AGREEMENT AND PLAN OF MERGER
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This Agreement and Plan of Merger (this "Agreement"), dated as of May ____,
2004, is made by and among Xxxxxxx IT Solutions, Inc., a Delaware corporation
("Parent"), Xxxxxxx Acquisition Sub, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Acquisition Sub") and Alternative Resources
Corporation, a Delaware corporation ("Company").
W I T N E S S E T H :
WHEREAS, the Board of Directors of Company has (i) unanimously determined
that this Agreement, the Merger and the transactions contemplated hereby are
fair to, and in the best interests of, Company and the stockholders of Company;
(ii) unanimously approved this Agreement and declared it advisable; and (iii)
unanimously resolved to recommend that the stockholders of Company approve and
adopt this Agreement, the Merger and the transactions contemplated hereby; and
WHEREAS, the Board of Directors of Parent and Acquisition Sub have approved
the Merger on the terms set forth in this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the Merger be
treated as a taxable transaction under the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code"); and
WHEREAS, concurrently with the execution and delivery of this Agreement, to
induce Parent to enter into this Agreement, Wynnchurch Capital Partners, L.P., a
Delaware limited partnership ("WCP"), Wynnchurch Capital Partners, Canada, L.P.,
a Canada limited partnership ("WCPC") and Wynnchurch Capital, Ltd., a Delaware
corporation ("WCL") have entered into an agreement in the form attached hereto
as Exhibit "A" (the "WCP, WCPC and WCL Agreement").
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants set forth herein, and intending to be legally bound, Parent,
Acquisition Sub and Company hereby agree as follows:
ARTICLE 1
THE MERGER
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1.1 The Merger. Upon the terms and subject to the conditions of this
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Agreement, at the Effective Time in accordance with the Delaware General
Corporation Law ("DGCL"), Acquisition Sub shall be merged with and into Company
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and the separate existence of Acquisition Sub shall thereupon cease (the
"Reverse Merger"). Parent may at any time change the method of effecting the
combination with Company (including, without limitation, the provisions of this
Section 1.1) if and to the extent it deems such change to be desirable,
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including without limitation, to provide for a merger of Company with an into
Acquisition Sub (the "Forward Merger"); provided, however, that no change shall
(i) alter or change the Merger Consideration, as herein after provided for in
this Agreement, (ii) materially impede or delay consummation of the transactions
contemplated by this Agreement, or (iii) relieve Parent of any of its
obligations hereunder. The Reverse Merger and Forward Merger shall
alternatively be referred to as the ("Merger"). The Company (in the case of a
Reverse Merger), or Acquisition Sub (in the case of a Forward Merger), as the
surviving corporation after the Merger, is hereinafter sometimes referred to as
"Surviving Corporation."
1.2 Effective Time of the Merger. The Merger shall become effective at
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such time (the "Effective Time") as shall be stated in the Certificate of
Merger, in a form reasonably acceptable to Parent, Company and Acquisition Sub,
respectively, to be filed with the Secretary of State of Delaware in accordance
with the DGCL ("Merger Filing"). The Merger Filing shall
Page 1 of 51 Pages
provide for the effectiveness of the Merger immediately upon its filing. The
Merger Filing shall be made at the Closing.
1.3 Consummation. The parties acknowledge that it is their mutual
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desire and intent to consummate the Merger as soon as practical after the date
hereof. Accordingly, the parties shall use their reasonable efforts to
consummate, as soon as practical, the transactions contemplated by this
Agreement in accordance with Section 3.5.
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1.4 Effects of the Merger. The Merger shall have the effect set forth
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in Section 259 of the DGCL.
1.5 Further Assurances. If, at any time after the Effective Time, the
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Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other actions are necessary, desirable
or proper to vest, perfect or confirm of record or otherwise in the Surviving
Corporation, the title of any property or rights of Acquisition Sub acquired or
to be acquired by reason of, or as a result of, the Merger (or Company in the
event of a Forward Merger), the Surviving Corporation and Acquisition Sub
(Company in the event of a Forward Merger) agree that the Acquisition Sub and
Surviving Corporation (Company in the event of a Forward Merger) and their
proper officers and directors shall and will execute and deliver all such proper
deeds, assignments and assurances in law and to do all things necessary,
desirable or proper to vest, perfect or confirm title to such property or rights
in the Surviving Corporation and otherwise to carry out the purpose of this
Agreement.
ARTICLE 2
THE SURVIVING CORPORATION AND PARENT
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2.1 Certificate of Incorporation. If the Reverse Merger is
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consummated, the Certificate of Incorporation of Company shall be amended at the
Effective Time, to read in its entirety as set forth on Exhibit "B" hereto and
shall be the Certificate of Incorporation after the Effective Time, until
thereafter amended in accordance with its terms as provided in the DGCL.
If the Forward Merger is consummated, the Certificate of Incorporation
of Acquisition Sub as in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation of Surviving Corporation after the Effective
Time, until thereafter amended in accordance with its term and as provided in
DGCL, except that Article 1 thereof shall be amended at the Effective Time in
accordance with the provisions of Section 251 of DGCL to read in its entirety as
follows: "The name of the Corporation is 'Alternative Resources Corporation'"
2.2 By-Laws. The By-Laws of Acquisition Sub as in effect immediately
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prior to the Effective Time shall be the By-Laws of Surviving Corporation after
the Effective Time, and thereafter may be amended in accordance with their terms
and as provided by the Certificate of Incorporation of Surviving Corporation and
the DGCL, except that references in the By-Laws to the term Acquisition Sub
shall be changed to "Alternative Resources Corporation"
2.3 Directors and Officers of Surviving Corporation. The Directors and
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Officers of Acquisition Sub, in effect immediately prior to the Effective Time
shall be the Directors and Officers of Surviving Corporation as of the Effective
Time and thereafter such Directors and Officers shall serve in accordance with
the By-Laws of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified.
Page 2 of 51 Pages
ARTICLE 3
CONVERSION OF SHARES
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3.1 Merger Consideration. The manner and basis of converting the
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shares of Company Common Stock upon consummation of the Merger shall be as set
forth in this Section 3.1. At the Effective Time, by virtue of the Merger and
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without any action on the part of Company, Acquisition Sub or any holder of
Company Capital Stock or holder of capital stock of Acquisition Sub:
(a) Subject to the other provisions of this Section 3.1, each
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share of common stock, par value $.01 per share, of Company (the "Company
Common Stock") issued and outstanding immediately prior to the Effective
Time (excluding any treasury shares, shares held by Parent, Acquisition Sub
or any Subsidiary of Parent or Acquisition Sub and Dissenting Shares) shall
be converted into the right to receive the Merger Consideration. The
"Merger Consideration" shall mean cash in the amount of $.70, without
interest
(b) Each share of Company Common Stock held in the treasury of
Company and each share of Company Common Stock owned by Parent, Acquisition
Sub or any Subsidiary of Parent or Acquisition Sub immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(c) At the Effective Time, all shares of Company Common Stock will
no longer be outstanding and will automatically be canceled and retired,
and each holder of a Company Certificate or Company Book-Entry Shares will
cease to have any rights with respect thereto, except the right to receive
the Merger Consideration applicable thereto.
(d) In connection with the Merger, each option (each, a "Company
Stock Option" and collectively, the "Company Stock Options") to purchase
Company Common Stock under any employee or director stock option or stock
purchase plan or arrangement or agreement of the Company listed on Section
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3.1 of the Company Disclosure Schedule, in the Company Reports or otherwise
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which is exercised by the holder of such Company Stock Option and each
share of Company Common Stock issued incident to the exercise of a Company
Stock Option shall be entitled to receive the Merger Consideration. Company
shall use its best efforts to cause all vested Company Stock Options whose
exercise price is equal to or in excess of $.70 per share as of the
Effective Time to be terminated. In the event any holder of a vested
Company Stock Option whose exercise price is less than $.70 per share fails
to exercise such Company Stock Option prior to the Effective Time, a
cashless exercise method shall automatically be implemented, on behalf of
such Company Stock Option holder, and in lieu of the Company Common Stock
to be issued pursuant to the cashless exercise, an amount per share shall
be payable to such Company Stock Option holder by Company promptly after
the Effective Time equal to the difference between the Merger Consideration
and the exercise price under such Company Stock Option (the "Cashless
Exercise Consideration"). Company shall be responsible for withholding all
applicable federal, state or local withholding taxes relating to the
exercise of Company Stock Options or the payment of Cashless Exercise
Consideration. If the exercise price provided for any vested Company Stock
Option is equal to or exceeds the Merger Consideration, and such Company
Stock Option is not exercised prior to the Effective Time, no Company
Common Stock shall be issued with respect to such Company Stock Option.
Immediately following the Effective Time of the Merger, all outstanding
Company Stock Options shall automatically be cancelled. The Company shall
take all actions necessary to ensure that no Company Stock Options are
granted after the date of this Agreement. Immediately after the Effective
Time, the Company Stock Option Plans shall terminate and the provisions of
any other plans, program or arrangement providing for the issuance
Page 3 of 51 Pages
or grant of any other interest in respect of the Company Capital Stock or
any Subsidiary of Company shall be of no further force and effect and shall
be deemed to be deleted and no holder of a Company Stock Option shall have
any right thereunder to acquire any equity securities of the Company,
Acquisition Sub, or any subsidiary thereof, or Parent.
(e) As of the Effective Time, each outstanding Company Warrant
listed on Section 3.1 of the Company Disclosure or the Company Reports, or
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otherwise, which is outstanding immediately prior to the Effective Time of
the Merger, shall be sold and transferred by the owner of such Company
Warrants to Parent free and clear of all Liens pursuant to the terms of the
WCP, WCPC and WCL Agreement. Parent shall pay to the owner of each Company
Warrant promptly after the Effective Time, an amount per share of Company
Common Stock into which such Company Warrant is exercisable equal to the
difference between $.70 and the exercise price under such Company Warrant
of $.26. The total purchase price for the Company Warrants shall be
$4,840,000.00 (11,000,000 Company Warrants x $.44). If the exercise price
per share provided for any Company Warrant is equal to or exceeds $.70,
Parent shall not be required to pay to the owner of such Company Warrant,
any amount with respect to such Company Warrant.
3.2 Acquisition Sub Shares. At the Effective Time, by virtue of the
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Merger and without any action on the part of Parent as the sole stockholder of
Acquisition Sub, each issued and outstanding share of common stock, par value
$.01 per share, of Acquisition Sub ("Acquisition Sub Common Stock") shall, in
the case of a Reverse Merger, be converted into one share of common stock, par
value $.01 per share, of the Surviving Corporation and each issued and
oustanding share of common stock, par value .01 per share, of Acquisition Sub,
shall, in the case of a Forward Merger, remain outstanding as one share of
common stock, .01 per share, of the Surviving Corporation.
3.3 Dissenting Shares. Notwithstanding anything in this Agreement to
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the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing and who has properly demanded appraisal for such
Company Common Stock in accordance with the requirements of Section 262 of the
DGCL (the "Dissenting Shares") shall not be converted into the right to receive
the Merger Consideration and the holders thereof shall be entitled to only such
rights as are granted by the DGCL, unless such holder fails to perfect,
withdraws or otherwise loses the right to appraisal, in which case such shares
of Company Common Stock shall be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consideration, as set forth
in Section 3.1, without any interest thereon. Company shall give Parent prompt
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notice of any demands received by Company for appraisal of shares of Company
Common Stock, withdrawals of such demands, and any other instruments or
documents served pursuant to the DGCL and received by Company, and Company shall
give Parent the opportunity to direct all negotiations and proceedings with
respect to such demands. Except with the prior written consent of Parent,
Company shall not make any payment with respect to, or offer to settle or
settle, any such demands. Each holder of Dissenting Shares who becomes entitled
to payment for such Dissenting Shares under the provisions of Section 262 of the
DGCL, will receive payment thereof from the Surviving Corporation and as of the
Effective Time such shares of Company Common Stock will no longer be outstanding
and will automatically be canceled and retired and will cease to exist.
3.4 Surrender and Payment.
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(a) Parent shall authorize one or more Persons reasonably
acceptable to the Company to act as Exchange Agent hereunder the "Exchange
Agent." Promptly after the Effective Time, Parent shall deliver to the
Exchange Agent sufficient cash to satisfy the Merger Consideration.
Promptly after the Effective Time, the Surviving Corporation shall cause to
be mailed to each record holder, as of the Effective Time, of certificates
representing outstanding shares of Company Common Stock ("Company
Certificates") or
Page 4 of 51 Pages
shares of Company Common Stock represented by book-entry ("Company
Book-Entry Shares") (other than Dissenting Shares), a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Company Certificates shall pass, only upon proper delivery of
the Company Certificates to the Exchange Agent or, in the case of Company
Book-Entry Shares, upon adherence to the procedures set forth in the letter
of transmittal) and instructions for use in effecting the surrender of the
Company Certificates or, in the case of Company Book-Entry Shares, the
surrender of such shares for payment of the Merger Consideration therefor.
After the Effective Time, upon surrender in accordance with this Section
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3.4(a), to the Exchange Agent of a Company Certificate or Company
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Book-Entry Shares, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, and such
other documents as may be required pursuant to such instructions, the
Exchange Agent shall promptly deliver to the holder of such Company
Certificate or Company Book-Entry Shares in exchange therefor, the Merger
Consideration to be received by the holder thereof pursuant to this
Agreement. The Exchange Agent shall accept such Company Certificates or
Company Book-Entry Shares upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. After the Effective
Time, there shall be no further transfer on the records of Company or its
transfer agent of shares of Company Common Stock and, if Company
Certificates or Company Book-Entry Shares are presented to Company for
transfer, they shall be canceled against delivery of the applicable Merger
Consideration. If any Merger Consideration is to be issued in a name other
than that in which the Company Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Company
Certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer, including compliance
with all laws and that the person requesting such exchange shall pay to
Company or its transfer agent any transfer or other taxes required by
reason of the issuance of the Merger Consideration in a name other than
that of the registered holder of the Company Certificate surrendered, or
establish to the satisfaction of the Surviving Corporation that such tax
has been paid or is not applicable. Until surrendered as contemplated by
this Section 3.4(a), each Company Certificate and each Company Book-Entry
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Share shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration as
contemplated by Section 3.1.
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(b) The Merger Consideration paid upon the surrender for exchange
of Company Certificates or Company Book-Entry Shares in accordance with the
terms of this Article 3 shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the shares of Company Common
Stock so exchanged.
(c) At any time following the date which is nine months after the
Effective Time, Parent shall be entitled to require the Exchange Agent to
deliver to it any or funds (including any interest received with respect
thereto) which have been made available to the Exchange Agent and which
have not been disbursed to holders of Company Certificates or Company
Book-Entry Shares and thereafter such holders shall be entitled to look to
Parent and the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with
respect to the applicable Merger Consideration payable upon due surrender
of their Company Certificates or Company Book-Entry Shares. The Surviving
Corporation shall pay all charges and expenses, including those of the
Exchange Agent, in connection with the exchange of shares of Company Common
Stock for the Merger Consideration. None of Parent, Surviving Corporation,
any subsidiary or Affiliate of Parent or Surviving Corporation or the
Exchange Agent shall be liable to any former holder of Company Common Stock
for cash, pursuant to any applicable abandoned property, escheat or other
similar laws.
Page 5 of 51 Pages
(d) If any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Company Certificate to be lost, stolen or destroyed and, if
requested by the Surviving Corporation, the posting by such Person of a
bond, in such reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with respect to
such Company Certificate, the Exchange Agent will pay, in exchange for such
lost, stolen or destroyed Company Certificate, the Merger Consideration to
be paid in respect of the shares of Company Common Stock represented by
such Company Certificate.
3.5 Closing. The closing (the "Closing") of the transactions
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contemplated by this Agreement shall take place at the offices of Parent, or
such other location as shall be mutually agreeable to Parent and Company on the
first (1st) Business Day immediately following the date on which the last of
the conditions set forth in Article 7 (other than the delivery of certificates,
and other instruments and documents to be delivered at the Closing, but subject
to the delivery at the Closing of such certificates, and other instruments and
documents) is fulfilled or waived, or at such other time and place as Parent and
Company shall agree (the date on which the Closing occurs is referred to in this
Agreement as the "Closing Date").
3.6 Withholding. Parent will be entitled to deduct and withhold from
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the aggregate Merger Consideration otherwise payable to any former holder of
Company Common Stock all amounts required by law to be deducted or withheld
therefrom. To the extent that amounts are so withheld by Parent or Acquisition
Sub, such withheld amount will be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by Parent or Acquisition Sub.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the Company Disclosure Schedule (with specific
reference to the relevant sections of the representations and warranties or
covenants in this Agreement or disclosure in such a way to make its relevance to
the information called for by the representations and warranties or covenants
readily apparent) or in the Company Reports, or as otherwise expressly
contemplated by this Agreement, Company represents and warrants to Parent and
Acquisition Sub as follows:
4.1 Organization, Standing, etc. of Company. Company is a corporation
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duly incorporated, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation, has the requisite corporate power and
authority to own its assets and to carry on its businesses as presently
conducted. The Company is duly qualified as a foreign corporation to do
business in and is in good standing in each jurisdiction where it is presently
engaged in business and is required to be so qualified except for the
jurisdictions set forth in Section 4.1 of the Company Disclosure Schedule which
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Company is currently preparing documentation to so qualify or where the failure
to be so qualified would not have a Material Adverse Effect on Company. Company
has delivered or made available to Parent and Acquisition Sub true and complete
copies of its Certificate of Incorporation and all amendments thereto to the
date hereof and its Bylaws as presently in effect and the Certificate of
Incorporation and Bylaws (or other comparable documents). Company has all
requisite corporate power and authority to execute and deliver, and perform its
obligations under, this Agreement and to consummate the transactions
contemplated hereby. Section 4.1 of the Company Disclosure Schedule sets forth
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a complete list of the jurisdictions in which the Company is qualified to do
business.
Page 6 of 51 Pages
4.2 Capitalization.
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(a) The authorized capital stock of Company consists of (a)
50,000,000 shares of Company Common Stock of which 17,117,304 shares are
issued and outstanding on the date hereof, 9,583,279 shares have been
reserved for issuance upon the conversion of the Company's Senior
Subordinated Convertible Notes, 2,154,281 shares have been reserved for
issuance under Company Option Plans, 11,000,000 shares have been reserved
for issuance under the Company Warrants, and 585,800 shares of Company
Common Stock are held in the treasury; and (b) 1,000,000 shares of Company
Preferred Stock, of which 0 shares are issued and outstanding on the date
hereof. All of the outstanding shares of Company Common Stock and Company
Preferred Stock have been duly authorized and are validly issued, fully
paid and nonassessable and free of preemptive rights. Each outstanding
share of capital stock (or other ownership interest) of each Subsidiary of
Company is duly authorized, validly issued, fully paid and nonassessable,
and is owned by Company or its Subsidiaries, free and clear of all Liens
other than Permitted Liens. Section 4.2 of the Company Disclosure Schedule
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sets forth the number and exercise price of all outstanding Company Stock
Options on the date hereof. All shares of Company Common Stock subject to
issuance upon exercise of the outstanding Company Stock Options described
above will be, upon issuance on the terms specified in the option
agreement, duly authorized, validly issued, fully paid and nonassessable.
(b) Except as set forth in Section 4.2 of the Company Disclosure
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Schedule, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, stock
appreciation rights (SARs), phantom stock, rights or warrants, including
any right of conversion or exchange under any outstanding security,
instrument or other agreement and also including any rights plan or other
anti-takeover agreement, obligating Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of Company Capital
Stock, or obligating Company to grant, extend or enter into any such
agreement or commitment. There are no voting trusts, proxies or other
agreements or understandings to which Company is a party or is bound with
respect to the voting of any shares of Company Capital Stock.
(c) The Board of Directors of Company has not declared any
dividend or distribution with respect to the Company Capital Stock the
record or payment date for which is on or after the date of this Agreement.
(d) As of the date hereof, (i) no bonds, debentures, notes or
other indebtedness of Company having the right to vote are issued or
outstanding, and (ii) there are no outstanding contractual obligations of
Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Company Capital Stock or any shares of capital stock
of any Subsidiary of Company.
