth in Section 1.9(a).
"ESTIMATED CLOSING DATE BALANCE SHEET" shall have the meaning set
forth in Section 1.8(a).
"ESTIMATED CLOSING WORKING CAPITAL STATEMENT" shall have the meaning
set forth in Section 1.8(a).
"ESTIMATED WORKING CAPITAL DEFICIENCY" shall have the meaning set
forth in Section 1.8(a).
"ESTIMATED WORKING CAPITAL SURPLUS" shall have the meaning set forth
in Section 1.8(a).
"EXPENSE RESERVE ACCOUNT" shall have the meaning set forth in Section
1.13.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"GENERAL INDEMNITY ESCROW AMOUNT" shall have the meaning set forth in
Section 1.9(a).
"GOVERNMENT CONTRACT" means any Contract to which the Company is a
party with any Governmental or Regulatory Authority or any Contract to
which the Company is a party that is a subcontract (at any tier) with
another Person that holds either a prime contract with any
Governmental or Regulatory Authority or a subcontract (at any tier)
under such a prime contract.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department,
official or other instrumentality of the United States, any foreign
country or any domestic or foreign state, county, city or other
political subdivision, and shall include any stock exchange, quotation
service and the National Association of Securities Dealers.
"HAZARDOUS MATERIAL" means (a) any chemical, material, substance or
waste including, containing or constituting petroleum or petroleum
products, solvents (including chlorinated solvents), nuclear or
radioactive materials, asbestos in any form that is or could become
friable, radon, lead-based paint, urea formaldehyde foam insulation or
polychlorinated biphenyls, (b) any chemicals, materials, substances or
wastes which are now defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import under any
Environmental Law; or (c) any other chemical, material, substance or
waste which is regulated by any Governmental or Regulatory Authority
or which could constitute a nuisance.
"IBCA" shall have the meaning set forth in the Recitals.
"INDEBTEDNESS" of any Person means all obligations of such Person (a)
for borrowed money, evidenced by notes, bonds, debentures or similar
instruments, (b) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course
of business), (c) under capital leases classified as such under GAAP
and (d) in the nature of guarantees of the obligations described in
clauses (a) through (c) above of any other Person.
"INDEMNIFICATION BASKET" shall have the meaning set forth in Section
8.2(e).
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
8.3(a).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
8.2(e).
"INDEMNIFIED PERSON" shall have the meaning set forth in Section 6.11.
"INITIAL GENERAL INDEMNITY RELEASE DATE" shall have the meaning set
forth in Section 1.10(b).
"INITIAL GENERAL INDEMNITY RELEASE AMOUNT" shall have the meaning set
forth in Section 1.10(b).
"INTELLECTUAL PROPERTY" means all trademarks and trademark rights
(whether or not registered), trade names and trade name rights,
service marks and service xxxx rights (whether or not registered),
service names and service name rights, patents and patent rights,
utility models and utility model rights, copyrights (statutory or
registered), mask work rights, moral rights, trade dress, rights of
publicity, trade secrets, inventions (whether patentable or not),
invention disclosures, improvements, processes, formulae, industrial
models, processes, designs, specifications, technology, methodologies,
techniques, computer software (including all source code and object
code), firmware, development tools, flow charts, annotations, all Web
addresses, sites and domain names, all data bases and data collections
and all rights therein, any right to enforce confidential treatment of
information, whether or not subject to statutory registration, and all
related technical information, manufacturing, engineering and
technical drawings, know-how and all pending applications for,
registrations of any of the foregoing, and the sole and exclusive
right to file for and apply for patents, utility models, trademarks,
service marks, domain names, and copyrights, and the sole and
exclusive right to xxx for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files
and other media on which any of the foregoing is stored.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"INVESTMENT ASSETS" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities),
interests in joint ventures and general and limited partnerships,
mortgage loans and other investment or portfolio assets.
"JOINT WRITTEN NOTICE" shall have the meaning set forth in Section
1.9(d).
"JUDICIAL DECISION NOTICE" shall have the meaning set forth in Section
1.9(d).
"KNOWLEDGE OF THE COMPANY" means the actual knowledge of Xxxxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxxx Xxxxxxx X.
Xxxxxx and Xxxxxxx Xxxxxxxx, individually and collectively.
"LAW" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having
the effect of law whether in the United States, any foreign country,
or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"LEASE DOCUMENTS" shall have the meaning set forth in Section 2.15(a).