(e) The Company Common Stock is traded on the OTC Bulletin Board. No
other securities of Company or any of its Subsidiaries are listed or quoted
for trading on any United States domestic or foreign securities exchange.
4.3 Subsidiaries.
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Except as set forth in Section 4.3 of the Company Disclosure Schedule,
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(a) Each Subsidiary of Company is a corporation (or other legal
entity, as applicable) duly incorporated (or an entity duly formed) and
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, as the case may be, and has
all corporate, partnership or other entity derived powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry
Page 7 of 51 Pages
on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, have a Material Adverse Effect on
Company. Section 4.3 of the Company Disclosure Schedule sets forth each
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jurisdiction in which each Subsidiary is qualified to do business. No
Subsidiary of Company is in default in any respect in the performance,
observation or fulfillment of any provision of its Certificate or Articles
of Incorporation or By-Laws (or similar organizational documents). Other
than its Subsidiaries, Company does not beneficially own or control,
directly or indirectly, 5% or more of any class of equity or similar
securities of any corporation or other entity whether incorporated or
unincorporated. No securities issued by any Subsidiary of Company are
registered or required to be registered with the SEC under the Exchange Act
and since January 1, 2000, no securities issued by any Subsidiary of
Company have been issued under a registration statement filed with the SEC
under the Securities Act.
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of company is owned
by Company, directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including, any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
voting securities or ownership interests), other than any restrictions
imposed under the Securities Act. There are no outstanding (i) shares of
capital stock or other voting securities or ownership interests in any of
Company's Subsidiaries, (ii) securities of Company or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock
or other voting securities or ownership interests in any of Company's
Subsidiaries or (iii) options or other rights to acquire from Company or
any of its Subsidiaries, or other obligation of Company or any of its
Subsidiaries to issue any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable
for any capital stock or other voting securities or ownership interests in
any of Company's Subsidiaries. There are no outstanding obligations of
Company of any of its Subsidiaries to repurchase, redeem or otherwise
acquire any of the securities referred to in clauses (i), (ii) or (iii) of
this Section 4.3(b).
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4.4 Authority; Non-Contravention; Approval.
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Except as set forth in Section 4.4 of the Company Disclosure Schedule,
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(a) Company has full corporate power and authority to enter into
this Agreement and, subject to the Stockholders' Approval and the Company
Required Statutory Approvals, to consummate the transactions contemplated
hereby. The Board of Directors of Company has (i) unanimously determined
that this Agreement, the Merger and the transactions contemplated hereby
are fair to and in the best interests of Company and the Stockholders, (ii)
unanimously approved this Agreement and declared it advisable and (iii)
unanimously resolved to recommend that the Stockholders approve and adopt
this Agreement, the Merger and the transactions contemplated hereby. No
other corporate proceedings on the part of Company are necessary to
authorize the execution and delivery of this Agreement or, except for the
Stockholders' Approval, the consummation by Company of the transactions
contemplated hereby. Company has duly executed and delivered this Agreement
and, assuming the due authorization, execution and delivery thereof by
Parent and Acquisition Sub, this Agreement constitutes a valid and legally
binding agreement of Company enforceable against Company in accordance with
its terms, except as such enforcement may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by Company does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or
Page 8 of 51 Pages
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or give rise to any
obligation to make payments or provide compensation under, or result in the
creation of any Lien upon any of the properties or assets of Company under
any of the terms, conditions or provisions of (i) the respective charters,
by-laws, partnership agreements, trust declarations, operating agreements,
or other similar organizational instruments of Company or any of its
Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to Company or any of its Subsidiaries or
any of their respective properties or assets or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease, partnership agreement, joint venture agreement or other
instrument, obligation or agreement of any kind to which Company or any of
its Subsidiaries is now a party or by which Company or any of its
Subsidiaries or any of their respective properties or assets may be bound
or affected. The consummation by Company of the transactions contemplated
by this Agreement will not result in any violation, conflict, breach,
termination, acceleration or creation of Liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (A) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the
Effective Time) Company Required Statutory Approvals, the Stockholders'
Approval and (B) in the case of the terms, conditions or provisions
described in clause (iii) above, to obtaining (prior to the Effective Time)
consents from lessors or other third parties that are listed in Section
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4.4(b) of the Company Disclosure Schedule. Excluded from the foregoing two
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sentences of this paragraph (b), insofar as they apply to the terms,
conditions or provisions two described in clauses (ii) and (iii) of the
first sentence of this paragraph (b) are such violations, conflicts,
breaches, defaults, termination, accelerations, payments, compensations or
creations of Liens that, individually or in the aggregate, would not have a
Material Adverse Effect on Company.
(c) Except for the Company Required Statutory Approvals, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Company or
the consummation by Company of the transactions contemplated thereby.
Excluded from the foregoing sentence are such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
made or obtained, as the case may be, would not, individually or in the
aggregate, have a Material Adverse Effect on Company.
(d) The affirmative vote of the holders of a majority of the
shares of outstanding Company Common Stock (the "Stockholders' Approval")
is the only vote of the holders of any class or series of Company Capital
Stock necessary to approve the Merger and the consummation of the
transactions contemplated hereby.
4.5 SEC Documents.
--------------
(a) Company has previously delivered (except to the extent such
filings are publicly available on the XXXXX system) to Parent and
Acquisition Sub each registration statement, report, proxy statement or
information statement (other than preliminary materials) filed by Company
with the SEC since January 1, 1999 each in the form (including exhibits and
any amendments thereto) filed with the SEC prior to the date hereof, and
except as set forth in Section 4.5 of the Company Disclosure Schedule,
-----------
Company has timely filed all forms, reports and documents required to be
filed by it with the SEC pursuant to relevant securities statutes,
regulations, policies and rules since January 1, 1999 (collectively, the
"Company Reports"). As of their respective dates (or, if amended,
supplemented or superseded by a filing prior to the date of this Agreement,
as of the date so amended, supplemented or superseded), the Company
Page 9 of 51 Pages
Reports (i) complied in all materials respects with the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations thereunder and complied with the requirements thereof including
all of the then applicable accounting requirements and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The principal executive officer of Company and the principal
financial officer of Company (and each former principal executive officer
or principal financial officer of Company) have made the certifications
required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002 (the
"Xxxxxxxx-Xxxxx Act"), and the rules and regulations of the SEC promulgated
thereunder with respect to the Company Reports filed since such
certifications have been required. For purposes of the preceding sentence,
"principal executive officer" and "principal financial officer" shall have
the meanings given to such terms in the Xxxxxxxx-Xxxxx Act.
(b) Company maintains disclosure controls and procedures required
by Rule l3a-l5 or l5d-l5 under the Exchange Act; such controls and
procedures are effective for gathering, analyzing and disclosing the
information the Company is required to disclose in its reports filed under
the Exchange Act. Since January 1, 1999, Company has not received notice
from the SEC or any other Governmental Entity that any of its accounting
policies or practices are the subject of any review, inquiry, investigation
or challenge other than comments from the SEC on Company filings which
comments have either been satisfied or withdrawn by the SEC.
4.6 Financial Statements. Each of the consolidated balance sheets of
---------------------
the Company included in or incorporated by reference into the Company Reports
(including, in each case, any related notes) and schedules fairly presents in
all material respects the consolidated financial position of the Company and its
Subsidiaries as of its date and each of the consolidated statements of
operations, shareholders' equity and cash flows of the Company and its
Subsidiaries included in or incorporated by reference into the Company Reports
(including, in each case, any related notes) fairly presents in all material
respects the consolidated financial position, results of operations or cash
flows, as the case may be, of the Company and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which in the aggregate were not or will not be
material in amount or effect), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein. Section
-------
4.6 of the Company Disclosure Schedule sets forth the outstanding balance of the
---
Company's indebtedness owed to WCP, WCPC and WCL as of March 31, 2004 (including
fees and accrued interest through such date).
4.7 Absence of Undisclosed Liabilities. Except as set forth in the
-------------------------------------
Company Reports or in Section 4.7 of the Company Disclosure Schedule, as of
------------
December 31, 2003, the Company and its Subsidiaries had no material liabilities
of any nature, whether accrued, absolute, contingent or otherwise (including
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others or liabilities for taxes due or then accrued or to become
due), required to be reflected or disclosed in the balance sheet dated December
31, 2003 (or the notes thereto) in accordance with GAAP included in the
Company's audited financial statements for such year and/or the Company 10-K
("the Company Balance Sheet") that were not adequately reflected or reserved
against on the Company Balance Sheet. Except as set forth in Section 4.7 of the
-----------
Company Disclosure Schedule, the Company has no material liabilities of any
nature, whether accrued, absolute, contingent or otherwise required to be
reflected or disclosed on the Company Balance Sheet prepared in accordance with
GAAP, other than liabilities (i) adequately reflected or reserved against on the
Company Balance Sheet, (ii) incurred since December 31, 2003 in the ordinary
course of business, or (iii) that would not, individually or in the aggregate,
have a Material Adverse Effect on Company. As of the Closing Date, Company
shall have accrued or made provisions in accordance with GAAP, for certain
obligations of Company in the aggregate amount of $375,000.00 relating to the
specific items set forth in Section 4.7 of the
------------
Page 10 of 51 Pages
Company Disclosure Schedule pertaining to this accrual and for any other
employee(s) set forth on Exhibit B who is/are due severance whose termination of
employment has occurred on or prior to Closing.
4.8 No Liabilities as Guarantor. Except as set forth in Section 4.8
----------------------------- -----------
of the Company Disclosure Schedule, neither Company nor any of its Subsidiaries
are directly or indirectly obligated to guaranty or assume any debt, dividend,
or other obligation of any Person, corporation, association, partnership, or
other entity (other than the Company or its Subsidiaries), except endorsements
made in the ordinary course of business in connection with the deposit of items
for collection.
4.9 Absence of Certain Changes or Events. Since December 31, 2003,
----------------------------------------
Company and its Subsidiaries have conducted their businesses only in the
ordinary course and, to the knowledge of Company, in a manner consistent with
past practice, and there has not been:
(a) any event, change, effect or development that, individually or
in the aggregate, would have a Material Adverse Effect on Company;
(b) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock (or ownership interests) of
Company, or any redemption, purchase or other acquisition of its
securities;
(c) any split, combination or reclassification of any shares of
Company or any issuance or authorization of any issuance of any other
securities in exchange or in substitution for shares of Company; or
(d) any acquisition by Company or any of its Subsidiaries
(including by merger, consolidation, or acquisition of stock or assets or
any other business combination) of any entity or any division thereof or
any material amount of assets.
4.10 Taxes and Tax Returns. Except as set forth in Section 4.10 of the
--------------------- ------------
Company Disclosure Schedule:
(a) Company and each of its Subsidiaries have duly filed in all
material respects all Tax Returns and will cause to be filed prior to
Closing all the Tax Returns set forth on Section 4.10 of the Company
------------
Disclosure Schedule and have duly paid or caused to be duly paid in full or
made provision in accordance with GAAP for the payment in all material
respects of all Taxes for all periods or portions thereof ending prior to
the date hereof including, but not limited to, all Taxes, for the Tax
Returns set forth on Section 4.10 of the Company Disclosure Schedule,
-------------
except to the extent that all such failures to file or make payments in
full, taken together, would not have a Material Adverse Effect. All such
Tax Returns accurately reflect in all material respects all liability for
Taxes for the periods covered thereby and all such Tax Returns are true,
correct and complete in all material respects. Company has made available
to Parent and Acquisition Sub complete and correct copies of all federal
income Tax Returns filed by Company and each of its Subsidiaries for the
three most recent taxable years for which such Tax Returns have been filed
prior to the date of this Agreement. Neither Company nor any of its
Subsidiaries has received written notice of any claim made by a Tribunal in
a jurisdiction where neither Company nor its Subsidiaries files Tax Returns
that Company or its Subsidiaries is or may be subject to taxation by that
jurisdiction that, individually or in the aggregate, which would have a
Material Adverse Effect on Company.
(b) Section 4.10 of the Company Disclosure Schedule lists all
-------------
income Tax Returns of Company or any of its Subsidiaries for the prior
three (3) fiscal years that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The applicable statutes of
limitation for the assessment of Federal income taxes for all
Page 11 of 51 Pages
taxable periods ending on or prior to December 31, 1997 have expired, and
no material deficiencies were asserted as a result of such examinations
that have not been resolved or fully paid or provided for in accordance
with GAAP. There is no material dispute or claim concerning any Tax
liability of Company or of any of its Subsidiaries either claimed or raised
by any taxing authority in writing.
(c) Neither Company nor any of its Subsidiaries (i) has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency, (ii) is a party to any
material tax sharing, tax indemnity or other agreement or arrangement with
any Person not included in Company's consolidated financial statements most
recently filed by Company with the SEC, (iii) has made an election under
former Section 341(f) of the Code, (iv) is a party to or bound by any
closing agreement or offer in compromise with any taxing authority, (v) has
any excess loss account (as defined in Treasury Regulations Section
1.1502-19), (vi) has any deferred intercompany gains (as defined in
Treasury Regulations Section 1.1502-13), or (vii) is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code or any similar
provision of foreign, state or local law.
(d) There is no material Tax lien against the assets of Company or
any of its Subsidiaries except for Permitted Liens.
(e) None of the assets of Company or any of its Subsidiaries is
(i) "tax exempt use property" within the meaning of Section 168(h) of the
Code, (ii) subject to any lease made pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954 or (iii) directly or indirectly secures any
debt the interest on which is tax exempt under Section 103(a) of the Code.
(f) Company and each of its Subsidiaries is a "United States
Person" within the meaning of Section 7701(a)(30) of the Code.
(g) Company and each of its Subsidiaries have disclosed on their
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 Code.
(h) Neither Company nor any of its Subsidiaries (i) has been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was Company) or (ii)
has any liability for the Taxes of any Person (other than Company or its
Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar
provisions of state, local or foreign law), as a transferee or successor,
by contract or otherwise.
(i) Neither Company nor any of its Subsidiaries is a partnership
or disregarded entity for federal income tax purposes.
(j) Neither Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(k) Neither Company nor any of its Subsidiaries has, with respect
to any open taxable period, applied for and been granted permission to
adopt a change in its method of accounting requiring adjustments under
Section 481 of the Code or comparable state, local or foreign law.
Page 12 of 51 Pages
(l) Neither Company nor any of its Subsidiaries have taken any
deduction or received any tax benefit arising from participation in a "tax
shelter" as defined for purposes of Section 6111(c) of the Code or have
"participated" in a "reportable transaction" as defined in Treasury
Regulations Section 1.6011-4(b) or (c)(3) or Treasury Regulations Section
1.6011-4T(a) and (b).
(m) Except as reflected or reserved against in the Company Balance
Sheet as of December 31, 2003, Company as of such date had no deferred tax
liabilities of any material nature and Company represents and warrants that
it does not know nor does it have any reasonable grounds to know of any
basis for any deferred tax liability in any material amount not fully
reflected or reserved against in its consolidated balance sheet as of
December 31, 2003.
(n) All deductions taken on Company's and its Subsidiaries' Tax
Returns have been properly deducted by Company and such Subsidiaries in all
material respects pursuant to pertinent provisions of the Code.
4.11 Compliance with Laws.
----------------------
(a) Except as set forth in Section 4.11 of the Company Disclosure
------------
Schedule or as would not, individually or in the aggregate, have a Material
Adverse Effect on Company: (i) the Company and its Subsidiaries have all
licenses, permits, authorizations, franchises, orders or approvals of any
Governmental Entity (collectively, "Permits") material to the conduct of
their respective businesses as presently conducted; (ii) such Permits are
in full force and effect; and (iii) no proceeding is pending or, to the
knowledge of the Company, threatened to revoke or limit any Permit.
(b) No Violation of Law. Neither Company nor any of its
----------------------
Subsidiaries is in violation of or has been given notice or been charged
with any violation of, any law, statute, order, rule, regulation, ordinance
or judgment of any governmental or regulatory body or authority, except for
violations which, individually or in the aggregate, would not have a
Material Adverse Effect on Company.
4.12 Litigation.
----------
(a) Other than matters existing or arising under Regulatory Laws
in connection with the transactions contemplated by this Agreement which
are to be dealt with as provided in Section 6.5, there are no claims,
-----------
suits, actions or proceedings pending or, to the knowledge of Company,
threatened against, relating to or affecting Company or any of its
Subsidiaries before any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator that seek to restrain or
enjoin the consummation of the Merger or seek other relief or remedy and
which would reasonably be expected, either alone or in the aggregate with
all such claims, actions or proceedings not otherwise disclosed in Section
-------
4.12 of the Company Disclosure Schedule, to have a Material Adverse Effect
----
on Company. Except as set forth in the initial clause of the preceding
sentence, as of the date hereof, neither Company nor any of its
Subsidiaries is subject to any judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality
or authority, or any arbitrator, which (i) prohibits or restricts the
consummation of the transactions contemplated by this Agreement or (ii)
which would reasonably be expected, either alone or in the aggregate with
all judgments, decrees, injunctions, rules or orders, to have a Material
Adverse Effect on Company, or (iii) which restricts the conduct of the
business of Company or any of its Subsidiaries or the ability of Company or
any of its Subsidiaries to compete freely with any other Person. Except as
disclosed in Section 4.12 of the
------------
Page 13 of 51 Pages
Company Disclosure Schedule, there are no (i) claims, suits, actions or
proceedings pending against Company or any of its Subsidiaries, or (ii) to
the knowledge of Company, material investigations or threatened material
claims, suits, actions or proceedings against Company or any of its
Subsidiaries, in either case, which would reasonably be expected either
alone or in the aggregate, to result in a Material Adverse Effect on the
Company.
(b) Section 4.12 of the Company Disclosure Schedule sets forth
-------------
each action, suit, proceeding or, to the knowledge of the Company,
investigation pending as of the date of this Agreement against Company or
any Subsidiary of Company, or, to the knowledge of the Company, any
director, officer or employee of Company or any Subsidiary of Company
alleging any violation of federal or state securities laws, the DGCL or the
rules or regulations of NASDAQ or any other securities exchange governing
Company.
4.13 Compliance with Agreements. Except as set forth in Section 4.13 of
-------------------------- ------------
the Company Disclosure Schedule, neither Company nor any of its Subsidiaries is
in breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under, (a) the charter or
by-laws of Company or (b) the contracts, commitments, agreements, leases,
licenses, and other instruments of Company or its Subsidiaries, except, in the
case of clause (b) above, for breaches, violations and defaults which, alone or
in the aggregate, would not have a Material Adverse Effect on Company.
4.14 Books and Records. The minute books of the Company have been made
-----------------
available to Parent and Acquisition Sub, contain or will contain at Closing in
all material respects accurate records of all meetings and accurately reflect in
all material respects all other corporate action of the shareholders and
directors and any committees of the Company board of directors.
4.15 Employee Benefit Plans; ERISA.
--------------------------------
(a) (1) Section4.15 of the Company Disclosure Schedule lists (A)
-----------
each plan, program, arrangement, practice and policy under which one, or
more than one, current or former officer, employee or director of Company
or a Subsidiary of Company has any right to employment, to purchase or
receive any stock or other securities of Company or a Subsidiary of Company
or to receive any compensation (whether in the form of cash or stock or
otherwise) or benefits of any kind or description whatsoever in any
material amount or under which Company or a Subsidiary of Company has any
material liability and (B) each employee benefit plan within the meaning
set forth in Section 3(3) of ERISA under which the Company or a Subsidiary
has any liability.
(2) Each plan, program, arrangement, practice and policy
described in Section 4.15(a)(1) shall be referred to individually as a
-------------------
"Union Plan" and shall be referred to collectively as the "Union Plans" if
described in Section 414(f) of the Code, and each other plan, program,
arrangement, practice and policy described in Section 4.15(a)(1) shall be
------------------
referred to individually as a "Company Plan" and collectively as the
"Company Plans".
(b) The Company has delivered or made available to Parent (i) a
current, complete and accurate copy of each Company Plan which is set forth
in writing (and any related trust, insurance contract or other funding
arrangement) and a written summary of each Company Plan which is not set
forth in writing and (ii) a copy of the most recent Annual Report (Form
5500) and all related exhibits and reports) for each Company Plan which is
subject to ERISA.
Page 14 of 51 Pages
(c) No Company Plan is subject to Title IV of ERISA or Section 412
of the Code, and no Company Plan is a multiemployer plan within the meaning
of Section 414(f) of the Code or a plan described in Section 413(c) of the
Code. Neither the Company nor any Subsidiary has any liability for any
withdrawal or partial withdrawal from any Union Plan and, based on
information provided by each Union Plan subject to Title IV of ERISA, the
Company has no reason to believe that either the Company or any Subsidiary
would have any liability under Title IV of ERISA to any Union Plan if the
Company or any of its Subsidiaries incurred a withdrawal or partial
withdrawal from such Union Plan.
(d) There have been no prohibited transactions within the meaning
of Section 406 or Section 407 of ERISA or Section 4975 of the Code with
respect to any of the Company Plans that could result in penalties, taxes,
liabilities or indemnification obligations which, individually or in the
aggregate, could have a Material Adverse Effect on Company, and there has
been no other event, or more than one other event, with respect to any
Company Plan that could result in any liability for the Company or any
Subsidiary related to any excise Taxes under the Code or to any liabilities
under ERISA which could have a Material Adverse Effect on Company.
(e) Each Company Plan which is intended to be qualified under
Section 401 (a) of the Code has received a favorable determination letter
from the Internal Revenue Service on the plan as currently in effect or has
pending an application for such a determination letter from the Internal
Revenue Service on the plan as currently in effect, and the Company is not
aware of any reason likely to result in the revocation of any favorable
determination letter which has been received or in the Internal Revenue
Service declining to issue a favorable determination letter on a pending
application. The Company has provided to Parent a copy of the most recent
Internal Revenue Service favorable determination letter with respect to
each such Company Plan and, if such letter does not cover a Company Plan as
currently in effect, a copy of the application to the Internal Revenue
Service for such a letter.
(f) Each Company Plan has been maintained and administered in
substantial compliance with its terms and with the requirements prescribed
by any and all statutes, orders, rules and regulations, including but not
limited to ERISA and the Code, which are applicable to such Company Plan or
to the Company or any Subsidiary as a sponsor, a plan administrator or a
fiduciary of such Company Plan. If a former Company Plan has been
terminated by or all or any part of the liabilities of the Company or any
Subsidiary for any current or former Company Plan or Union Plan have been
transferred to another employer, such termination or transfer was properly
effected and neither Company nor any of its Subsidiaries has any further
liability with respect to such termination or transfer.
(g) Except as set forth in Section 4.15 of the Company Disclosure
------------
Schedule, neither the requisite corporate or stockholder approval of, nor
the consummation of, the transactions contemplated by this Agreement will
(either alone or together with any other event, including, any termination
of employment) entitle any current or former officer, employee, director or
other independent contractor of the Company or a Subsidiary to any change
in control payment or benefit, transaction bonus or similar benefit or
severance pay or accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation
or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any Company Plan.
(h) Except as set forth in Section 4.15 of the Company Disclosure
------------
Schedule, neither the Company nor any of its Subsidiaries have any material
liability in respect of post-retirement health, medical or life insurance
benefits for any current or
Page 15 of 51 Pages
former officer, employee, director or independent contractor except as
required to avoid excise Tax under Section 4980B of the Code.
(i) All contributions and other payment due from the Company or
any of its Subsidiaries with respect to each Company Plan and each Union
Plan (other than for routine and reasonable claims for benefits made in the
ordinary course of the Company Plan's operations) have been made or paid in
full or are shown in the Company Reports, and all of the assets which have
been set aside in a trust, escrow account or insurance company separate
account to satisfy any obligations under any Company Plan are shown on the
books and records of each such trust or account at their current fair
market value as of the most recent valuation date for such trust or
account, and the fair market value of all such assets as of each such
valuation date equals or exceeds the present value of any obligation under
any Company Plan.
(j) There are no pending or, to the knowledge of the Company,
threatened claims with respect to a Company Plan (other than routine and
reasonable claims for benefits made in the ordinary course of the plan's
operations) or with respect to the terms and conditions of employment or
termination of employment of any current or former officer, employee or
independent contractor of the Company or any Subsidiary, which claims could
result in any material liability to the Company or any of its Subsidiaries,
and no audit or investigation by any domestic or foreign governmental or
other law enforcement agency is pending or, to the knowledge of the Company
or a Subsidiary, has been proposed with respect to any Company Plan.
(k) Section 4.15 of the Company Disclosure Schedule sets forth the
------------
number of individuals who were performing services for Company on December
31, 2003 who were classified by Company as independent contractors. Each
individual who performs, or has performed, services for the Company or any
Subsidiary of Company as an employee or as an independent contractor is, or
has been, properly classified as an employee or as an independent
contractor, except where failure to properly classify such individual(s)
would not, individually or in the aggregate, have a Material Adverse Effect
on Company.
(l) Vesting for options which are outstanding under Company Stock
Option Plans, including accelerated vesting which may occur at the
Effective Time, has been or will be effected in accordance with the terms
of the Company plans. Except as set forth in Section 4.16 of the Company
------------
Disclosure Schedule, the interests in or shares available for issuance
under each such Company Stock Option Plan are properly registered pursuant
to the Securities Act on a Form S-8.
4.16 Labor Matters.
--------------
(a) Section 4.16(a) of the Company Disclosure Schedule, lists (i)
---------------
the corporate officers, corporate employees and non-corporate executives of
the Company and its Subsidiaries who, upon termination of their employement
by reason of the Merger are entitled to payments for severance or other
similar payments, (ii) any written agreements regarding such payments and
(iii) any other severance agreements with current or former employees or
directors of the Company or any of its Subsidiaries: (A) that provide (in
the case of each such agreement) for severance payments in excess of
$30,000.00 or (B) where the current or former employee or director is
otherwise entitled to receive annual base salary or annual fees from the
Company or any of its Subsidiaries in excess of $30,000. Section 4.16(a) of
---------------
the Company Disclosure Schedule sets forth the standard severance policy of
the Company applicable to employees generally.
(b) Except as set forth in Section 4.16 of the Company Disclosure
------------
Schedule, neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective
Page 16 of 51 Pages
barganing agreement, contract or other agrement or understanding with a
domestic labor union or domestic labor union organization. There is no
unfair labor practice or labor arbitration proceeding or grievance pending
or, to the Company's knowledge, threatened against the Company or any of
its Subsidiaries relating to their business that would, individually or in
the aggregate, have a Material Adverse Efffect on Company, and no such
proceeding or grievance has occurred within the past three years. There is
no labor strike, dispute, requst for representation, slowdown or stoppage
pending or, to the Company's knowledge, threatened against the Company or
any of its Subsidiaries that would, individually or in the aggregate, have
a Material Adverse Efffect on Company, and no such labor strike, dispute,
request for representation, slowdown or stoppage has occurred within the
past three years. To the Company's knowledge, there are no organizational
efforts with respect to the formation of a collective barganing unit
presently being made or threatened involving employees of Company or any of
its Subsidiaries. The Company and each of its Subsidiaries have complied in
all material respects with all labor and employment Laws, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other Taxes, except as
would not, individually or in the aggergate, have a Material Adverse
Efffect on Company. Except as set forth in Section 4.16 of the Company
------------
Disclosure Schedule, neither Company nor any Company Subsidiary is
delinquent in any material payment to any of its current or former
officers, directors, employees or agents for any wages, salaries,
commissions, bonuses or severance.
4.17 Assets. Except as provided in Section 4.17 of the Company
------ -------------
Disclosure Schedule, Company and each Subsidiary of Company have good title to
all of their respective assets and properties, including, but not limited to,
those assets and properties reflected in Company's Balance Sheet, except only
for assets subsequently disposed of in the ordinary course of business, free and
clear of all Liens, except (a) as specifically reflected thereon, or (b) for
Permitted Liens. To the knowledge of Company, all Company's and each
Subsidiary's tangible and other operating assets, property and equipment, except
those no longer carried on Company's books, are generally in good operating
condition and repair in light of their age, free of structural or material
mechanical defects (it being acknowledged that at any time certain of such
assets may be in disrepair or needing replacement in the ordinary course) and to
Company's knowledge conform with all applicable laws and regulations.
4.18 Accounts Receivable and Vendor Receivables. All Accounts
----------------------------------------------
Receivable and Vendor Receivables of Company and each Subsidiary which have
arisen in connection with the businesses or otherwise and which are reflected on
Company's Balance Sheet, and all such receivables which will have arisen since
December 31, 2003 have arisen only from bona fide transactions in the ordinary
course of business and represent valid, collectible (net of any bad debt
reserves) and existing claims. Except as set forth on Section 4.18 of the
------------
Company Disclosure Schedule, and subject to customer credits, the payment of
each Account Receivable and Vendor Receivable will not, as of the Closing Date,
to the knowledge of the Company, be subject to any known defense, counterclaim
or condition (other than Company's performance in the ordinary course of
business) whatsoever. Section 4.18 of the Company Disclosure Schedule hereto
-------------
accurately lists, as of a date within five (5) days of execution of this
Agreement, and will list, as of a date within five (5) days of the Closing Date,
all receivables arising out of or relating to the businesses, the amount owing
and the aging of such Accounts Receivable and Vendor Receivables. Company has
provided Parent and Acquisition Sub the opportunity to review complete and
correct copies of all instruments, documents and agreements evidencing such
Accounts Receivable and Vendor Receivables and of all instruments, documents or
agreements, if any, creating security therefor. Company represents and warrants
that the bad debt reserves established for its Accounts Receivables and Vendor
Receivables are sufficient to cover the risk of loss resulting from the
uncollectability of such Accounts Receivables and Vendor Receivables.
4.19 Real Estate.
------------
Page 17 of 51 Pages
(a) The Company owns no real property.
(b) Section 4.19 of the Company Disclosure Schedule sets forth the
------------
address of all material real property in which Company or any Subsidiary of
Company holds a leasehold or subleasehold estate (the "Leased Real
Property"; the leases or subleases for such Leased Real Property being
referred to as the "Leases"). With respect to each of the Leases: (i)
Company or such Subsidiary, as applicable, holds good and marketable title
to the leasehold or subleasehold interest thereunder; (ii) neither Company
nor any Subsidiary has assigned, subleased, mortgaged, deeded in trust or
otherwise transferred or encumbered such Lease, or any interest therein,
except as set forth in Section 4.19 of the Company Disclosure Schedule; and
------------
(iii) neither Company nor any Subsidiary is in default under the terms of
such Leases, except for such defaults which would not, individually or in
the aggregate, result in a Material Adverse Effect on the Company.
4.20 Tangible Personal Property Leases.
------------------------------------
(a) Section 4.20 of the Company Disclosure Schedule sets forth a
-------------
list, that is accurate in all material respects, of all Tangible Property
that is leased or subleased by Company and/or Subsidiary (each, a "Tangible
Property Lease"). Company and each Subsidiary of Company has been in
peaceable possession of the Tangible Property covered by such Tangible
Property Lease since the commencement of the term thereof.
(b) Each of the Tangible Property Leases is in full force and
effect, except as the same would not, individually or in the aggregate,
have a Material Adverse Effect on Company. Company and/or its Subsidiaries
have complied with all commitments and obligations on their part to be
performed or observed under each of the Tangible Property Leases, except
for such noncompliance which would not, individually or in the aggregate,
have a Material Adverse Effect on Company. The Company has not received any
written notice of a default, offset or counterclaim under any of the
Tangible Property Leases.
4.21 Intellectual Property.
----------------------
(a) To the Company's knowledge, the Company and any Subsidiary of
Company own or are licensed to use, or otherwise have the right to use all
patents, and all registrations of the foregoing, or applications therefor,
that are material to their respective businesses as presently conducted
(collectively, the "Patents"). Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Company, the Company and any
Subsidiary of Company own or are licensed to use, or otherwise have the
right to use all trademarks, service marks, trade names, brand names,
domain names, trade secrets, franchises, inventions, copyrights, and all
other technology, intellectual property and intangible property, all
registrations of the foregoing, or applications therefor, that are material
to their respective businesses as presently conducted (collectively with
the Patents, the "Proprietary Rights"). To the Company's knowledge, all
patents, registered trademarks and copyrights referred to above which are
registered in the name of the Company are valid. The Company has provided
Parent with schedules of any Taxes or maintenance fees related to filings
with the U.S. Patent and Trademark Office or U.S. Copyright Office, falling
due within 180 days after the date of this Agreement, and any expirations
of patents or registered trademarks or copyrights scheduled to occur within
three years after the date of this Agreement.
(b) Except as disclosed in the Company Reports filed prior to the
date of this Agreement or Section 4.21(b) of the Company Disclosure
----------------
Schedule, there are no claims pending or, to the Company's knowledge,
threatened, that the businesses of the
Page 18 of 51 Pages
Company or any of its Subsidiaries infringe upon the proprietary rights of
others, nor, to the Company's knowledge, is there any existing or
threatened infringement by any third party on, or any competing claim of
right to use or own any of, the Proprietary Rights, in each case, except as
would not, individually or in the aggregate, have a Material Adverse Effect
on Company.
(c) Except as disclosed in Section 4.21(c) of the Company
----------------
Disclosure Schedule, to the knowledge of the Company, the Company and its
Subsidiaries have the right to sell their products and services (whether
now offered for sale or under development) free from any royalty or other
obligations to third parties. To the knowledge of Company, none of the
activities of the employees of the Company or any Subsidiary of Company on
behalf of such entity violates any agreement or arrangement which any such
employees have with former employers.
(d) To the knowledge of the Company, none of the Company or any of
its Subsidiaries is in material breach of, or has failed to perform in any
material respect under, any of the contracts, licenses and agreements
listed in Section 4.21(c) of the Company Disclosure Schedule, and, to the
---------------
Company's knowledge, no other party to any such contract, license or
agreement is in material breach thereof or has failed to perform in any
material respect thereunder.
4.22 Insurance.
---------
(a) Except as set forth in Section 4.22(a) of the Company
----------------
Disclosure Schedule, the Company has made available to Parent and
Acquisition Sub all current material insurance policies and binders
("Insurance Policies") (i) insuring the business or properties of the
Company or the Subsidiaries of Company or (ii) which provides insurance for
any director, officer, employee, fiduciary or agent of the Company or any
Subsidiaries of Company, that is held by or on behalf of the Company or any
Subsidiary of Company.
(b) All policies or binders of insurance held by or on behalf of
the Company and the Subsidiaries of Company are in full force and effect
and are in conformity, in all material respects, with the requirements of
all leases or other agreements to which the Company or the relevant
Subsidiary is a party and are valid and enforceable in accordance with
their terms, in each case, except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the
Company nor any Subsidiary is in default with respect to any provision
contained in such policy or binder nor has the Company or any Subsidiary of
Company failed to give any notice or present any claim under any such
policy or binder in due and timely fashion, except as would not,
individually or in the aggregate, have a Material Adverse Effect on
Company. There are no outstanding unpaid material claims under any such
policy or binder. Except as set forth in Section 4.22(b) of the Company
---------------
Disclosure Schedule, neither the Company nor any Subsidiary of Company has
received written notice of cancellation or non-renewal of any such policy
or binder or disclaiming coverage or reserving rights with respect to any
claim or any such policy or binder in general.
4.23 Commercial Relationships.
-------------------------
(a) Schedule 4.23(a) of the Company Disclosure Schedule sets forth
----------------
the top ten customers of the Company and the Subsidiaries of Company in the
year ended December 31, 2003 measured in terms of aggregate sales volume.
(each a "Customer"). Except as set forth in Section 4.23(a) of the Company
---------------
Disclosure Schedule, prior to the date of this Agreement, none of the
Company or any Subsidiaries of Company has received any written notice of
any intent of a Customer to terminate, cancel or materially alter its
business relationship with the Company or any of the Subsidiaries of
Company.
Page 19 of 51 Pages
(b) To the knowledge of the Company, except as set forth in
Section 4.23(b) of the Company Disclosure Schedule, prior to the date of
----------------
this Agreement, none of the Company or any Subsidiaries of Company has
received from any of its top ten (10) suppliers measured in terms of
aggregate purchase volume from its suppliers in the year ended December 31,
2003 (each a "Supplier") any written notice of any intent of a Supplier to
terminate, cancel or materially alter its business relationship with the
Company or any of the Subsidiaries of Company.
4.24 Environmental Matters.
----------------------
(a) Definitions.
-----------
"Environmental Law" means any applicable Federal, state, local or
------------------
foreign laws, relating to (a) the protection, preservation or
restoration of the environment (including, air, water vapor, surface
water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or (b) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of, Hazardous Substances, in each case as amended and as in
effect on the date hereof.
"Hazardous Substance" means any substance listed, defined, designated
--------------------
or classified as hazardous, toxic, radioactive, or dangerous, or
otherwise regulated, under any Environmental Law. Hazardous Substance
includes any substance for which exposure is regulated by any
government authority or any Environmental Law including, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum or any derivative or
by-product thereof, radon, radioactive material, asbestos, or asbestos
containing material, urea formaldehyde foam insulation, lead or
polychlorinated byphenyls.
"Contamination" (or "Contaminated") means the known presence of
------------- ------------
Hazardous Substances in, on or under the soil, groundwater, surface
water or other environmental media if any investigatory, remedial,
removal reporting or other response action is required or legally
could be required by a Governmental Entity under any Environmental Law
with respect to such presence of Hazardous Substances.
(b) Environmental Conditions.
-------------------------
(i) each of the Company and the Subsidiaries of Company is and
has been in compliance with all applicable Environmental Laws,
including without limitation, the possession of or having applied for
all Permits required under applicable Environmental Laws, and
compliance with their terms and conditions, except as would not,
individually or in the aggregate, have a Material Adverse Effect on
Company. Each of the Company and the Subsidiaries of Company has made
all reports and given all notices required by Environmental Laws,
except as would not, individually or in the aggregate, have a Material
Adverse Effect on Company;
(ii) No civil, criminal or administrative suit, claim, action
or proceeding is pending, and to the Company's knowledge, there is no
pending investigation by any Governmental Entity, under any
Environmental Law relating to any operations, property or facility
owned, operated or leased, or previously owned, operated or leased, by
the Company or any Subsidiary of Company or
Page 20 of 51 Pages
any location at or to which the Company or any Subsidiary of Company
has disposed of, transported or arranged for the disposal of Hazardous
Substances that, individually or in the aggregate, would have a
Material Adverse Effect on Company. There are no outstanding orders,
judgments or decrees of any court or of any Governmental Entity under
any Environmental Law which specifically apply to any of the Company
and the Subsidiaries of Company or any of their respective assets or
operations and that, individually or in the aggregate, would be
material to the business of the Company and the Subsidiaries of
Company taken as a whole;
(iii) In the last three years, none of the Company or the
Subsidiaries of Company with operations in the United States has
received from any Governmental Entity or any other Person notice that
it has been named as a responsible or potentially responsible party
under any Environmental Law for any site Contaminated by Hazardous
Substances nor has the Company or any Subsidiary of Company received a
request for information about any such site;
(iv) To the knowledge of the Company, except as disclosed in
environmental reports and documents that have been made available to
Parent and Acquisition Sub and are listed in Section 4.24(b)(iv) of
-------------------
the Company Disclosure Schedule or as would not, individually or in
the aggregate, have a Material Adverse Effect on Company, no portion
of any property currently owned, leased or occupied by the Company or
any Subsidiary of Company is Contaminated, and no Contamination
occurred during the Company's or any Subsidiary of Company's prior
ownership, lease or occupancy of other property;
(v) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on Company, none of the Company or any
Subsidiary of Company has been notified by any Governmental Entity
that it is currently liable under the Comprehensive Environmental
Response, Compensation and Liability Act or any comparable state or
federal Environmental Law for investigation, remedial, removal or
other response costs, natural resources damages or other claims
(including administrative orders) arising out of the release or
threatened release of any Hazardous Substance;
(vi) To the Company's knowledge, none of the Company or any
Subsidiary of Company has expressly assumed the liability of any other
Person for, and has not agreed to indemnify any other Person against,
claims arising out of the release of Hazardous Substances into the
environment or other claims under Environmental Laws, except for any
agreement to indemnify a lessor of real property contained in the
lease between such lessor and the Company or any Subsidiary of
Company;
(vii) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Company, during the past three
years, no Governmental Entity has issued any citation or notice of
violation or noncompliance under any Environmental Law to the Company
or any Subsidiary of Company;
(viii) The Company or any Subsidiary of Company has not
released any insurance policies, or waived or fully released all
rights under insurance policies, that may provide coverage for
liabilities under Environmental Laws or liabilities or damages
otherwise arising out of the release of Hazardous Substances into the
environment;
Page 21 of 51 Pages
(ix) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Company, none of the Company or any
Subsidiary of Company owns or operates any of the following and none
of the following are located on any property owned, leased or occupied
by the Company or any Subsidiary of Company: (A) underground storage
tank (whether or not in use or decommissioned and whether not
regulated or exempt from regulation); (B) underground injection well
as defined under any Environmental Law; (C) surface impoundment or
lagoon; (D) landfill (unless legally closed); (E) hazardous waste
treatment, storage or disposal unit or facility regulated under the
Resource Conservation and Recovery Act as amended (RCRA) or any
comparable Environmental Law; or (F) any radioactive material for
which a license or permit (including general permits and permits by
rule) is required under any Environmental Law; and
(x) The Company has made available to Parent and Acquisition
Sub copies of material reasonably available reports, studies,
investigations and audits in the possession of the Company pertaining
to environmental matters relating to the Company or any Subsidiary of
Company, its present operations or any property currently owned,
leased or occupied by the Company or any Subsidiary of Company,
including without limitation compliance with Environmental Laws,
employee safety or Contamination.