"LEASED REAL PROPERTY" shall have the meaning set forth in Section
2.15(a).
"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or
based upon any contingency), known or unknown, fixed or otherwise, or
whether due or to become due.
"LICENSE" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including
any covenants not to xxx with respect to any Intellectual Property).
"LIENS" means any mortgage, pledge, security interest, lien, easement,
covenant, restriction, levy, charge, adverse claim or restriction or
other encumbrance of any kind, or any conditional sale Contract, title
retention Contract or other Contract to give any of the foregoing,
except for any restrictions on transfer generally arising under any
applicable federal or state securities Law.
"LOSS(ES)" shall have the meaning set forth in Section 8.2(a).
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, any
event, fact, circumstance or condition that, individually or in the
aggregate with any other such events, facts, circumstances or
conditions, has had or would be reasonably expected to have, a
material adverse effect on the business, financial condition or
results of operations of such Person; provided, however, that the
following shall be excluded from the definition of "Material Adverse
Effect" and from the determination of whether such a Material Adverse
Effect has occurred: any change or effect relating to (a) the effects
of conditions or events (which change or effect does not
disproportionately affect the Company) that are generally applicable
to (i) the business in which the Company operates or (ii) the capital,
financial, banking or currency markets, (b) the announcement of the
transactions described in this Agreement or the consummation of the
Closing, and (c) national or international political or social
conditions, including the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist
attack upon the United States, or any of its territories, possessions,
or diplomatic or consular offices or upon any military installation,
equipment or personnel of the United States.
"MATERIAL CONTRACTS" shall have the meaning set forth in Section
2.18(a).
"MERGER" shall have the meaning set forth in Section 1.1(a).
"MERGER CONSIDERATION" shall mean the sum of the Stock Merger
Consideration and the Option Merger Consideration.
"MERGER NOTICE" shall have the meaning set forth in Section 1.15.
"MOST RECENT BALANCE SHEET DATE" shall have the meaning set forth in
Section 2.7.
"NEGATIVE ADJUSTMENT AMOUNT" shall have the meaning set forth in
Section 1.8(d).
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract
that gives the right to (a) purchase or otherwise receive or be issued
any shares of capital stock or other equity interests of such Person
or any security of any kind convertible into or exchangeable or
exercisable for any shares of capital stock or other equity interests
of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock
or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors of such
Person.
"OPTION ESCROW PERCENTAGE" shall have the meaning set forth in Section
1.5(d).
"OPTION ESCROW PORTION" shall have the meaning set forth in Section
1.5(d).
"OPTION HOLDER" shall mean each holder of outstanding Company Options.
"OPTION HOLDERS" shall mean, collectively, all of the Option Holders.
"ORDER" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"OTHER CONFIDENTIAL INFORMATION OF SHAREHOLDERS" shall have the
meaning set forth in Section 6.3(a).
"OWNED REAL PROPERTY" shall have the meaning set forth in Section
2.15(a).
"PER OPTION ESCROW PORTION" shall have the meaning set forth in
Section 1.5(d).
"PER SHARE ESCROW PORTION" shall have the meaning set forth in Section
1.5(d).
"PER SHARE MERGER CONSIDERATION" shall have the meaning set forth in
Section 1.5(d).
"PERMITS" means all federal, state, local or foreign permits, grants,
easements, consents, approvals, authorizations, exemptions, licenses,
franchises, insurance brokerage licenses, certificates, orders of,
and/or any other authorization required by any Governmental or
Regulatory Authority, any other Person, or the Laws of any state in
which the Company does business required for the Company to own the
Assets and Properties, or to conduct the Company's business as is now
being conducted, including without limitation to engage in the
business of offering or selling insurance products.
"PERSON" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association
or Governmental or Regulatory Authority.
"PLAN" mean (a) each of the "employee benefit plans" (as such term is
defined in Section 3(3) of ERISA) of which any of the Company or any
member of the same controlled group of businesses as the Company
within the meaning of Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") is a sponsor or participating employer or as to which the
Company or any of its ERISA Affiliates makes contributions or is
required to make contributions, and (b) any employment, severance or
other arrangement or policy of the Company or any of its ERISA
Affiliates (whether written or oral) providing for health, life,
vision or dental insurance coverage (including self-insured
arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits or retirement
benefits, fringe benefits, or for profit sharing, deferred
compensation, bonuses, stock options, stock appreciation or other
forms of incentive compensation or post-retirement insurance,
compensation or benefits.