4.25 Contracts and Commitments.
---------------------------
(a) Except for contracts, commitments, agreements, leases,
licenses, and other instruments disclosed in Section 4.25 of the Company
------------
Disclosure Schedule (collectively, the "Material Contracts"), neither
Company nor any of its Subsidiaries is a party to or bound by: (a) any
agreements with any present employee, officer or director (or former
employee, officer or director to the extent there remain at the date hereof
obligations to be performed by Company or any of its Subsidiaries), other
than individual non-competition and/or confidentiality agreements with
employees entered into in the ordinary course of business; (b) any material
agreements with a consultant, sales representative, agent or dealer not
terminable upon 30 days written notice; (c) agreements or indentures
relating to the borrowing of money or the deferred purchase price of
property (in either case whether or not secured in any way), or any
guarantee of any of the foregoing, having a remaining balance on the date
hereof in an amount exceeding $100,000 or in respect of which Company or
one of its Subsidiaries is not authorized to prepay the related
indebtedness on 30 days or less advance notice; (d) any partnership, joint
venture, profit-sharing or similar agreement; (e) contracts, not entered
into in the ordinary course of business on an arm's-length basis, that are
material to Company; (f) any collective bargaining agreements, memoranda or
understanding, settlements or other labor agreements with any union or
labor organization applicable to Company, its Affiliates or their
employees; (g) any agreements or arrangements for the acquisition or sale
of any business of Company entered into since January 1, 2001 (or, without
regard to such date, to the extent any indemnification or similar
obligations of Company or any of its Subsidiaries exist as of the date of
this Agreement) or any such agreement or arrangement, regardless of when
such agreement or arrangement was entered into, that has not yet been
consummated or in respect of which Company or any of its Subsidiaries has
any remaining obligations (whether by merger, sale or purchase of assets or
stock, consolidation, share exchange or otherwise); (h) any agreement which
imposes non-competition or non-solicitation restrictions, or any
"exclusivity" or similar provision or covenant, including any
organizational conflict of interest prohibition, restriction,
representation, warranty or notice provision or any other restriction on
future contracting set forth in Company's Government Contracts, other than
non-solicitation restrictions relating to clients' or the Company's
employees contained in the Company's contracts entered into in the ordinary
course of business; (i) any employment, severance
Page 22 of 51 Pages
or other similar agreement which contains a change of control or "golden
parachute" provision; and (j) any other agreements to which Company or any
of its Subsidiaries is a party or by which they or any of their assets are
bound and which involves consideration or other obligation in excess of
$250,000.00 annually.
4.26 Section 203 of the DGCL Not Applicable. The Board of Directors of
--------------------------------------
Company has approved the Merger, this Agreement and transactions contemplated
hereby and thereby, and such approval is sufficient to render inapplicable to
the Merger and the other transactions contemplated hereby the restrictions
contained in Section 203 of the DGCL, and no other antitakeover or similar
statute or regulation of the State of Delaware or any other state or
jurisdiction applies or purports to apply to any such transactions.
4.27 Government Contracts. Except as set forth in Section 4.27 of the
--------------------- ------------
Company Disclosure Schedule, to the knowledge of Company, with respect to
services rendered to a Governmental Entity pursuant to any Government Contracts,
there is, as of the date of this Agreement, no (a) civil fraud or criminal
investigation of any Governmental Entity that, individually or in the aggregate,
has had or would have a Material Adverse Effect on Company, (b) suspension or
debarment proceeding (or equivalent proceeding) against Company or any of its
Subsidiaries that, individually or in the aggregate, has had or would have a
Material Adverse Effect on Company, (c) request by a Governmental Entity for a
contract price adjustment based on a claimed disallowance by the Defense
Contract Audit Agency (or other applicable Governmental Entity) or claim of
defective pricing in excess of $25,000, (d) dispute between Company or any of
its Subsidiaries and a Governmental Entity which, since December 31, 2000,has
resulted in a government contracting officer's final decision where the amount
in controversy exceeds or is expected to exceed $50,000 or (e) claim or request
for equitable adjustment by Company or any of its Subsidiaries against a
Governmental Entity in excess of $25,000.
4.28 Relations with Governments. To the knowledge of Company, neither
---------------------------
Company nor any of its Subsidiaries, nor any director, officer, agent or
employee of Company or any of its Subsidiaries, has (a) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to political activity, (b) made any unlawful payment or offered anything of
value to foreign or domestic government officials or employees or to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns, (c) made any other unlawful payment, or (d) violated any
applicable export control, money laundering or anti-terrorism law or regulation,
nor have any of them otherwise taken any action which would cause Company or any
of its Subsidiaries to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any applicable law of similar effect.
4.29 Stockholder Rights Plan. As of the date of this Agreement,
-------------------------
Company does not have any stockholder rights plan in effect.
4.30 No Existing Discussions. As of the date of this Agreement, Company
-----------------------
is not engaged, directly or indirectly, in any negotiations or discussions with
any other party with respect to an Acquisition Proposal.
4.31 Disclosure Documents. None of the information supplied or to be
---------------------
supplied by Company for inclusion or incorporation by reference in the Proxy
Statement or any amendment or supplement thereto shall, at the date the Proxy
Statement or any such amendment or supplement is first mailed to the Company
Common Stockholders or at the time of the Stockholders' Approval contain any
untrue statement of a material fact or omit any material fact necessary in order
to make the statements therein, in light of the circumstances under, which they
were made, not misleading. No representation or warranty is made by Company in
this Section 4.31 with respect to statements made or incorporated by reference
therein based on information that was not supplied by Company or its
Subsidiaries for inclusion or incorporation by
Page 23 of 51 Pages
reference in the Proxy Statement. The Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act.
4.32 Advisors' Fees. Except for Updata Capital, a copy of whose
---------------
engagement agreement has been made available to Parent prior to the date of this
Agreement, there is no investment banker, broker, finder, financial advisor or
other intermediary that has been retained by or is authorized to act on behalf
of Company or any of its Subsidiaries who might be entitled to any fee from
Company or any of its Subsidiaries (including, after the consummation of the
Merger from Parent or Acquisition Sub) in connection with the Merger or any of
the other transactions contemplated by this Agreement.
4.33 Opinion of Financial Advisor. Company has received the opinion of
----------------------------
Updata Capital, financial advisor to Company, to the effect that as of the date
of this Agreement, the Merger Consideration is fair to the Stockholders from a
financial point of view.
4.34 Certain Loans, Split Dollar Arrangements and Other Transactions No
---------------------------------------------------------------
present or former director, officer or employee (or Person affiliated with any
such director, officer or employee) of Company or any of its Subsidiaries owes
money to Company or any of its Subsidiaries pursuant to a loan or other
arrangement. Except as set forth in Company Reports, since January 1, 2000, no
event has occurred that would be required to be reported as a "Certain
Relationship or Related Transaction" disclosure pursuant to Item 404 of
Regulation S-K promulgated by the SEC. As of the date of this Agreement,
neither Company nor any of its Subsidiaries have any loan or any split dollar
arrangement in existence that is in violation of the applicable provisions of
the Xxxxxxxx-Xxxxx Act.
4.35 Territorial Restrictions. Except as described in Section 4.35 of
------------------------- ------------
the Company Disclosure Schedule, neither Company nor any Subsidiary of Company
is restricted by any written agreement or understanding with any other Person
(excluding applicable laws of Governmental Entities) from carrying on the
businesses anywhere in the world.
4.36 Product Liability. To the Company's knowledge, there are no
------------------
material product liability claims against Company or any Subsidiary of Company,
either potential or existing, which are not fully covered by product liability
insurance coverage or which are not covered by any manufacturers warranty
provided to Company or any Subsidiary of Company, which, if determined adversely
to Company or any Subsidiary of Company, could have a Material Adverse Effect on
Company.
4.37 Immigration Compliance.
-----------------------
(a) Company and each Subsidiary of Company are in compliance in
all material aspects with all applicable federal, state and local laws,
rules, directives and regulations relating to the employment authorization
of their respective employees (including, without limitation, the
Immigration Reform and Control Act of 1986, as amended and supplemented,
and Section 212(n) and 274A of the Immigration and Nationality Act, as
amended and supplemented, and all implementing regulations relating
thereto), and Company and its Subsidiaries have not, to the knowledge of
the Company, employed nor are any such entities currently employing, to the
knowledge of the Company, any unauthorized aliens (as such term is defined
under 8 CFR 274a.1(a)).
(b) Neither Company nor any Subsidiary of Company has received any
notice from the Immigration and Naturalization Service (the "INS") or the
United States Department of Labor (the "DOL") of the disapproval or denial
of any visa petition or entry permit pending before the INS or labor
certification pending before the DOL on behalf of any employee or
prospective employee of Company or any Subsidiary of Company.
Page 24 of 51 Pages
(c) Since the approval of each of their respective visa petitions,
there has been no material change in the terms and conditions of employment
of any employees of Company or any Subsidiary of Company who are employed
on visas.
(d) Company shall have delivered or made available to Parent and
Acquisition Sub true, accurate and complete copies of all visa petitions,
entry permits and visa applications (and all supporting documents)
submitted to the INS for all foreign employees and prospective foreign
employees of Company and any Subsidiary of Company.
4.38 Preference Payments. Neither Company nor any Subsidiary of
--------------------
Company has received any payments from any third party creditor presently
seeking protection under Chapter 11 or Chapter 7 of the Bankruptcy Code that
could be set aside as a preference item within the meaning of Section 547 of the
Bankruptcy Code, as such section may hereafter be amended that individually or
in the aggregate has had or would have a Material Adverse Effect on Company.
4.39 Vote Required. The affirmative votes of holders of greater than
--------------
fifty percent (50%) of the outstanding shares of Company Common Stock entitled
to vote thereon are the only votes of the holders of any class or series of
Company Capital Stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
4.40 Minority Business Status. Neither Company nor any Subsidiary of
--------------------------
Company is certified as a minority business enterprise under any federal, state
or local certification process and none of the businesses of Company or any
Subsidiary of Company has been awarded as a result, or predicated upon,
Company's or any Subsidiary of Company's certification of being a minority
business supplier.
4.41 Acquisitions. Section 4.41 of the Company Disclosure Schedule
------------ -------------
sets forth all the acquisitions of other businesses made by Company and/or any
Subsidiary of Company during the past ten (10) years. Company represents that
no claims for indemnification against Company or Subsidiary or any other
liability emanating out of said transactions may be asserted against Company or
any Subsidiary of Company that could have a Material Adverse Effect on Company.
4.42 Definition of Company's Knowledge. As used in this Agreement, the
---------------------------------
phrase "to the knowledge of Company" or any similar phrase means the actual
knowledge of the individuals identified in Section 4.42 of the Company
-------------
Disclosure Schedule.
4.43 No Additional Representations. Company acknowledges that neither
------------------------------
Parent nor Acquisition Sub, nor any other Person advising or acting on behalf of
Parent, Acquisition Sub, or any Affiliate of Parent or Acquisition Sub, has made
any representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding Parent or Acquisition Sub or the
business conducted by Parent or Acquisition Sub, in each case, except as
expressly set forth in this Agreement.
4.44 Disclosure. None of the representations and warranties made by
-----------
Company herein, or made in any certificate furnished or to be furnished by it,
pursuant to the requirements of this Agreement, including any disclosures made
in the Company Disclosure Schedule, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact, an
omission of which could, in light of the circumstances in which it was made, be
misleading. Company has no knowledge of any factors materially adversely
affecting the future prospect of the business of the Company and its
Subsidiaries, taken as a whole, which has not been disclosed in this Agreement
and the Company Disclosure Schedule, other than any change, circumstance, fact,
event or effect relating to (i) the securities markets in general, (ii) the
economy in general, except if the Company and its Subsidiaries is adversely
affected in a materially disproportionate manner as compared to similarly
situated entities, (iii) the industries in which the
Page 25 of 51 Pages
Company and its subsidiaries operate and not specifically relating to the
Company and its Subsidiaries, including changes in legal, accounting or
regulatory changes, or conditions, except if the Company and its Subsidiaries is
adversely affected in a materially disproportionate manner as compared to other
comparable participants in such industries, or (iv) the announcement of the
Merger and the performance of the obligations of the parties under this
Agreement (including any cancellations or delays in contract awards and any
impact on relationships with customers, prime contractors, subcontractors or
suppliers to the extent but only to the extent relating to the announcement of
the Merger or the performance of the obligations of the parties hereunder).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
------------------------------------------------------------
Except as set forth in the Parent Disclosure Schedule (with specific
reference to the relevant sections of the representations and warranties or
covenants in this Agreement or disclosure in such a way to make its relevance to
the information called for by the representations and warranties or covenants
readily apparent) or in the Parent SEC Reports, or as otherwise expressly
contemplated by this Agreement, Parent and Acquisition Sub represent and warrant
to Company as follows:
5.1 Organization, Standing, etc. of Parent and Acquisition Sub. Each
------------------------------------------------------------
of Parent and Acquisition Sub are corporations duly incorporated, validly
existing, and in good standing under the laws of the jurisdiction of their
incorporation, have the requisite corporate power and authority to own their
assets and to carry on their businesses as presently conducted. Each of Parent
and Acquisition Sub is duly qualified as a foreign corporation to do business in
and is in good standing in each jurisdiction where it is presently engaged in
business and is required to be so qualified except where the failure to be so
qualified would not have a Material Adverse Effect on Parent or Acquisition Sub.
Parent and Acquisition Sub have delivered or made available to Company true and
complete copies of its respective Certificates of Incorporation and all
amendments thereto to the date hereof and its Bylaws as presently in effect on
the date of this Agreement, including all amendments thereto.
5.2 Authorization and Execution. Parent and Acquisition Sub have full
----------------------------
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby and thereby. This Agreement has been approved
by the respective Boards of Directors of Parent and Acquisition Sub and by
Parent as the sole stockholder of Acquisition Sub and no other corporate
proceedings on the part of Parent or Acquisition Sub are necessary to authorize
the execution and delivery of this Agreement and the consummation by Parent and
Acquisition Sub of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and Acquisition Sub and, assuming the
due authorization, execution and delivery thereof by Company, constitutes a
valid and legally binding Agreement of Parent and Acquisition Sub enforceable
against each of them in accordance with its term, except as such enforcement may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditor rights generally,
and (ii) general equitable principles.
5.3 Absence of Conflicts; Governmental Authorizations.
-----------------------------------------------------
(a) The execution and delivery of this Agreement by Parent and
Acquisition Sub does not violate, conflict with or result in a breach of
any provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or give rise to any
obligation to make payments or provide compensation under, or result in the
creation of any Lien upon any of the properties or assets of Parent and
Acquisition Sub under any of the terms, conditions or provisions of (i) the
respective charters, by-laws, partnership
Page 26 of 51 Pages
agreements, trust declarations, operating agreements, or other similar
organizational instruments of Parent and Acquisition Sub or any of their
Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to Parent and Acquisition Sub or any of
their Subsidiaries or any of their respective properties or assets or (iii)
any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease, partnership agreement, joint venture
agreement or other instrument, obligation or agreement of any kind to which
Parent and Acquisition Sub or any of their Subsidiaries is now a party or
by which Parent and Acquisition Sub or any of their Subsidiaries or any of
their respective properties or assets may be bound or affected. The
consummation by Parent and Acquisition Sub of the transactions contemplated
by this Agreement will not result in any violation, conflict, breach,
termination, acceleration or creation of Liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence. Excluded from the foregoing two sentences of this
paragraph (b), insofar as they apply to the terms, conditions or provisions
two described in clauses (ii) and (iii) of the first sentence of this
paragraph (b) are such violations, conflicts, breaches, defaults,
termination, accelerations, payments, compensations or creations of Liens
that, individually or in the aggregate, would not have a Material Adverse
Effect on Parent and Acquisition Sub.
(b) Except for the Parent and Acquisition Sub Required Statutory
Approvals, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body
or authority is necessary for the execution and delivery of this Agreement
by Parent or Acquisition Sub or the consummation by Parent or Acquisition
Sub of the transactions contemplated thereby. Excluded from the foregoing
sentence are such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as
the case may be, would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or Acquisition Sub.
5.4 Capitalization. (a) The authorized capital stock of Parent
--------------
consists of 20,000,000 shares of Parent Common Stock and 2,000,000 shares of
Parent Preferred Stock. As of May 5, 2004, the only shares of capital stock of
Parent that are issued and outstanding are 12,258,186 shares of Parent Common
Stock, all of which were validly issued, and are fully paid and nonassessable
and free of preemptive rights. (b) The authorized capital stock of Acquisition
Sub consists of 1500 shares of Acquisition Sub Common Stock, of which 100 shares
are issued and outstanding as of the date hereof. All the shares of Acquisition
Sub that are issued and oustanding were validly issued and are fully paid,
nonassessable and free of preemptive rights.
5.5 SEC Reports. The Company has had access through publicly-available
-----------
information to (i) Parent's Annual Report on Form 10-K for the year ended
January 5, 2004, as filed with the SEC (the "Parent 10-K"), (ii) its quarterly
report on Form 10-Q for the quarter ended October 5, 2003, as filed with the SEC
(the "Parent 10-Q"), (iii) all proxy statements relating to Parent's meetings of
shareholders held, and (iv) all other documents filed by Parent with the SEC
under the Exchange Act or the Securities Act since January 5, 2000 (the "Parent
SEC Reports"). As of their respective dates, such documents complied, and all
documents filed by Parent with the SEC under the Exchange Act or the Securities
Act between the date of this Agreement and the Closing Date will comply, in all
material respects with applicable SEC requirements and did not, or in the case
of documents filed on or after the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except as set forth
in Section 5.5 of the Parent Disclosure Schedule, all Parent SEC Reports have
------------
been timely filed with the SEC and constitute all forms, reports and documents
required to be filed by Parent under the Exchange Act and the Securities Act
since January 5, 2000. Between the date of this Agreement and the Closing Date,
Parent will timely file with the SEC all documents required to be filed by it
under the Exchange Act or the Securities
Page 27 of 51 Pages
Act. No Parent Subsidiary is required to file any form, report or other document
with the SEC. The certifications of the chief executive officer and chief
financial officer of Parent required by Rules 13a-14 and 15d14 of the Exchange
Act with respect to the Parent SEC Reports, as applicable, are true and correct
as of the date of this Agreement, as they relate to a particular Parent SEC
Report, as though made as of the date of this Agreement. Parent has established
and maintains disclosure controls and procedures, has conducted the procedures
in accordance with their terms and has otherwise operated in compliance with the
requirements under Rules 13a-15 and 15d-15 of the Exchange Act.
5.6 Financial Statements. Each of the consolidated balance sheets of
---------------------
Parent included in or incorporated by reference into the Parent SEC Reports
(including, in each case, any related notes) fairly presents in all material
respects the consolidated financial position of Parent and the Parent
Subsidiaries as of its date and each of the consolidated statements of income,
shareholders' investment and cash flows of Parent included in or incorporated by
reference into the Parent SEC Reports (including, in each case, any related
notes) fairly presents in all material respects the consolidated financial
position, results of operations or cash flows, as the case may be, of Parent and
the Parent Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to normal year-end audit adjustments which in the
aggregate were not or will not be material in amount or effect), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein.
5.7 Absence of Undisclosed Liabilities. Except as set forth in the
-------------------------------------
Parent SEC Reports or in Section 5.7 of the Parent Disclosure Schedule, as of
-----------
January 5, 2004 , Parent and the Parent Subsidiaries had no material liabilities
of any nature, whether accrued, absolute, contingent or otherwise (including,
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others or liabilities for taxes due or then accrued or to become
due), required to be reflected or disclosed in the balance sheet dated January
5, 2004(or the notes thereto) included in the Parent 10-K (the "Parent Balance
Sheet") that were not adequately reflected or reserved against on the Parent
Balance Sheet. Except as set forth in Section 5.7 of the Parent Disclosure
-----------
Schedule, Parent has no material liabilities of any nature, whether accrued,
absolute, contingent or otherwise, other than liabilities (i) adequately
reflected or reserved against on the Parent Balance Sheet , (ii) incurred since
January 5, 2004in the ordinary course of business, or (iii) that would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
5.8 Absence of Adverse Changes. Since January 5, 2004, there has not
----------------------------
been any change, event or circumstance that has had, or would have, a Material
Adverse Effect on Parent.
5.9 Actions and Proceedings. Except as set forth in the Parent SEC
-------------------------
Reports or in Section 5.9 of the Parent Disclosure Schedule, there are no
------------
actions, suits or claims or legal, administrative or arbitration proceedings
pending or, to the knowledge of Parent, threatened against Parent or Acquisition
Sub that, individually or in the aggregate, would have a Material Adverse Effect
on Parent. Except as set forth in Section 5.9 of the Parent Disclosure
------------
Schedule, there is no writ, order, injunction, judgment or decree in effect or,
to the knowledge of Parent, threatened that is applicable to Parent or
Acquisition Sub or by which any of their respective properties or assets is
bound and that, individually or in the aggregate, would be material to the
business of Parent and Acquisition Sub taken as a whole.
5.10 Proxy Statement.. None of the information supplied by Parent
----------------
specifically for inclusion or incorporation by reference in the Proxy Statement
will, at the date it is first mailed to holders of Company Common Stock or at
the time of the Company Shareholders Meeting (except as supplemented by Parent
to reflect changes in information so supplied at the time of such meeting),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Page 28 of 51 Pages
5.11 Advisors' Fees. Except for Bear Xxxxxxx, there is no investment
---------------
banker, broker, finder, financial advisor or other intermediary that has been
retained by or is authorized to act on behalf of Parent or Acquisition Sub who
might be entitled to any fee from Parent or Acquisition Sub (including, after
the consummation of the Merger from Parent or Acquisition Sub) in connection
with the Merger or any of the other transactions contemplated by this Agreement.
5.12. Company Shares and Acquisition Sub Interests.
-------------------------------------------------
(a) Except as set forth in Section 5.12 of the Parent Disclosure
------------
Schedule, neither Parent nor Acquisition Sub beneficially owns any Company
Shares. With respect to the Company Shares held by Parent or Acquisition
Sub as set forth in Section 5.12 of the Parent Disclosure Schedule, (i)
------------
neither Parent nor Acquisition Sub acquired any such Company Shares in
connection with or in contemplation of the Merger and (ii) Parent and
Acquisition Sub acquired such Company Shares more than two years prior to
the date of this Agreement.
(b) Acquisition Sub currently is, and at all times since its
formation has been, organized as a corporation under the laws of the State
of Delaware. Parent currently is, and at all times since the formation of
Acquisition Sub has been, the sole owner of 100% of the outstanding stock
of Acquisition Sub.
5.13 Definition of Parent's Knowledge. As used in this Agreement, the
---------------------------------
phrase "to the knowledge of Parent' or any similar phrase means the actual
knowledge of the individuals identified in Section 5.13 of the Parent Disc
------------
xxxxxx Schedule.
5.14 Financing. Parent has obtained all necessary financing
---------
commitments and unconditional approvals necessary to consummate the transactions
contemplated hereby.
5.15 Disclosure. None of the representations or warranties made by
----------
Parent herein, or made in any certificate furnished or to be furnished by it,
pursuant to the requirements of this Agreement, including any disclosures made
in the Parent Disclosure Schedule, contain or will contain any untrue statement
of a material fact or omits or will omit any material fact, an omission of which
could, in light of the circumstances in which it was made, be misleading.
Parent has no knowledge of any factors materially adversely affecting the future
prospect of Parent's business which has not been disclosed in this Agreement and
the Disclosure Schedule, other than any change, circumstance, fact, event or
effect relating to (i) the securities markets in general, (ii) the economy in
general, except if the Parent and its Subsidiaries is adversely affected in a
materially disproportionate manner as compared to similarly situated entities,
(iii) the industries in which the Parent and its Subsidiaries operate and not
specifically relating to the Parent and its Subsidiaries, including changes in
legal, accounting or regulatory changes, or conditions, except if the Parent and
its Subsidiaries is adversely affected in a materially disproportionate manner
as compared to other comparable participants in such industries, or (iv) the
announcement of the Merger and the performance of the obligations of the parties
under this Agreement (including any cancellations or delays in contract awards
and any impact on relationships with customers, prime contractors,
subcontractors or suppliers to the extent but only to the extent relating to the
announcement of the Merger or the performance of the obligations of the parties
hereunder).
ARTICLE 6
COVENANTS
---------
6.1 Conduct of Businessby Company Pending the Merger. After the date
--------------------------------------------------
hereof and except as set forth in Section 6.1 of the Company Disclosure
------------
Schedule, prior to the Closing Date or earlier termination of this Agreement,
unless Parent shall otherwise agree in writing
Page 29 of 51 Pages
(which consent shall not be unreasonably withheld or delayed), Company shall,
and shall cause its Subsidiaries, subject to restrictions imposed by applicable
law, to:
(a) conduct its business in the ordinary and usual course of
business and consistent with past practice;
(b) not (i) amend or propose to amend its certificate of
incorporation or by-laws, (ii) split, combine or reclassify its outstanding
capital stock, (iii) declare, set aside or pay any dividend or distribution
payable in stock or property, or (iv) repurchase, redeem or otherwise
acquire any of its outstanding share of capital stock;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of its or its
Subsidiaries' capital stock, or any debt or equity securities convertible
into, exchangeable for or exercisable for such capital stock, or enter into
any contract, agreement, commitment or arrangement with respect to any of
the foregoing, except for issuances of Company Common Stock pursuant to the
exercise of rights or options outstanding as of the date of this Agreement
under the Company Stock Option Plans outstanding as of the date of this
Agreement and except for issuance of Company Common Stock pursuant to the
exercise of rights outstanding as of the date of this Agreement under the
Company Warrants outstanding as of the date of this Agreement and except
for equity to be issued under Interim Additional Financing upon terms
approved by Parent, such approval not to be unreasonably withheld or
delayed;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money, except for indebtedness incurred under
the Company's revolving credit facility from time to time in the ordinary
course of business, and except for debt to be issued under Interim
Additional Financing upon terms approved by Parent, such approval not to be
unreasonably withheld or delayed, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) make any
acquisition of any assets or businesses or any other capital expenditures
other than expenditures for fixed or capital assets in the ordinary course
of business, (iv) sell, pledge, dispose of or encumber any assets or
businesses other than sales in the ordinary course of business, (v) loan,
advance funds or make any investment in or capital contribution to any
other Person other than to any Subsidiary or to employees for travel and
other business related expenses in the ordinary course of business, or (vi)
enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(e) use commercially reasonable efforts to preserve intact its
business organizations and goodwill, keep available the services of its
present officers and key employees, preserve the goodwill and business
relationships with customers, suppliers and others having business
relationships with Company and, except as permitted pursuant to Section
-------
6.3, not engage in any action, directly or indirectly, with the intent to
---
adversely impact the transactions contemplated by this Agreement;
(f) use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance on its tangible
assets and its business in such amounts and against such risks and losses
as are consistent with past practice;
(g) not enter into any plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of Company or any of its Subsidiaries (other than the
transactions contemplated by this Agreement);
Page 30 of 51 Pages
(h) not alter, through merger, liquidation, reorganization,
restructuring or any other fashion, the corporate structure or ownership of
any of Company's Subsidiaries;
(i) not enter into any sale, lease or license or suffer to exist
any Lien (except for Permitted Liens) in respect of any of its assets,
other than (i) Liens securing intercompany indebtedness, (ii) sales or
dispositions of property or inventory in the ordinary course of business
consistent with past practice, (iii) leases and licenses with a term of
less than one year of property in the ordinary course of business
consistent with past practice, (iv) leases and licenses with a term of at
least one year of property in the ordinary course of business consistent
with past practice and (v) sales, leases or licenses with respect to
immaterial assets;
(j) not enter into any Material Contract and/or any Government
Contract in excess of $100,000.00 Dollars or for a term in excess of 1
year, other than contracts with clients entered into in the ordinary course
of business.
(k) except as required by generally accepted accounting
principles, not revalue in any material respect of any of its assets,
including writing down the value of inventory or writing-off notes or
accounts receivables, or good will due to any impairment, other than in the
ordinary course of business consistent with past practice;
(l) change any of the accounting principles or practices used by
it (except as required by GAAP, in which case written notice shall be
provided to Parent and Acquisition Sub prior to any such change), or
restate, or become obligated to restate, the financial statements in the
Company's 10-K or Company's 10-Qs (except as required by GAAP or a
Governmental Entity, in which case written notice shall be provided to
Parent and Acquisition Sub prior to any such restatement);
(m) except as required by law or as is consistent with past
practice, not make or change any Tax election, change any annual Tax
accounting period, adopt or change any method of Tax accounting, extend or
waive any applicable statute of limitations with respect to Taxes, file any
amended Tax Returns, enter into any closing agreement in respect of any Tax
claim, audit or assessment, or surrender any right to claim a Tax refund,
offset or other reduction in Tax liability;
(n) not (i) grant any severance, retention or termination pay to,
or amend any existing severance, retention or termination arrangement with,
any current or former director, officer or employee of Company or any of
its Subsidiaries, except for severance or termination pay that may be
payable in accordance with the Company's existing severance or termination
pay policies as set forth in Section 4.16 of the Company Disclosure
-------------
Schedule in the ordinary course of business, (ii) increase or accelerate
the payment or vesting of, benefits payable under any existing severance,
retention or termination pay policies or employment agreements except that
Company may elect to accelerate the vesting of the Company Stock Options,
(iii) enter into or amend any employment, consulting, deferred compensation
or other similar agreement with any director, officer, consultant or
employee of Company or any of its Subsidiaries other than consulting
agreements with clients entered into in the ordinary course of business,
(iv) establish, adopt or amend (except as required by applicable law) any
collective bargaining agreement, bonus, profit-sharing, thrift, pension,
retirement, post-retirement medical or life insurance, retention, deferred
compensation, compensation, stock option, restricted stock or other benefit
plan or arrangement covering any present or former director, officer or
employee, or any beneficiaries thereof, of Company or any of its
Subsidiaries or (v) increase the compensation, bonus or other benefits
payable to any director, officer or employee of Company or any of its
Subsidiaries, except for salary increases as a result of employee
promotions in the ordinary course of business
Page 31 of 51 Pages
consistent with past practice or required by the terms of existing
arrangements, policies or agreements set forth in the Company Disclosure
Schedule; or
(o) enter into or authorize an agreement with respect to any of
the foregoing actions, or commit to take any action to effect any of the
foregoing actions.
6.2 Control of Operations. Nothing contained in this Agreement shall
-----------------------
give to Parent or Acquisition Sub, directly or indirectly, rights to control or
direct the operations of Company prior to the Effective Time. Prior to the
Effective Time, Company shall exercise, consistent with the terms and conditions
of this Agreement, complete control and supervision of its and its Subsidiaries'
operations.
6.3 No Solicitation by Company.
-----------------------------
(a) Company agrees that it and its Subsidiaries will not (and
Company will not permit its or its Subsidiaries' officers, directors,
employees, agents or representatives, including any investment banker or
other financial advisor, attorney, consultant, accountant or other Person
retained by Company or any of its Subsidiaries, to):
(i) directly or indirectly, solicit, initiate or knowingly
facilitate or encourage the making by any Person (other than Parent
and its Subsidiaries) of any inquiry, proposal or offer or other
agreement (including any proposal or offer to Company's Stockholders)
that constitutes or would lead to, a proposal for any tender offer,
merger, consolidation, recapitalization, reorganization, share
exchange, business combination, liquidation, dissolution or similar
transaction involving Company or any of its Subsidiaries and a third
party, or any acquisition by a third party of any Company Capital
Stock (other than Company Common Stock issued by the Company upon the
exercise of the Company Stock Options and/or the Company Warrants that
are outstanding on the date hereof in accordance with their terms and
other than in connection with any Interim Additional Financing) or any
business or assets of Company or any of its Subsidiaries (other than
acquisitions of a business or assets in the ordinary course of
business that constitute less than 5% of the net revenues, net
operating income and assets of Company and its Subsidiaries, taken as
a whole), or any combination of the foregoing, in a single transaction
or a series of related transactions (in each case, an "Acquisition
Proposal");
(ii) directly or indirectly, participate or engage in
discussions or negotiations concerning an Acquisition Proposal (and
Company, its Subsidiaries and all such Persons shall immediately cease
and cause to be terminated any existing discussions or negotiations
with any third parties conducted heretofore with respect to any
Acquisition Proposal), or furnish or disclose to any Person any
information with respect to or in furtherance of any Acquisition
Proposal, or provide access to its properties, books and records or
other information or data to any Person with respect to or in
furtherance of any Acquisition Proposal;
(iii) grant any waiver or release under any confidentiality
agreement, standstill agreement or similar agreement with respect to
Company or any of its Subsidiaries; or
(iv) execute or enter into any agreement, understanding or
arrangement with respect to any Acquisition Proposal, or approve or
recommend or propose to approve or recommend any Acquisition Proposal
or any agreement, understanding or arrangement relating to any
Acquisition Proposal (or resolve or authorize or propose to agree to
do any of the foregoing actions).
Page 32 of 51 Pages
(b) Nothing contained in the foregoing Section 6.3(a) shall
---------------
prevent Company or its Board of Directors, at any time prior to receipt of
Stockholders' Approval with respect to the Merger, from (i) taking and
disclosing to the Stockholders a position contemplated by Rule 14d-9 and
Rule 14e-2(a) promulgated under the Exchange Act (or any similar
communication to stockholders required to be made by applicable statute,
law, rule or regulation in connection with the making or amendment of a
tender offer or exchange offer) or from making any legally required
disclosure to Stockholders with regard to any Acquisition Proposal;
provided, however, that neither Company nor the Board of Directors of
Company shall, except as specifically permitted by Section 6.4(b),
---------------
withdraw, withhold, modify or change any recommendation regarding this
Agreement, the Merger or the other transactions contemplated hereby or
approve, recommend or declare advisable any Acquisition Proposal, and (ii)
providing information (pursuant to a confidentiality agreement in
substantially the same form and on substantially the same terms as the
Confidentiality Agreement and which does not prevent Company from complying
with its obligations under this Agreement) to or engaging in any
negotiations or discussions with any Person or group who has made (A) an
unsolicited bona fide Acquisition Proposal with respect to all of the
outstanding shares of capital stock of Company (whether by tender or
exchange offer, merger, consolidation or otherwise) or all or substantially
all of the assets of Company if, with respect to such actions, or (B) an
unsolicited bona fide proposal for a Material Equity Financing (x) in the
good faith judgment of the Board of Directors of Company, taking into
account, among other things, the likelihood of consummation and the other
terms and conditions of such Acquisition Proposal or Material Equity
Financing and after discussions with its financial advisors, such
Acquisition Proposal or Material Equity Financing is believed to be
reasonably likely to result in a transaction more favorable to the holders
of Company Common Stock than the Merger (a "Superior Proposal") and (y) the
-------- --------
Board of Directors of Company (after consultation with outside legal
counsel) believes that that failure to do so would violate its fiduciary
duties.
(c) Company agrees that it will notify Parent promptly (and in any
event within twenty-four hours of receipt) if any proposal or offer
------------------
relating to or constituting an Acquisition Proposal or Material Equity
Financing is received by, any information is requested from, or any
discussions or negotiations are sought to be initiated or continued with,
Company or any of its officers, directors, employees, agents or
representatives. The notice shall be in writing and state the identity of
the Person or group making such request or inquiry or engaging in such
negotiations or discussions and the material terms (including in the event
of an oral offer or proposal, a writing that sets forth the material terms
of such oral offer or proposal) and conditions of any Acquisition Proposal
or Material Equity Financing. Thereafter, Company shall keep Parent fully
informed on a prompt basis (and in any event within forty-eight hours of
-----------------
receipt) of any material changes, additions or adjustments to the terms of
any such proposal or offer.
(d) Nothing in this Section 6.3 shall permit Company to enter into
-----------
any agreement with respect to an Acquisition Proposal or Material Equity
Financing during the term of this Agreement, it being agreed that, during
the term of this Agreement, Company shall not enter into any agreement with
any Person with respect to or that provides for, or in any way facilitates,
an Acquisition Proposal or Material Equity Financing, other than a
confidentiality agreement permitted by Section 6.3(b).
---------------
(e) Notwithstanding any other provision of this Agreement, if,
prior to obtaining Stockholders' Approval with respect to the Merger, the
Board of Directors of Company determines, in its good faith judgment, that
an Acquisition Proposal or Material Equity Financing is a Superior
Proposal, the Board of Directors of Company may terminate this Agreement
(subject to Company's obligations under Article 8); provided, that
----------
Page 33 of 51 Pages
(i) Company provides at least three (3) business days' prior
written notice to the Parent of its intention to terminate this
Agreement in the absence of any further action by Parent,
(ii) during such three (3) Business Day period (or longer
period if extended by the mutual agreement of Company and Parent),
Company agrees to negotiate in good faith with Parent regarding such
changes as Parent may propose to the terms of this Agreement, which
would make the terms of this Agreement more favorable to the holders
of Company Common Stock than the Superior Proposal; and
(iii) the Board of Directors of Company determines (after
receipt of advice from its outside legal counsel and an independent
financial advisor) that the Acquisition Proposal or Material Equity
Financing is a Superior Proposal taking into account any modifications
to the terms of this Agreement proposed in writing by Parent, and the
Board of Directors of Company determines in good faith that such
actions are required by its fiduciary duties under Delaware law. In
the event of termination of this Agreement as provided in this Section
-------
6.3(e), this Agreement shall forthwith become void and there shall be
------
no further obligation on the part of Company, Parent, Acquisition Sub
or their respective officers or directors, except as provided in
Section 8.3 and except that in the case of any such termination,
------------
Section 6.6(b), Section 6.8 and Section 9.2 shall survive.
--------------- ------------ ------------
Nothing in this Section 6.3(e) shall relieve Company from liability for any
---------------
willful or intentional breach of this Agreement.
6.4 Meeting of Company Stockholders.
----------------------------------
(a) Subject to Section 6.7 hereof, Company will take all action
------------
necessary in accordance with applicable law and its certificate of
incorporation and bylaws to convene as promptly as reasonably practicable
after the date hereof a meeting (the "Stockholders' Meeting") of the
holders of Company Common Stock (the "Company Common Stockholders") and
shall submit the Merger for approval by the Company Common Stockholders at
such meeting or any adjournment thereof.
(b) Subject to Section 6.3, Company, through its Board of
------------
Directors, shall recommend approval and adoption of the Merger by the
Company Common Stockholders at the Stockholders' Meeting or any adjournment
thereof; provided that the Board of Directors of Company may at any time
prior to receipt of the Stockholders' Approval with respect to the Merger
approve, recommend and declare advisable any Superior Proposal, if the
Board of Directors of Company determines in good faith after receipt of
advice from its outside legal counsel that such action is required by its
fiduciary obligations under Delaware law and Company terminates this
Agreement as provided for in Section 8.1(b)(ii).