"POSITIVE ADJUSTMENT AMOUNT" shall have the meaning set forth in
Section 1.8(e)(i). "Pre-Closing Tax Period" shall have the meaning set
forth in Section 6.12.
"PTO" shall have the meaning set forth in Section 2.17(a).
"PURCHASER" shall have the meaning set forth in the Preamble of this
Agreement.
"PURCHASERSUB" shall have the meaning set forth in the Preamble of
this Agreement.
"PURCHASER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 8.2(a).
"PURCHASER KNOWLEDGE PARTY" means the actual knowledge of Xxxxxxx X.
Xxxxxxxxx, Xxxxxxx X. Xxxxxxx and Xxxx X. Xxxxx, individually and
collectively.
"PURCHASE WELFARE PLAN" shall have the meaning set forth in Section
6.12.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all United States,
international and foreign: (a) patents and patent applications
(including provisional applications); (b) registered trademarks and
service marks, applications to register trademarks and service marks,
intent-to-use applications, or other registrations or applications to
trademarks or service marks; (c) registered copyrights and
applications for copyright registration; (d) any mask work
registrations and applications to register mask works; (e) registered
domain names and applications to register domain names, and (f) any
other Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued by, filed
with, or recorded by, any Governmental or Regulatory Authority.
"RESPONSE NOTICE" shall have the meaning set forth in Section 1.9(c).
"RETAINED AMOUNT" shall have the meaning set forth in Section 1.10(b).
"SECRETARY" shall have the meaning set forth in Section 1.1(b).
"SHAREHOLDER" and "SHAREHOLDERS" shall have the meaning set forth in
the Preamble of this Agreement
"SHAREHOLDER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 8.2(b).
"SHAREHOLDER LOANS" shall have the meaning set forth in Section 1.5.
"SHAREHOLDER REPRESENTATIVE" shall have the meaning set forth in
Section 1.13.
"STOCK MERGER CONSIDERATION" shall have the meaning set forth in
Section 1.5(b).
"STRADDLE PERIOD" shall have the meaning set forth in Section 6.12.
"SUBSIDIARY" means any Person in which the Company or Purchaser, as
the context requires, directly or indirectly through Subsidiaries or
otherwise, beneficially owns at least fifty percent (50%) of either
the equity interest in, or the voting control of, such Person, whether
or not existing on the date hereof.
"SURVEY" shall have the meaning set forth in Section 6.13(b).
"SURVIVING CORPORATION" shall have the meaning set forth in Section
1.1(a).
"TAKEOVER STATUTE" means a "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States, including,
without limitation, Section 7.85 and 11.75 of the IBCA.
"TARGET WORKING CAPITAL" shall have the meaning set forth in Section
1.8(a).
"TAX" or "Taxes" means (a) any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Internal Revenue Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not, and (b) any Liability for the payment of any
amounts of the type described in clause (a) as a result of being a
member of an affiliated, consolidated, combined or unitary group for
any taxable period.
"TAX ESCROW AMOUNT" shall have the meaning set forth in Section
1.10(b).
"TAX ESCROW RELEASE DATE" shall have the meaning set forth in Section
1.10(b).
"TAX RETURNS" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIMS" shall have the meaning set forth in Section
8.3(a).
"TOTAL ESCROW AMOUNT" shall have the meaning set forth in Section
1.5(d).
"TRANSACTION EXPENSES" shall have the meaning set forth in Section
1.12.
"TRANSFER" shall have the meaning set forth in Section 1.15.
"TREASURY REGULATIONS" means the federal income Tax regulations
promulgated under the Internal Revenue Code, as amended from time to
time, and including corresponding provisions of succeeding regulations
"WARRANTY OBLIGATIONS" shall have the meaning set forth in Section
2.27.
"Working Capital" shall have the meaning set forth in Section 1.8(d).
"WORKING CAPITAL INDEMNITY AMOUNT" shall have the meaning set forth in
Section 1.9(a).