-------------------
(c) For the avoidance of doubt and notwithstanding anything to the
contrary contained in this Agreement, Company shall not be required to hold
the Stockholders' Meeting if this Agreement is terminated.
6.5 Agreement to Cooperate.
------------------------
(a) Subject to the terms and conditions herein provided, each of
the parties hereto shall use its reasonable best efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws to consummate and make
effective the transactions contemplated by this Agreement, subject,
however, to the requisite vote of the Company Common Stockholders. Prior to
Page 34 of 51 Pages
the Effective Time, (i) Parent shall plan and adopt procedures that will
expedite, to the fullest extent reasonably and commercially practical: (A)
the process in Section 3.4(a) to deliver and otherwise provide to the
---------------
Stockholders the Merger Consideration , and (B) procedures for the exercise
of Company Stock Options and the purchase of the Company Warrants by
Parent; and (ii) Company shall, to the fullest extent commercially
practical, cooperate with Parent in connection with the foregoing and
assist Parent in such efforts. Prior to the Effective Time, Company shall
use commercially reasonable efforts, and Parent and Acquisition Sub shall
use their commercially reasonable efforts to cooperate and assist Company,
to obtain all consents of any third parties that may be necessary for the
consummation of the Merger.
(b) Each of Parent and Company undertake to contest and resist any
action, including any legislative, administrative or judicial action, and
to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order (whether temporary, preliminary or permanent)
that restricts, prevents or prohibits the consummation of the transactions
contemplated by this Agreement, provided, however, that neither party is
required to contest or appeal any such order issued by a United States
Court of Appeals.
(c) Notwithstanding anything in this Agreement to the contrary,
neither Parent nor any of its Affiliates shall be under any obligation to
make proposals, execute or carry out agreements or submit to orders
providing for the sale or other disposition or holding separate (through
the establishment of a trust or otherwise) of any assets or categories of
assets of the Parent, any of its Affiliates, or Company or any of its
Affiliates, or seeking to impose any material limitation on the ability of
Parent or any of its Affiliates to conduct their business or own such
assets or to acquire, hold or exercise full rights of ownership of Company.
6.6 Access to Information.
---------------------
(a) Company has given and will continue to give to Parent and its
accountants, counsel, financial advisors and other representatives (the
"Parent Representatives"), reasonable access in accordance with the terms
of the Confidentiality Agreement during normal business hours to its
personnel, properties, books, contracts, commitments and records; provided,
however, that no investigation pursuant to this Section 6.6(a) shall amend
--------------
or modify any representations or warranties made herein or the conditions
to the obligations of the respective parties to consummate the Merger;
provided, further, that the foregoing right of access shall not require
furnishing information that would, in the reasonable opinion of counsel,
violate any laws, or any confidentiality agreements with respect to such
information.
(b) The Confidentiality Agreement shall remain in full force and
effect until Closing and, if this Agreement is terminated pursuant to
Article 8, such Confidentiality Agreement shall continue in accordance with
---------
its terms. The Company hereby waives the provisions of the Confidentiality
Agreement as and to the extent necessary to permit the consummation of the
Merger.
(c) Company shall promptly advise Parent in writing when the
Company becomes aware of any change or the occurrence of any event after
the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, a Material Adverse Effect on Company.
6.7 Proxy Statement.
----------------
Page 35 of 51 Pages
(a) Company shall prepare as promptly as practicable, the proxy
statement pursuant to Regulation 14A under the Exchange Act with respect to
the Stockholders' Meeting (the "Proxy Statement"). Company shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC on
or prior to eight (8) weeks after the execution of this Agreement. Company
shall, as promptly as practicable after receipt thereof, provide Parent
with copies of any written comments, and advise it of any oral comments or
communications regarding the Proxy Statement received from the SEC. Company
shall cooperate and provide Parent with a reasonable opportunity to review
and comment on any amendment or supplement to the Proxy Statement prior to
filing the same with the SEC, and will provide Parent with a copy of all
such filings made with the SEC.
(b) Company will use its reasonable best efforts to cause the
Proxy Statement to be mailed to the Company Common Stockholders as promptly
as practicable after the execution of this Agreement but in no event later
than one week after the receipt of clearance by Company from the SEC of the
Proxy Statement. Company shall furnish all information concerning it and
the holders of its capital stock as may be reasonably requested in
connection with any such action. Company will advise Parent, promptly after
it receives notice thereof, of any request by the SEC for amendment of the
Proxy Statement.
(c) Company agrees that the information provided by it for
inclusion in the Proxy Statement and each amendment or supplement thereto,
at the time of mailing thereof and at the time of the Stockholders'
Meeting, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Stockholders' Meeting,
there shall occur any event with respect to Company or its Subsidiaries, or
with respect to any information provided by Company for inclusion in the
Proxy Statement , which event is required to be described in an amendment
of or supplement to the Proxy Statement , such amendment or supplement
shall be promptly filed with the SEC, as required by applicable law, and
disseminated to the Company Common Stockholders.
6.8 Expenses and Fees. Except as may be otherwise expressly provided
-------------------
in this Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated thereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated. WCP, WCPC
and WCL shall be solely responsible for paying all their costs and expenses
incurred in connection with this Agreement and the transactions contemplated
thereby that are applicable to them. None of such costs and expenses shall be
paid by Company, Parent or Acquisition Sub.
6.9 Public Statements. Company, on the one hand, and Parent and
------------------
Acquisition Sub, on the other hand, agree that, from the date hereof through the
Closing Date, no public release or announcement concerning the transactions
contemplated hereby shall be issued or made by any party without the prior
consent of the other party or parties (which consent shall not be unreasonably
withheld), except (a) as such release or announcement may be required by law or
the rules or regulations of any United States securities exchange, in which case
the party required to make the release or announcement shall allow the other
party or parties reasonable time to comment on such release or announcement in
advance of such issuance, and (b) that each of Parent, Acquisition Sub and
Company and their respective Affiliates may make such an announcement to their
respective employees after consultation with the other parties.
6.10 Company Employees, Employee Benefit Plan Transition, Etc.
--------------------------------------------------------------
(a) Surviving Corporation shall honor, maintain and perform on or
after the Effective Time and for a period of thirty (30) days thereafter (or
such longer period as may be necessary
Page 36 of 51 Pages
to take into account any applicable enrollment dates under the Parent Employee
Plans), as may be extended by Parent for any reason without deductions,
counterclaims, interruptions or deferment (other than withholding under
applicable law or expressly authorized by a Company Employee Plan), all of
Company and Company Subsidiary's obligations under Company Employee Plans as
such Company Employee Plans are in effect as of the Effective Time. Nothing in
this section shall be construed to require the accrual of any benefit under any
Company Employee Plans past the applicable date set forth above or preclude
Parent from amending or terminating any such Company Employee Plans effective on
or after the applicable date set forth above.
(b) Commencing as of the applicable date set forth above in
Section 6.10(a), Parent shall cause the continuing Company Employees of
----------------
Surviving Corporation, while employed by Surviving Corporation, to be able to
participate in the Parent Employee Plans and provide employee benefits
(including, but not limited to, pension, welfare, incentive compensation,
severance, and vacation pay benefits) that similarly situated Parent employees
participate in.
(c) Parent and its Subsidiaries shall cause the Parent Employee
Plans that cover the continuing Company Employees or any of their dependents or
their beneficiaries to treat the employment and service of the continuing
Company Employees with the Company and Company's Subsidiaries through the
Effective Time as employment and service with Parent and its subsidiaries for
all purposes under Parent Employee Plans that cover the continuing Company
Employees.
6.11 Notification of Certain Matters; Supplemental Disclosure.
-------------------------------------------------------------
(a) Each of Company, Parent and Acquisition Sub agrees to give
prompt notice to each other of, and to use their respective commercially
reasonable efforts to prevent or promptly remedy, (i) the occurrence or failure
to occur or the impending or threatened occurrence or failure to occur, of any
event which occurrence or failure to occur would be likely to cause any of its
representations or warranties in this Agreement to be untrue or inaccurate in
any material respect at any time from the date hereof to the Effective Time and
(ii) any material failure on its part to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 6.11
------------
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
(b) Until the Closing, Parent and Company shall have the
continuing obligation to promptly supplement the information contained in their
respective disclosure schedules attached hereto with respect to any material
matter hereafter arising or discovered which, if in existence on the date hereof
and known at the date of this Agreement, would have been required to be set
forth or described in such disclosure schedules.
(c) Neither the supplementation of the disclosure schedules
pursuant to the obligation in Section 6.11(b) nor any disclosure after the date
---------------
hereof of the untruth of any representation and warranty made in this Agreement
shall operate as a cure of the failure to disclose the information, or a cure of
any representation or warranty made herein, which representation or warranty was
untrue as of the date hereof.
6.12 Reliance Upon and Enforcement of Warranties, Representations and
------------------------------------------------------------------
Agreements of Company. Company hereby agrees that, notwithstanding any right of
---------------------
Parent or Acquisition Sub to fully investigate the affairs of Company and the
Subsidiaries of Company, and notwithstanding any knowledge of facts determined
or determinable by Parent and/or Acquisition Sub pursuant to such investigation
or right of investigation, Parent and Acquisition Sub have the right to rely
fully upon the representations, covenants, warranties and agreements of Company
contained in this Agreement, and upon the accuracy of any document, schedule,
certificate or
Page 37 of 51 Pages
exhibit given or delivered to Parent and Acquisition Sub pursuant to the
provisions of this Agreement.
6.13 Reliance Upon and Enforcement of Representations, Warranties and
------------------------------------------------------------------
Agreements of Parent and Acquisition Sub. Parent and Acquisition Sub hereby
---------------------------------------------
agree that, notwithstanding any right of Company to fully investigate the
affairs of Parent and Acquisition Sub and notwithstanding any knowledge of facts
determined or determinable by Company pursuant to such investigation or right of
investigation, Company has the right to fully rely upon the representations,
covenants, warranties and agreements of Parent and Acquisition Sub contained in
this Agreement and upon the accuracy of any document, certificate or exhibit
given or delivered to Company pursuant to the provisions of this Agreement.
6.14 Indemnification.
---------------
(a) Subject to the occurrence of the Effective Time, until the
three year anniversary of the date on which the Effective Time occurs
(provided, however, that all rights and indemnification with respect of any
claim asserted or made within such period shall continue until the final
disposition of such claim), Parent and the Surviving Corporation agree that
all rights to indemnification or exculpation now existing in favor of each
present and former employee, agent, fiduciary, director or officer of the
Company and the Subsidiaries of Company (the "Indemnified Parties") as
provided in the respective charters or by-laws or otherwise in effect as of
the date hereof shall survive and remain in full force and effect. From and
after the Effective Time, Parent and the Surviving Corporation also agree
to indemnify and hold harmless the present and former officers and
directors of the Company and the Subsidiaries of Company in respect of acts
or omissions occurring prior to the Effective Time to the extent provided
in any written indemnification agreements between the Company and/or one or
more Subsidiaries of Company and such officers and directors and listed in
Section 6.14 of the Company Disclosure Schedule. Nothing contained in this
-------------
Section 6.14 shall diminish the rights of the present and former officers
-------------
and directors of the Company and the Subsidiaries of the Company pursuant
to such indemnification agreements and, in the case any of the provisions
of this Section 6.14 conflict with the terms of such indemnification
-------------
agreements, the terms of such indemnification agreements shall control.
(b) In the event of any threatened or actual claim, action, suit,
demand, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action,
suit, demand, proceeding or investigation in which any person who is now,
or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, an Indemnified Party is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of,
or pertaining to (i) the fact that he or she is or was a director, officer,
employee, fiduciary or agent of the Company or any of the Subsidiaries of
Company, or is or was serving at the request of the Company or any of the
Subsidiaries of Company as a director, officer, employee, trustee, partner,
fiduciary or agent of another corporation, partnership, joint venture,
trust, pension or other employee benefit plan or other enterprise, or (ii)
the negotiation, execution or performance of this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate
and use their commercially reasonable best efforts to defend against and
respond thereto. It is understood and agreed that the Company shall
indemnify and hold harmless, and after the Effective Time the Surviving
Corporation and Parent shall indemnify and hold harmless, as and to the
full extent permitted by applicable law, each Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorneys' fees and expenses), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action,
suit, demand, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, demand, proceeding or
investigation (whether asserted or
Page 38 of 51 Pages
arising before or after the Effective Time), (A) the Company, and the
Surviving Corporation and Parent after the Effective Time, shall promptly
pay reasonable expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the full
extent permitted by law, (B) the Indemnified Parties may retain one counsel
(plus one local counsel) reasonably satisfactory to them and Parent, and
the Company and the Surviving Corporation shall pay all fees and expenses
of such counsel for the Indemnified Parties within 30 days after statements
therefor are received; and (C) the Company, Parent, the Surviving
Corporation and the Indemnified Parties shall use their respective
commercially reasonable best efforts to assist in the vigorous defense of
any such matter; provided that none of the Company, the Surviving
Corporation or Parent shall be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably
withheld); and provided further that the Surviving Corporation and Parent
shall have no obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall become final and non-appealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited
under applicable law (whereupon any advances received shall be repaid to
Parent or the Surviving Corporation). Any Indemnified Party wishing to
claim indemnification under this Section 6.14(b), upon learning of any such
---------------
claim, action, suit, demand, proceeding or investigation, shall promptly
notify the Company and, after the Effective Time, the Surviving Corporation
and Parent; provided that the failure to so notify shall not affect the
obligations of the Company, the Surviving Corporation and Parent except to
the extent such failure to notify materially prejudices such party.
(c) Prior to the Effective Time, the Company shall purchase an
extended reporting period endorsement under the Company's existing
directors' and officers' liability insurance coverage for the Company's
directors and officers in a form acceptable to the Company which shall
provide such directors and officers with coverage for three (3) years
following the Effective Time of not less than the existing coverage under,
and have other terms not materially less favorable on the whole to, the
insured persons than the directors' and officers' liability insurance
coverage presently maintained by the Company, so long as the annual cost is
$200,000.00 or less. In the event that $200,000.00 is insufficient for such
coverage, the Company may spend up to that amount to purchase as much
coverage as is commercially obtainable. Parent shall, and shall cause the
Surviving Corporation to, maintain such policies in full force and effect,
and continue to honor the obligations thereunder. Company shall have the
right, but not the obligation, to subsititue therefor policies of at least
the same coverage and amounts containing terms and conditions which are not
materially less favorable than such policy.
(d) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Parent assume the obligations set forth in this Section 6.14.
------------
(e) The provisions of this Section 6.14 are intended to be for the
------------
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6.15 Maintenance of Company Records. Parent and its Subsidiaries shall
------------------------------
maintain the books, records and files of Company which exist at the Effective
Time and which become subject to the direct or indirect control of Parent
pursuant to the Merger in accordance with Parent's document retention policies
as they exist from time to time.
Page 39 of 51 Pages
6.16 Stockholder Litigation. Company shall keep Parent informed of,
-----------------------
and cooperate with Parent in connection with, any stockholder litigation or
claim against Company and/or its directors or officers relating to the Merger or
the other transactions contemplated by this Agreement; provided, however, that
no settlement in connection with such stockholder litigation shall be agreed to
without Parent's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed; provided, further, that all obligations in
this Section 6.16 shall be subject to the obligations of Company under
-------------
applicable laws relating to attorney-client communication and privilege.
6.17 Affiliates. Prior to the Closing Date, Company shall deliver to
----------
Parent a letter identifying all Persons that, to Company's knowledge, are at the
time this Agreement is submitted for adoption by the Company Common
Stockholders, "affiliates" of Company for purposes of Rule 145 under the
Securities Act. Company shall use its reasonable best efforts to cause each
such Person to deliver to Parent on or prior to the Closing Date a written
agreement containing customary and reasonable terms and conditions relating to
resales by such affiliates of Parent Common Stock acquired in the Merger.
6.18 Resignations. Upon the written request of Parent, Company shall
------------
cause any or all of the officers of the Company and all of the officers and
directors of each Company Subsidiary to resign or be removed or, ask the
officers to resign or be terminated, effective as of the Closing. In addition,
Company and each Company Subsidiary shall request all directors to resign at
Closing, except to the extent otherwise indicated by Parent.
ARTICLE 7
CONDITIONS
----------
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
-------------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the Company Common
Stockholders under applicable law;
(b) the Agreement with WCP, WCPC and WCL shall have been executed
and be in full force and effect;
(c) no laws shall have been adopted or promulgated, and no
temporary restraining order, preliminary or permanent injunction or other
order issued by a court or other Governmental Entity of competent
jurisdiction shall be in effect, having the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger; provided,
however, that the provisions of this Section 7.1(c) shall not be available
--------------
to any party whose failure to fulfill its obligations pursuant to Section
-------
6.5 shall have been the cause of, or shall have resulted in, such order or
---
injunction;
(d) all governmental waivers, consents, orders and approvals
legally required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect on the
Closing Date, other than those, the failure of which to be obtained would
not have, individually or in the aggregate, a Material Adverse Effect on
Parent;
7.2 Conditions to Obligation of Company to Effect the Merger. Unless
----------------------------------------------------------
waived in writing by Company, the obligation of Company to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
Page 40 of 51 Pages
(a) Parent and Acquisition Sub shall have performed in all
material respects their covenants contained in this Agreement required to
be performed at or prior to the Effective Time.
(b) the representations and warranties of Parent and Acquisition
Sub contained in this Agreement shall be true and correct when made, and
the representations and warranties set forth in Article V above shall be
true and correct as of the Effective Time as if made at and as of such
time, except as expressly contemplated or permitted by this Agreement,
except for representations and warranties relating to a time or times other
than the Effective Time which were or will be true and correct at such time
or times and except where the failure or failures of such representations
and warranties to be so true and correct, individually or in the aggregate,
does not result or would not result in a Material Adverse Effect without
taking into consideration any materiality or knowledge qualifier that
applies to such representation or warranty.
(c) Parent and Acquisition Sub shall have furnished Company a
certificate dated the date of the Closing, signed on its behalf by the
Chief Executive Officer, President or Chief Financial Officer of Parent and
Acquisition Sub, as applicable, to the best of their knowledge and belief
after due inquiry, that the conditions set forth in Section 7.2(a) and
--------------
Section 7.2(b) above have been satisfied.
---------------
(d) Parent shall have funded the payment in full of all amounts
due and owing by the Company pursuant to the Company's Senior Subordinated
Convertible Notes due January 31, 2009 and the Fleet Credit Agreement and
for the purchase of the Company Warrants set forth in Section 3.1(e).
--------------
(e) Parent shall have funded the payment of all of the Company's
severance payment obligations which are payable upon the Merger and the
Cashless Exercise Consideration as set forth in Section 3.1(d). Company
--------------
acknowledges that it is the Closing of the Merger that shall trigger any
severance payment obligations, and not the execution of this Agreement.
7.3 Conditions to Obligations of Parent to Effect the Merger. Unless
----------------------------------------------------------
waived in writing by Parent, the obligations of Parent and Acquisition Sub to
effect the Merger shall be subject to the fulfillment at or prior to the Closing
Date of the additional following conditions:
(a) Company shall have performed in all material respects its
covenants contained in this Agreement required to be performed at or prior
to the Effective Time.
(b) The representations and warranties of Company contained in
this Agreement shall be true and correct when made and the representations
and warranties set forth in Article IV above shall be true and correct as
of the Effective Time as if made on and as of such time, except as
expressly contemplated or permitted by this Agreement, except for the
representations and warranties relating to a time or times other than the
Effective Time which were or will be true and correct at such time or times
and except where the failure or failures of such representations and
warranties to be so true and correct, individually or in the aggregate,
does not result or would not result in a Material Adverse Effect without
taking into consideration any materiality or knowledge qualifier that
applies to such representation or warranty.
(c) Company shall furnish Parent and Acquisition Sub a certificate
dated the date of the Closing signed on its behalf by the Chief Executive
Officer, President or Chief Financial Officer of Company that, to the best
of their knowledge and belief after due inquiry, the conditions set forth
in Section 7.3(a), and Section 7.3(b) above have been satisfied.