11.2 CONSTRUCTION. Unless the context of this Agreement otherwise
requires, (i) words of any gender or the neuter include each other gender and
the neuter, (ii) words using the singular or plural number also include the
plural or singular number, respectively, (iii) the terms "hereof," "hereto,"
"herein," "hereby" and derivative or similar words refer to this entire
Agreement as a whole and not to any particular Article, Section or other
subdivision, (iv) the terms "Article," "Section," "Schedule" or other
subdivision or portion refer to the specified Article, Section, Schedule or
other subdivision or portion of the body of this Agreement or Schedules attached
hereto, as applicable, (v) the phrases "ordinary course of business" and
"ordinary course of business consistent with past practice" refer to the
business and practice of the Company, (vi) the words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation,"
and (vii) when a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP. When used herein, the terms "party" or
"parties" refer to Purchaser, on the one hand, and the Company (prior to the
Closing) and Shareholders, on the other, and the terms "third party" or "third
parties" refers to Persons other than Purchaser, the Company or the
Shareholders.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their duly authorized representatives, all as of the date first
written above.
PURCHASER
INTERSECTIONS INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: CEO
PURCHASERSUB
CMSI MERGER INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman and President
COMPANY
CHARTERED MARKETING SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: CEO
SHAREHOLDERS
[SHAREHOLDER SIGNATURE PAGES FOLLOW]
SHAREHOLDER SIGNATURE PAGE
CHARTERED HOLDINGS, LLC
By: SPECTRUM EQUITY INVESTORS II,
L.P., its Member
By: Spectrum Equity Associates II,
L.P., its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Director
and
By: TA/ADVENT VIII L.P., its Member
By: TA Associates VIII LLC, its
General Partner
By: TA Associates, Inc., its Manager
By: /s/ Xxxxxxx Xxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Director
No. of Shares of Company
Common Stock: 666,234
No. of Company Options: 0
Address: Chartered Holdings, LLC
000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxxx,
Xxxxxxxx 00000
XXXXX X. XXXXXXX TRUST
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Trustee
No. of Shares of Company
Common Stock: 283,766
No. of Company Options: 0
Address: Xxxxx X. Xxxxxxx Trust
c/o Xxxxx X. Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx
Xxxxx Xxxxx Xxxxx,
Xxxxxxx 00000
/s/ G. Xxxxx Xxxxxx
--------------------------
Xxxx Xxxxx Xxxxxx
No.of Shares of Company Common
Stock: 0
No. of Company Options: 8,000
Address: Xxxxx Xxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
/s/ Xxxxx X. Xxxxxxxx
--------------------------
Xxxxx X. Xxxxxxxx
No. of Shares of Company Common
Stock: 7,500
No. of Company Options: 22,500
Address: Xxxxx X. Xxxxxxxx
000 Xxxx Xxxxxxxx Xx. #0000
Xxxxxxx, Xxxxxxxx 00000
/s/ Xxxxxxx Xxxxxxxxx
--------------------------
Xxxxxxx Xxxxxxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 106,930
Address: Xxxxxxx Xxxxxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
/s/ Xxxxxx Xxxxxxxx
--------------------------
Xxxxxx Xxxxxxxx
No. of Shares of Company Common
Stock: 12,500
No. of Company Options: 37,500
Address: Xxxxxx Xxxxxxxx
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
/s/ Xxxxx Xxxxx
--------------------------
Xxxxx Xxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 8,000
Address: Xxxxx Xxxxx
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
/s/ Xxxxxxx X Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 8,000
Address: Xxxxxxx X. Xxxxxx
0000 Xxxxx Xxxxxxxxxx
Xxxxxxxxx Xxxxxxx, Xxxxxxxx
00000
/s/ Xxxxxxx Xxxxxxx 6-8-06
----------------------------------
Xxxxxxx Xxxxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 10,000
Address: Xxxxx Xxxxxxx
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
/s/ Xxxxxxxx Xxxxxxx
--------------------------
Xxxxxxxx Xxxxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 8,000
Address: Xxxxx Xxxxxxx
0000 X. Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
/s/ Xxxxx Xxxxxxxxx
--------------------------
Xxxxx Xxxxxxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 8,000
Address: Xxxxx Xxxxxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
/s/ Xxxxxxx Xxxxxxxx
--------------------------
Xxxxxxx Xxxxxxxx
No. of Shares of Company Common
Stock: 5,500
No. of Company Options: 24,500
Address: Xxxxxxx Xxxxxxxx
000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx
00000
/s/ Xxxxxxx Xxxxxxxxx
--------------------------
Xxxxxxx Xxxxxxxxx
No. of Shares of Company Common
Stock: 2,000
No. of Company Options: 6,000
Address: Xxxxxxx Xxxxxxxxx
00 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
/s/ Xxxx Xxxxxxx
--------------------------
Xxxx Xxxxxxx
No. of Shares of Company Common
Stock: 2,812.5
No. of Company Options: 0
Address: Xxxx Xxxxxxx
0000 Xxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
/s/ Xxxxxx Xxxxx
--------------------------
Xxxxxx Xxxxx
No. of Shares of Company Common
Stock: 7,500
No. of Company Options: 0
Address: Xxxxxx Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
/s/ Xxxxxxx Xxxxxx
--------------------------
Xxxxxxx Xxxxxx
No. of Shares of Company Common
Stock: 2,000
No. of Company Options: 6,000
Address: Xxxxxxx Xxxxxx
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
/s/ Xxxxxxx Xxxxxx
--------------------------
Xxxxxxx Xxxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 6,297.8
Address: Xxx Xxxxxx
000 X. Xxxxx Xx. Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
By executing this signature page to the Merger Agreement dated as of
June 9, 2006 by and among Chartered Marketing Services, Inc. (the "Company"),
Intersections Inc. ("Purchaser"), CMSI Merger, Inc. and the other parties
thereto (the "Agreement"), the undersigned becomes a party to the Agreement as a
"Shareholder" (as defined therein) and makes the representations and is subject
to all of the obligations of a Shareholder as set forth therein, provided that
the undersigned does not make the representation set forth in Section 3.6 and
shall not be subject to the obligations of a Shareholder under Sections 6.2 or
6.3(b).
/s/ Xxxxxxx Xxxxxxx
--------------------------
Xxxxxxx Xxxxxxx
No. of Shares of Company Common
Stock: 0
No. of Company Options: 1,104.2
Address: Xxxxxxx Xxxxxxx
318 Clear Sky Trail
Lake in the Xxxxx, Xxxxxxxx
00000
The foregoing limitations to the representations and obligations of
Xxxxxxx Xxxxxxx as a Shareholder under the Agreement are hereby consented to by
the Company, Purchaser and the Shareholder Representative, on behalf of the
Shareholders.
PURCHASER
INTERSECTIONS INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman & CEO
COMPANY
CHARTERED MARKETING SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: CEO
SHAREHOLDER REPRESENTATIVE
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxx, solely in his
capacity as Shareholder
Representative
LIST OF SCHEDULES TO THE MERGER AGREEMENT
Schedule 2.1 - Organization and Qualification
Schedule 2.3(b) - Capital Stock
Schedule 2.3(c) - Capital Stock
Schedule 2.3(d) - Capital Stock
Schedule 2.3(e) - Capital Stock
Schedule 2.5 - Directors and Officers
Schedule 2.6(c) - No Conflicts
Schedule 2.6(d) - No Conflicts
Schedule 2.7 - Company Financial Statements
Schedule 2.9(d) - Absence of Changes
Schedule 2.9(e) - Absence of Changes
Schedule 2.9(p) - Absence of Changes
Schedule 2.9(t) - Absence of Changes
Schedule 2.9(aa) - Absence of Changes
Schedule 2.11(a) - Taxes
Schedule 2.11(c) - Taxes
Schedule 2.12 - Legal Proceedings
Schedule 2.13(a) - Compliance with Laws and Orders; Permits
Schedule 2.13(b) - Compliance with Laws and Orders; Permits
Schedule 2.14(a) - Plans; ERISA
Schedule 2.15(a) - Real Property
Schedule 2.15(c) - Real Property
Schedule 2.17(a) - Intellectual Property
Schedule 2.17(b) - Intellectual Property
Schedule 2.17(c) - Intellectual Property
Schedule 2.17(f) - Intellectual Property
Schedule 2.17(l) - Intellectual Property
Schedule 2.18(a) - Contracts
Schedule 2.18(b) - Contracts
Schedule 2.19 - Insurance
Schedule 2.20 - Affiliate Transactions
Schedule 2.21(b)(i) - Employees; Labor Relations
Schedule 2.21(b)(ii) - Employees; Labor Relations
Schedule 2.23 - Substantial Customers and Suppliers
Schedule 2.25 - Other Negotiations; Brokers; Third-Party Expenses
Schedule 2.26 - Banks and Brokerage Accounts
Schedule 2.29 - Financial Projections
Schedule 7.1(a) - Conditions to Obligations of Each Party to Effect
the Merger
Schedule 7.3(e) - Additional Conditions to the Obligations of
Purchaser
Schedule 8.2(a)(vi) - Indemnification
[The schedules and exhibits to the Merger Agreement have been omitted.
Intersections Inc. will furnish copies of such schedules and exhibits
supplementally to the Commission upon request.]