--------------- ---------------
Page 41 of 51 Pages
(d) There shall not have occurred since the date of this Agreement
any change, effect, circumstance or event, which together with any other
changes, effects, circumstances or events since the date hereof, has had or
is reasonably likely to have a Material Adverse Effect with respect to
Company;
(e) The Dissenting Shares shall not constitute more than fifteen
percent (15%) of the issued and outstanding Company Common Stock; and
(f) The Company Warrants shall have been sold to the Parent.
Company shall have received the written agreement of holders under
Company's Senior Subordinated Convertible Notes due January 31, 2009 and
Company's senior lender under the Fleet Credit Agreement that upon payment
in full of such obligations, they will release and terminate all UCC liens
filed against Company and/or any Company Subsidiaries and in addition will
release any collateral currently in such party's possession that had been
pledged to such party by Company or any of Company's Subsidiaries.
(g) Company shall have substantially completed its obligations
regarding the filing of Tax Returns and corporate qualification matters set
forth in Sections 4.1 and 4.10, respectively.
------------- ----
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1 Termination. This Agreement may be terminated as set forth below
-----------
at any time prior to the Closing Date, whether before or after the Stockholders'
Approval has been obtained:
(a) by mutual written consent of Parent and Company, by action of
their respective boards of directors; or
(b) by Company, if
(i) upon a breach of any representation, warranty, covenant
or agreement on the part of Parent or Acquisition Sub set forth in
this Agreement, or if any representation or warranty of Parent or
Acquisition Sub shall have become untrue, in either case such that the
conditions set forth in Section 7.2(a), (b) and (c), as the case may
---------------------------
be, would be incapable of being satisfied by September 30, 2004 (as
otherwise extended by mutual written agreement by Company, Parent and
Acquisition Sub (the "Outside Date"));
(ii) the Board of Directors of Company shall have delivered a
termination notice, provided that Company may terminate this Agreement
under this clause (ii) only if it has complied with all the provisions
of Section 6.3.
------------
(c) by Parent, if
(i) Company shall breach any representation, warranty,
covenant or agreement on the part of Company set forth in this
Agreement, or if any representation or warranty of Company shall have
become untrue, in either case such that the conditions set forth in
Section7.3 (a), (b) and (c),, would be incapable of being satisfied by
-------------- -----------
the Outside Date or if the conditions set forth in Section 7.3 (d),
-----------
(f) or (g) would be incapable of being satisfied by the Outside Date;
or
Page 42 of 51 Pages
(ii) the condition set forth in Section 7.3(e) is not
---------------
satisfied by the Outside Date;
(iii) prior to the approval of this Agreement at the
Stockholders Meeting, (A) the Board of Directors of Company shall have
withdrawn or modified in any manner adverse to Parent or has failed to
reaffirm (within three (3) days of its receipt of an Acquisition
Proposal or a Material Equity Financing) its approval or
recommendation of the Merger or this Agreement in connection with, or
approved or recommended, any Acquisition Proposal or Material Equity
Financing, or (B) Company shall have entered into any agreement with
respect to any Acquisition Proposal or Material Equity Financing; or
(iv) a tender offer or exchange offer shall have been
commenced that, if consummated, would result in any Person becoming
the legal or beneficial owner of either (x) twenty-five percent (25%)
or more of the Company Common Stock or (y) ten percent (10%) or more
of the Company Common Stock and such offer is made as a part of a
transaction or series of transactions in which such Person shall
acquire additional Company Common Stock which in the aggregate
constitutes more than fifty percent (50%) of the issued and
outstanding Company Common Stock; and the Board of Directors of
Company fails to recommend against acceptance of such tender offer or
exchange offer or elects to take no position with respect to the
acceptance of such offer; or
(v)
(a) the Stockholder Meeting shall not have been called prior
to September 30, 2004 through fault (whether commission or omission)
of Company;
(b) the Board of Directors of Company does not publicly
recommend in the proxy statement that the Company stockholders approve
and adopt this Agreement; or
(c) after recommending in the proxy statement that such
stockholders approve and adopt this Agreement, the Board of Directors
of Company shall have withdrawn, modified or amended such recommending
in any manner adverse to Parent, except in compliance with and
pursuant to Section 6.3.
------------
(d) by either Parent or Company, if
(i) any judgment, injunction, order, decree or action by any
Governmental Entity of competent authority preventing the consummation
of the Merger shall have become final and non-appealable;
(ii) the Merger shall not have occurred on or before the
Outside Date provided, however, that a party that has materially
breached a representation, warranty or covenant of such party set
forth in this Agreement and not cured such breach by the Outside Date
shall not be entitled to exercise its right to terminate under this
Section 8.1(d)(ii); or
-------------------
(iii) upon a vote at a duly held Stockholder Meeting, the
Stockholders Approval shall not have been obtained as required by
Section 4.4(d).
---------------
8.2 Effect of Termination. In the event of termination of this
-----------------------
Agreement by either Parent or Company, as provided in Section 8.1, this
-----------
Agreement shall forthwith become void and
Page 43 of 51 Pages
there shall be no further obligation on the part of Company, Parent, Acquisition
Sub or their respective officers or directors, except as provided in Section 8.3
-----------
and except that in the case of any such termination, this Section 8.2 and
-----------
Section 6.6(b), Section 6.8, Section 6.9 and Section 9.2 shall survive. Nothing
--------------- ------------------------ -----------
in this Section 8.2 shall relieve any party from liability for any willful or
------------
intentional breach of this Agreement.
Page 44 of 51 Pages
8.3 Termination Payment by Company.
---------------------------------
(a) Company agrees that if this Agreement is terminated pursuant
to Section 8.1(d)(iii) (and in the case of any such termination, Parent has
-------------------
not materially breached its representations and warranties or covenants (or
has cured any such breach prior to the date of the Stockholders Meeting)),
Company shall pay Parent an amount equal to Parent's actual out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby in an amount not to exceed $250,000.00 (the "Expense
Amount") no later than two (2) days after the occurrence of the event set
forth in Section 8.1(d)(iii). In addition, if Company signs or closes an
--------------------
Acquisition Proposal for all the Company within one year after termination,
Company shall pay to Parent, or as directed by Parent, fifty percent (50%)
of the Parent Break-Up Fee, no later than two (2) business days after the
execution of a definitive agreement with respect to the Acquisition
Proposal and the remaining fifty percent (50%) shall be paid on the earlier
to occur of the closing of the Acquisition Proposal for all of the Company
or six (6) months after execution of the definitive agreement for the
Acquisition Proposal. The Expense Amount paid by Company to Parent within
two (2) days of the termination under Section 8.1(d)(iii) shall be credited
-------------------
against any Parent Break-Up Fee owed hereunder, which credit shall be
applied against the initial fifty percent (50%) that is due within two (2)
business days of the execution of the definitive agreement with respect to
the Acquisition Proposal.
(b) Company agrees that if this Agreement is terminated pursuant
to Section 8.1(b)(ii) and Company signs or closes an Acquisition Proposal
-------------------
for all of the Company within one year, or signs or closes a Material
Equity Financing within one (1) year, or a tender offer is consummated
within one (1) year, Company shall pay to Parent, or as directed by Parent,
the Parent Break-Up Fee. Fifty percent (50%) of any Parent Break-Up Fee
shall be made, within two (2) business days of the execution of the
definitive agreement with respect to the Acquisition Proposal, the Material
Equity Financing, or tender offer, and the remaining fifty percent (50%)
shall be paid on the earlier to occur of the closing of the Acquisition
Proposal, Material Equity Financing or tender offer or six (6) months after
execution of the definitive agreement relating to any of such transactions.
(c) Company agrees that if this Agreement is terminated pursuant
to Section 8.1(c)(iv) or 8.1(c)(v) and within one (1) year after any such
------------------- ---------
termination Company signs or closes an Acquisition Proposal or a Material
Equity Financing, or a tender offer is consummated, Company shall pay to
Parent, or as directed by Parent, the Parent Break-Up Fee. Fifty percent
(50%) of any Parent Break-Up Fee shall be made within two (2) business days
of execution of a definitive agreement with respect to the Acquisition
Proposal, Material Equity Financing or tender offer and the remaining fifty
percent (50%) shall be paid on the earlier to occur of closing of that
Acquisition Proposal, Material Equity Financing or tender offer, or six (6)
months after execution of a definitive agreement relating to such
transaction.
(d) Company agrees that if (i) this Agreement is terminated by
Company pursuant to Section 8.1(d)(ii) notwithstanding Parent's
-------------------
confirmation that it remains ready, willing and able to proceed, (ii) at
the time of such termination, the conditions precedent to Closing set forth
in Section 7.2 are satisfied or would be satisfied upon Parent's
------------
performance of its obligations at Closing and (iii) within one (1) year
after any such termination Company signs or closes an Acquisition Proposal
for all of Company, or signs or closes a Material Equity Financing within
one year, or a tender offer is consummated within one (1) year, Company
shall pay to Parent, or as directed by Parent, the Parent Break-Up Fee.
Fifty percent (50%) of any Parent Break-Up Fee shall be made within two (2)
business days of execution of a definitive agreement with respect to the
Acquisition Proposal, the Material Equity Financing or tender offer and the
remaining fifty percent (50%) shall be paid on the earlier to occur of
closing of that Acquisition Proposal, Material
Page 45 of 51 Pages
Equity Financing or tender offer, or six (6) months after execution of a
definitive agreement relating to any of such transactions.
(e) Company agrees that if (i) this Agreement is terminated by
Parent pursuant to Section 8.1(d)(ii), (ii) at the time of such
-------------------
termination, the conditions precedent to Closing set forth in Section 7.2
-----------
are satisfied or would be satisfied upon Parent's performance of its
obligations at Closing but the Company fails to close notwithstanding
Parent's confirmation that it remains ready, willing and able to proceed
and (iii) within one (1) year after any such termination Company signs or
closes an Acquisition Proposal for all of Company, or signs or closes a
Material Equity Financing within one year, or a tender offer is consummated
within one (1) year, Company shall pay to Parent, or as directed by Parent,
the Parent Break-Up Fee. Fifty percent (50%) of any Parent Break-Up Fee
shall be made within two (2) business days of execution of a definitive
agreement with respect to the Acquisition Proposal, Material Equity
Financing or tender offer and the remaining fifty percent (50%) shall be
paid on the earlier to occur of closing of that Acquisition Proposal,
Material Equity Financing or tender offer, or six (6) months after
execution of a definitive agreement relating to any of such transactions.
(f) Company agrees that if (i) this Agreement is terminated by
Parent pursuant to Section 8.1(d)(ii), (ii) at the time of such
-------------------
termination, the conditions precedent to Closing set forth in Section 7.2
-----------
are satisfied or would be satisfied upon Parent's performance of its
obligations at Closing, (iii) the Company shall have materially breached
its covenants such that the conditions set forth in Section 7.3(a), Section
-------------- -------
7.3(f) or in Section 7.3(g) are not satisfied (iv) Parent confirms that it
------ --------------
would be ready, willing and able to proceed but for such material breach by
the Company, and (v) within one (1) year after any such termination,
Company signs or closes an Acquisition Proposal for all of Company, or
signs or closes a Material Equity Financing within one (1) year, or a
tender offer is consummated within one (1) year, Company shall pay to
Parent, or as directed by Parent, the Parent Break-Up Fee. Fifty percent
(50%) of any Parent Break-Up Fee shall be made within two (2) business days
of execution of a definitive agreement with respect to the Acquisition
Proposal, the Materials Equity Financing or tender offer, and the remaining
fifty percent (50%) shall be paid on the earlier to occur of closing of
that Acquisition Proposal, Material Equity Financing or tender offer or six
(6) months after execution of a definitive agreement relating to any of
such transactions.
(g) Company agrees that if this Agreement (i) is terminated
pursuant to Section 8.1(c)(iii)(A) or 8.1(c)(iii)(B), without compliance
----------------------- --------------
with the processes outlined in the provisions contained in Section 6.3,
------------
Company shall pay to Parent, the Parent Break-Up Fee hereunder no later
than two (2) days after the occurrence of the applicable event set forth in
Section 8.1(c)(iii)(A) or Section 8.1(c)(iii)(B).
----------------------- -----------------------
(h) For purposes of this Agreement, the Parent Break-Up Fee shall
be an amount equal to $1,500,000.00. The Parent Break-Up Fee and expense
reimbursement shall be payable by wire transfer of immediately accessible
funds.
(i) In the event the Parent Break-Up Fee or Expense Amount
contemplated by Section 8.3(a) through 8.03(g) is/are not paid when due,
--------------- -------
such payments shall bear interest at a rate equal to the prime rate
announced from time to time by XX Xxxxxx Xxxxx Bank plus 2% per annum, and
in addition to being obligated to pay such applicable amounts and interest
thereon, Company shall pay or reimburse Parent's costs and expenses
(including but not limited to reasonable legal fees and expenses) solely to
the extent incurred in connection with any action, including but not
limited to the filing of any lawsuit or other legal action to collect
payment of such amounts and any interest thereon.
Page 46 of 51 Pages
8.4 Amendment. This Agreement may not be amended except by action
---------
taken by the parties' respective boards of directors or duly authorized
committees thereof or pursuant to authority granted by such boards of directors
or duly authorized committees thereof and then only by an instrument in writing
signed on behalf of each of the parties hereto and in compliance with applicable
law.
8.5 Waiver. At any time prior to the Effective Time, the parties
------
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE 9
GENERAL PROVISIONS
------------------
9.1 Non-Survival. None of the representations and warranties in this
------------
Agreement shall survive the Merger, and after the Effective Time, no person or
entity shall have any further obligation, nor shall any claim be asserted or
action be brought, with respect thereto. None of the covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such covenants and
other agreements, shall survive the Effective Time, except for those covenants
and agreements contained herein and therein that by their terms apply or are to
be performed in whole or in part after the Effective Time, and this Article 9.
---------
9.2 Brokers. Each of the parties hereto agrees to hold each of the
-------
other parties hereto harmless from and against any finders' fees in connection
with the Merger contemplated by this Agreement based upon arrangements made by
or on behalf of such arranging party.
9.3 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed duly given if delivered personally, delivered by
UPS or other nationally recognized overnight courier service or sent via
facsimile to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice) or two Business Days after
being sent by registered or certified mail (postage prepaid, return receipt
requested) as follows:
(a) If to Parent or Acquisition Sub to:
Pomeroy IT Solutions, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
with copies to (which shall not constitute notice):
Xxxxxxxxx & Dreidame Co., LPA
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxx, III, Esq.
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
Page 47 of 51 Pages
(b) If to Company, to:
Alternative Resources Corporation
000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
with copies to (which shall not constitute notice):
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
All such communications shall be deemed to have been duly given: (A) in the
case of a notice delivered by hand, when personally delivered; (B) in the case
of a notice sent by facsimile, upon transmission subject to telephone and
automated confirmation of receipt; and (C) in the case of a notice sent by
overnight courier service, the date delivered at the designated address, in each
case given or addressed as aforesaid.
9.4 Interpretation. The headings contained in this Agreement are for
--------------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary
intention appears, (a) the words "herein," "hereof' and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, (b) the word "including" means
"including without limitation' 'and is intended by the parties to be by way of
example rather than limitation and (c) reference to any Article or Section means
such Article or Section hereof. No provision of this Agreement shall be
interpreted or construed against any party hereto solely because such party or
its legal representative drafted such provision.
9.5 Miscellaneous. This Agreement (including the documents and
-------------
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
(b) is not intended to confer upon any other person any rights or remedies
hereunder, except for rights of indemnified parties under Section 6.14 as herein
------------
provided and (c) shall not be assigned by operation of law or otherwise, except
that on or prior to the mailing of the Proxy Statement, Acquisition Sub may
assign this Agreement to a wholly-owned Subsidiary of Parent, but no such
assignment shall relieve Acquisition Sub of its obligations hereunder. THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION
AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
9.6 Jurisdiction. Each of Company, Parent and Acquisition Sub hereby
------------
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
located in the State of Delaware (the "Relevant Courts") for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the Relevant Courts and agrees not to plead or claim in any Relevant Court
that such litigation brought therein has been brought in an inconvenient forum;
provided, however, that nothing in this Section 9.6 is intended to waive the
-----------
right of any party to remove any such action or proceeding commenced in
Page 48 of 51 Pages
any such state court to an appropriate federal court to the extent the basis for
such removal exists under applicable law. Parent and the Subsidiaries hereby
irrevocably (a) appoint CT Corporation System (the "Process Agent"), with an
office on the date hereof in Wilmington, Delaware as their agent to receive on
behalf of either of them service of copies of the summons and complaint and any
other process which may be served in any such litigation, (b) agree that service
of process may be made on Parent or Acquisition Sub by mailing, by certified
mail, a copy of such summons, complaint or other process to Parent or
Acquisition Sub in care of the Process Agent at the Process Agent's above
address, with a copy to Parent or Acquisition Sub, as applicable, at its address
for notice specified herein, and (c) authorizes and directs the Process Agent to
accept such service on their behalf. Company hereby irrevocably (i) appoints the
Process Agent as its agent to receive on its behalf service of copies of the
summons and complaint and any other process which may be served in any such
litigation, (ii) agrees that service of process may be made on Company by
mailing, by certified mail, a copy of such summons, complaint or other process
to Company in care of the Process Agent at the Process Agent's above address,
with a copy to Company at its address for notice specified herein, and (iii)
authorizes and directs the Process Agent to accept such service on behalf of
Company. As an alternative method of service, the parties further agree that the
mailing by certified or registered mail, return receipt requested, of any
process required by such courts, to the address specified in Section 9.3, shall
-----------
constitute valid and lawful service of process against them, without necessity
for service by any other means provided by statute or rule of court.
9.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
9.8 Parties In Interest. This Agreement shall be binding upon and
---------------------
inure solely to the benefit of each party hereto and, except as set forth in the
exception to Section 9.5(b), nothing in this Agreement, express or implied, is
--------------
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. Notwithstanding the foregoing,
the provisions of Section 6.14 are intended to benefit each person who is a
-------------
beneficiary of Company's current directors' and officers' insurance and
indemnification policy and related arrangements, and each such person shall have
the right to enforce the obligations of Parent under Section 6.14.
-------------
9.9 Severability. Should any provision of this Agreement be judicially
------------
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Agreement, and the part
or parts of this Agreement so held to be invalid, unenforceable or void will be
deemed to have been stricken herefrom, and the remainder will have the same
force and effectiveness as if such stricken part or parts had never been
included herein.
9.10 Entire Agreement. This Agreement, together with the exhibits and
-----------------
schedules hereto, contains the entire agreement between the parties with respect
to the Merger and related transactions, and supersede all prior agreements,
written or oral, between the parties with respect thereto, other than the
Confidentiality Agreement (excluding the provisions of the agreement dated
November 17, 2003 between Parent and the Company), which shall survive execution
of this Agreement and any termination of this Agreement.
9.11 Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Delaware without regard to its
conflicts of law provisions.
9.12 Section Headings; Construction. The headings of Sections in this
-------------------------------
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the
Page 49 of 51 Pages
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
9.13 Enforcement. The parties recognize and agree that if for any
-----------
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement and to specific
performance of any of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
9.14 Rules of Construction. The parties hereto agree that they have
-----------------------
been represented by counsel during the negotiation and execution of this
Agreement and, therefor, waive the application of any law, regulation, holding
or ruling of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
9.15 Waiver of Trial by Jury. EACH PARTY TO THIS AGREEMENT WAIVES ANY
------------------------
RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS
AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED, OR
WHICH IN THE FUTURE MAY BE DELIVERED, IN CONNECTION WITH THE MERGER OR THE OTHER
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
9.16 Consent to Granting of a Security Interest in Acquisition
-----------------------------------------------------------------
Documents. Parent and Surviving Corporation agree that upon the Closing of this
---------
transaction, the Surviving Corporation shall have the right to grant to GE
Commercial Distribution Finance Corporation, formerly known as Deutsche
Financial Services Corporation, as Administrative Agent for the benefit of
various lenders under a Credit Facilities Agreement, and Surviving Corporation
and various Affiliates of such parties, a first priority security interest and
lien on all of Surviving Corporation's rights, remedies, claims and interests
under all the acquisition documents for this transaction.
IN WITNESS WHEREOF, Parent, Acquisition Sub and Company have caused this
Agreement and Plan of Merger to be signed by their respective officers as of the
date first written above.
XXXXXXX IT SOLUTIONS, INC.
By:
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
---------------------------------
Title: President
--------------------------------
Page 50 of 51 Pages
XXXXXXX ACQUISITION SUB, INC.
By:
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
---------------------------------
Title: President
--------------------------------
ALTERNATIVE RESOURCES
CORPORATION
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
---------------------------------
Title: Chairman of the Board, CEO
--------------------------------
Page 51 of 51 Pages
APPENDIX A
DEFINITIONS - REFERENCE TABLE
-----------------------------
"Accounts Receivable" means all notes and accounts receivable held by Company or
-------------------
any Subsidiary of Company, or of which Company or any Subsidiary of Company is
the beneficial holder and all notes, bonds and other evidences of indebtedness
of and rights to receive payments from any Person held by Company or any
Subsidiary of Company.
"Acquisition Proposal" has the meaning assigned to such term in Section
--------------------- -------
6.3(a)(i).
---------
"Acquisition Sub Common Stock" has the meaning assigned to such term in Section
----------------------------- -------
3.2.
---
"Acquisition Sub" has the meaning assigned to such term in the Preamble.
----------------
"Affiliate" means any Person that directly, or indirectly through one or more
---------
intermediaries, controls, is controlled by, or is under common control with, the
Person specified.
"Agreement" has the meaning assigned to such term in the Preamble.
---------
"Bid" means any quotation, bid or proposal by Company or any of its Affiliates
---
which, if accepted or awarded, would lead to a contract with a Governmental
Entity, or a prime contractor or a higher-tier subcontractor to a Governmental
Entity, for the sale of goods or the provision of services by Company, any
Subsidiary of Company or a contracting team of which Company is a member.
"Business Day" means a day, other than Saturday, Sunday or any other day on
-------------
which commercial banks in Cincinnati, Ohio are authorized or required by law to
close.
"Cashless Exercise Consideration" has the meaning assigned to such term in
---------------------------------
Section 3.1(e).
---------------
"Closing" has the meaning assigned to such term in Section 3.5.
------- ------------
"Closing Date" has the meaning assigned to such term in Section 3.5.
------------- ------------
"Code" has the meaning assigned to such term in the Recitals.
----
"Company" has the meaning assigned to such term in the Preamble.
-------
"Company Balance Sheet" has the meaning assigned to such term in Section 4.7.
----------------------- -----------
"Company Book-Entry Shares" has the meaning assigned to such term in Section
--------------------------- -------
3.4(a).
------
"Company Capital Stock" means the capital stock of Company.
-----------------------
"Company Certificates" has the meaning assigned to such term in Section 3.4(a).
--------------------- --------------
"Company Common Stock" has the meaning assigned to such term in Section 3.1(a).
--------------------- --------------
"Company Common Stockholders" has the meaning assigned to such term in Section
----------------------------- -------
6.4(a).
------
"Company Disclosure Schedule" shall mean, with respect to the Company and its
-----------------------------
Subsidiaries, the schedules delivered by Company to the Parent and Acquisition
Sub in connection with the execution and delivery of this Agreement setting
forth, among other things, items the disclosure of which is required under this
Agreement either in response to an express disclosure requirement contained in a
provision of this Agreement or as an exception to one or more of the
representations, warranties or covenants contained in this Agreement; provided
that the mere inclusion of an item in the Company Disclosure Schedule as an
exception to a representation or warranty will not be deemed an admission by the
Company that such item (or any non-disclosed item or information of comparable
or greater significance) is required by the terms hereof to be disclosed or
represents a material exception or fact, event or circumstance or that such item
has had, or is reasonably expected to have, a Material Adverse Effect on
Company.
"Company Employees" has the meaning assigned to such term in Section 6.10.
------------------ ------------
"Company's Knowledge" has the meaning assigned to such term in Section 4.42.
-------------------- ------------
"Company Plans" has the meaning assigned to such term in Section 4.16(a).
-------------- ---------------
"Company Preferred Stock" has the meaning assigned to such term in Section 6.14.
----------------------- ------------
"Company Reports" has the meaning assigned to such term in Section 4.5(a).
---------------- --------------
"Company Required Statutory Approvals" means the making of the Merger Filing
---------------------------------------
with the Secretary of State of the State of Delaware in connection with the
Merger.
"Company Stock Option" has the meaning assigned to such term in Section 3.1(d).
--------------------- --------------
"Company Stock Option Plans" has the meaning assigned to such term in Section
----------------------------- -------
3.1(d).
------
"Company Subordinated Convertible Notes Due January 31, 2009" has the meaning
--------------------------------------------------------------
assigned to such term in Section 7.2(d).
---------------
"Company Senior Secured Revolving Credit Facility" has the meaning assigned to
--------------------------------------------------
such term in Section 7.2(d).
---------------
"Company Warrants" has the meaning assigned to such term in Section 3.1(e).
----------------- --------------
"Confidentiality Agreement" means the confidentiality agreement dated effective
--------------------------
as of November 17, 2003, between Company and Parent, as the same may be amended
from time to time.
"Consent" means any consent, approval, authorization, waiver, permit, grant,
-------
franchise, concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person.
"Contaminated" has the meaning assigned to such term in Section 4.24(a).
------------ ---------------
"DGCL" has the meaning assigned to such term in Section 1.1.
---- ------------
"Dissenting Shares" has the meaning assigned to such term in Section 3.3.
------------------ -----------
"DOL" has the meaning assigned to such term in Section 4.37(b).
--- ----------------
"Effective Time" has the meaning assigned to such term in Section 1.2.
--------------- -----------
"Environmental Law" has the meaning assigned to such term in Section 4.24(a).
------------------ ---------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
-----
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
-------------
"Exchange Agent" has the meaning assigned to such term in Section 3.4(a).
--------------- --------------
"Expense Amount" has the meaning assigned to such term in Section 8.3(a)
--------------- --------------
"Forward Merger" has the meaning assigned to such term in Section 1.1.
---------------
"GAAP" means United States generally accepted accounting principles set forth in
----
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board.
"Government Contracts" means any prime contract, subcontract, teaming agreement
---------------------
or arrangement, joint venture, basic ordering agreement, blanket purchase
agreement, letter agreement, purchase order, delivery order, task order, grant,
cooperative agreement, Bid, change order or other commitment or funding vehicle
between Company or any Subsidiary of Company and (a) a Governmental Entity, (b)
any prime contractor to a Governmental Entity or (c) any subcontractor with
respect to any contract described in clause (a) or (b).
"Governmental Entity" means any government or any agency, bureau, board,
--------------------
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign, as well as any corporations owned or
chartered by any such governmental agency, bureau, board, commission, court,
department, official, political subdivision, tribunal or other instrumentality.
"Hazardous Substance" has the meaning assigned to such term in Section 4.24(a).
-------------------- ---------------
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
--------
amended.
"Indemnified Parties" has the meaning assigned to such term in Section 6.14(a).
-------------------- ---------------
"INS" has the meaning assigned to such term in Section 4.37(b).
--- ----------------
"Insurance Policies" has the meaning assigned to such term in Section 4.22.
------------------- ------------
"Interim Additional Financing" means a debt or equity financing other than under
----------------------------
the Company's revolving credit facility resulting in net proceeds to the Company
in an amount not to exceed $3,000,000.00.
"Knowledge" has the meaning assigned to such term in Sections 4.42 and 5.12.
---------
"Laws" means all foreign, federal, state and local statutes, laws, ordinances,
----
regulations, rules, resolutions, orders, tariffs, determinations, writs,
injunctions, awards (including, awards of any arbitrator), judgments and decrees
applicable to the specified Person and to the businesses and assets thereof
(including, laws relating to the protection of classified information; the sale,
leasing, ownership or management of real property; employment practices, terms
and conditions, and wages and hours; building standards, land use and zoning;
and safety, health and fire prevention.
"Leased Real Property" has the meaning assigned to such term in Section 4.21(b).
-------------------- ---------------
"Leases" has the meaning assigned to such term in Section 4.21(b).
------ ----------------
"Liens" means, with the exception of Permitted Liens, a mortgage, pledge,
-----
hypothecation, right of others, claim, security interest, encumbrance, lease,
sublease, license, occupancy agreement, adverse claim or interest, easement,
covenant, encroachment, burden, title defect, title retention agreement, voting
trust agreement, interest, equity, option, lien, right of first refusal, charge
or other restrictions or limitations of any nature whatsoever, including,
without limitation, such that may arise under any Material Contracts and/or
Governmental Contracts.
"Material Adverse Effect" means, with respect to any entity, (a) any adverse
-------------------------
change, circumstance, fact, event or effect that, individually or in the
aggregate with all other adverse changes, circumstances, facts, events and
effects, is or is reasonably likely to be materially adverse to the business,
condition (financial or otherwise), assets or results of operations of such
entity and its Subsidiaries taken as a whole, other than any change,
circumstance, fact, event or effect relating to (i) the securities markets in
general, (ii) the economy in general, except if such entity is adversely
affected in a materially disproportionate manner as compared to similarly
situated entities, (iii) the industries in which Parent or Company operate and
not specifically relating to Parent or Company, including changes in legal,
accounting or regulatory changes, or conditions, except if such entity is
adversely affected in a materially disproportionate manner as compared to other
comparable participants in such industries, or (iv) the announcement of the
Merger and the performance of the obligations of the parties under this
Agreement (including any cancellations or delays in contract awards and any
impact on relationships with customers, prime contractors, subcontractors or
suppliers to the extent but only to the extent relating to the announcement of
the Merger or the performance of the obligations of the parties hereunder),or
(b) a material adverse effect on the ability of such entity to perform its
obligations under this Agreement. For purposes hereof, changes in the trading
price of Parent Common Stock or Company Common Stock, as reported on NASDAQ or
OTC Bulletin Board, will not alone constitute a Material Adverse Effect, whether
occurring at any time or from time to time. The parties specifically agree that
if upon the Closing Date, four (4) or more of the seven (7) individuals
identified on Exhibit C, should die, become disabled which renders such
individual unable to perform his/her duties under his/her Employment Agreement
for a period of sixty (60) consecutive days or for an aggregate of ninety (90)
days or more during any twelve (12) month period or decline to continue to be
employed by Company, pursuant to the Employment Agreements identified on such
Exhibit C, such deaths, disabilities and/or declinations of
continued employment shall constitute a Material Adverse Effect that will allow,
but not obligate, Parent to terminate this transaction pursuant to the
provisions of Section 7.3(d) of this Agreement.
---------------------------
"Material Contracts" has the meaning assigned to such term in Section 4.25(a).
------------------- ---------------
"Merger Consideration" has the meaning assigned to such term in Section 3.1(a).
--------------------- --------------
"Material Equity Financing" means the issuance by the Company of stock (or any
---------------------------
debt instruments convertible into stock) of the Company for net proceeds to the
Company in excess of $3,000,000.00.
"Merger Filing" has the meaning assigned to such term in Section 1.2.
-------------- ------------
"Merger" has the meaning assigned to such term in Section 1.1.
------ ------------
"OTC Bulletin Board" has the meaning assigned to such term in Section 4.2(e).
-------------------- --------------
"Outside Date" has the meaning assigned to such term in Section 8.1(b)(i).
------------- -----------------
"Parent" has the meaning assigned to such term in the Preamble.
------
"Parent 10-K" has the meaning assigned to such term in Section 5.5.
------------ ------------
"Parent 10-Q" has the meaning assigned to such term in Section 5.5.
------------ ------------
"Parent Balance Sheet" has the meaning assigned to such term in Section 5.7.
---------------------- -----------
"Parent Break-Up Fees" has the meaning assigned to such term in Section 8.3(a).
--------------------- --------------
"Parent Common Stock" has the meaning assigned to such term in Section 5.4.
--------------------- ------------
"Parent Disclosure Schedule" shall mean, with respect to the Parent and its
----------------------------
Subsidiaries, the Schedule delivered by Parent and Acquisition Sub to Company in
connection with the execution and delivery of this Agreement setting forth,
among other things, items the disclosure of which is required under this
Agreement either in response to an express disclosure requirement contained in a
provision of this Agreement or as an exception to one or more of the
representations, warranties or covenants contained in this Agreement; provided
that the mere inclusion of an item in the Parent Disclosure Schedule as an
exception to a representation or warranty will not be deemed an admission by
Parent and Acquisition Sub that such item (or any non-disclosed item or
information of comparable or greater significance) is required by the terms
hereof to be disclosed or represents a material exception or fact, event or
circumstance or that such item has had, or is reasonably expected to have, a
Material Adverse Effect on Parent and Acquisition Sub.
"Parent Preferred Stock" has the meaning assigned to such term in Section 5.4.
------------------------ -----------
"Parent Benefit Plans" has the meaning assigned to such term in Section 6.10(b).
-------------------- ---------------
"Parent Representatives" has the meaning assigned to such term in Section
----------------------- -------
6.6(a).
------
"Parent and Acquisition Sub Required Statutory Approvals" means the making of
----------------------------------------------------------
the Merger Filing with the Secretary of State of the State of Delaware.
"Parent SEC Reports" has the meaning assigned to such term in Section 5.5.
-------------------- -----------
"Permits" has the meaning assigned to such term in Section 4.11(a).
------- ----------------
"Permitted Liens" means (a) Liens that do not interfere with the value,
----------------
marketability or use of the assets in the operations or business of the Company,
(b) Liens for Taxes not yet due and payable or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on Company's books in accordance with generally accepted
accounting principles, (c) Liens which do not secure monetary liabilities of any
Person and that, individually or in the aggregate, do not and would not
materially detract from the value or marketability of any of the assets of
Company or materially interfere with the use thereof as currently used and (d)
Liens in favor of carriers, warehousemen, mechanics, materialmen and landlords
granted in the ordinary course of business for amounts not overdue or being
diligently
contested in good faith by appropriate proceedings and/or which adequate
reserves in accordance with generally accepted accounting principles shall have
been set aside on its books.
"Person" means any individual, partnership, joint venture, corporation, limited
------
liability company, trust, unincorporated organization or other entity and a
government or any department or agency thereof.
"Process Agent" has the meaning assigned to such term in Section 9.6.
-------------- ------------
"Proprietary Rights" has the meaning assigned to such term in Section 4.21(a).
------------------- ---------------
"Proxy Statement" has the meaning assigned to such term in Section 6.7(a).
---------------- --------------
"Regulatory Law" means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended,
--------------
the HSR Act, the Federal Trade Commission Act, as amended, and all other
federal, state and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition, through
merger or acquisition.
"Relevant Courts" has the meaning assigned to such term in Section 9.6.
---------------- -----------
"Reverse Merger" has the meaning assigned to such term in Section 1.1.
--------------- -----------
"Xxxxxxxx-Xxxxx Act" has the meaning assigned to such term in Section 4.5(a).
------------------- --------------
"SEC" has the meaning assigned to such term in Section 4.5(a).
--- ---------------
"Securities Act" means the Securities Act of 1933, as amended.
---------------
"Stockholders' Approval" has the meaning assigned to such term in Section
----------------------- -------
4.4(d).
------
"Stockholders' Meeting" has the meaning assigned to such term in Section 6.4(a).
--------------------- --------------
"Stockholders" means the Stockholders of Company.
------------
"Subsidiary" shall mean, when used with reference to any person or entity, any
----------
corporation, partnership, limited liability company, business trust, joint
venture or other entity of which such person or entity (either acting alone or
together with its other Subsidiaries) owns, directly or indirectly, 50% or more
of the stock or other voting interests, the holders of which are entitled to
vote for the election of a majority of the board of directors or any similar
governing body of such corporation, partnership, limited liability company,
business trust, joint venture or other entity.
"Superior Proposal" has the meaning assigned to such term in Section 6.3(b).
------------------ --------------
"Supplier" has the meaning assigned to such term in Section 4.23(b).
-------- ----------------
"Surviving Corporation" has the meaning assigned to such term in Section 1.1.
---------------------- -----------
"Tangible Property Leases" has the meaning assigned to such term in Section
-------------------------- -------
4.22.
----
"Taxes" means all taxes, including, income, estimated income, gross receipts,
-----
excise, property, sales, withholding, social security, occupation, use, service,
service use, license, payroll, franchise, transfer and recording taxes, fees and
charges, windfall profits, severance, customs, import, export, employment or
similar taxes, charges, fees, levies or other assessments imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof, whether computed on a separate, consolidated, unitary, combined or any
other basis, and such term shall include any interest, fines, penalties or
additional amounts and any interest in respect of any additions, fines or
penalties attributable or imposed on or with respect to any such taxes, charges,
fees, levies or other assessments, and any obligation to indemnify or otherwise
assume or succeed to the Tax liability of any other Person.
"Tax Return" means any return, report or other document or information required
-----------
to be supplied to a taxing authority in connection with Taxes.
"Tribunal" means any government, any arbitration panel, any court or any
--------
governmental department, commission, board, bureau, agency or instrumentality of
any state or the United States.
"Union Plans" has the meaning assigned to such term in Section 4.5(a).
------------ --------------
"Vendor Receivables" means any amounts owing to Company or any Subsidiary of
--------------------
Company from vendors of goods and products used in the business resulting from
discounts for prompt payment, volume discounts, promotional programs or similar
vendor special pricing and term arrangements.
"WCP," "WCPC" and "WCL" have the meanings assigned to such terms in the
---- ----
recitals.
"WCP, WCPC and WCL Agreement" shall have the meaning assigned to such term in
------------------------------
the recitals.
TABLE OF CONTENTS
-----------------
ARTICLE 1: THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . 1
1.3 Consummation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2: THE SURVIVING CORPORATION AND PARENT . . . . . . . . . . . . . . . . 2
2.1 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . 2
2.2 By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Directors and Officers of Surviving Corporation. . . . . . . . . . . 2
ARTICLE 3: CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Acquisition Sub Shares . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Surrender and Payment. . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF COMPANY. . . . . . . . . . . . . . 6
4.1 Organization, Standing, etc. of Company. . . . . . . . . . . . . . . 6
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Authority; Non-Contravention; Approval . . . . . . . . . . . . . . . 8
4.5 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .10
4.7 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . .10
4.8 No Liabilities as Guarantor. . . . . . . . . . . . . . . . . . . . .11
4.9 Absence of Certain Changes or Events . . . . . . . . . . . . . . . .11
4.10 Taxes and Tax Returns. . . . . . . . . . . . . . . . . . . . . . . .11
4.11 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . .13
4.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.13 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . .14
4.14 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . .14
4.15 Employee Benefit Plans; ERISA. . . . . . . . . . . . . . . . . . . .14
4.16 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.17 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.18 Accounts Receivable and Vendor Receivables . . . . . . . . . . . . .17
4.19 Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.20 Tangible Personal Property Leases. . . . . . . . . . . . . . . . . .18
4.21 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . .18
4.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
4.23 Commercial Relationships . . . . . . . . . . . . . . . . . . . . . .19
4.24 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . .20
4.25 Contracts and Commitments; Suppliers and Customers . . . . . . . . .22
4.26 Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . .23
4.27 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . .23
4.28 Relations with Governments . . . . . . . . . . . . . . . . . . . . .23
4.29 Stockholder Rights Plan. . . . . . . . . . . . . . . . . . . . . . .23
4.30 No Existing Discussions. . . . . . . . . . . . . . . . . . . . . . .23
4.31 Disclosure Documents . . . . . . . . . . . . . . . . . . . . . . . .23
4.32 Advisors' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.33 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . .24
4.34 Certain Loans, Split Dollar Arrangements and Other Transactions. . .24
4.35 Territorial Restrictions . . . . . . . . . . . . . . . . . . . . . .24
4.36 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . .24
4.37 Immigration Compliance . . . . . . . . . . . . . . . . . . . . . . .24
4.38 Preference Payments. . . . . . . . . . . . . . . . . . . . . . . . .25
4.39 Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
4.40 Minority Business Status . . . . . . . . . . . . . . . . . . . . . .25
4.41 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
4.42 Definition of Company's Knowledge. . . . . . . . . . . . . . . . . .25
4.43 No Additional Representations. . . . . . . . . . . . . . . . . . . .25
4.44 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . .26
5.1 Organization, Standing, etc. of Parent . . . . . . . . . . . . . . .26
5.2 Authorization and Execution. . . . . . . . . . . . . . . . . . . . .26
5.3 Absence of Conflicts; Governmental Authorizations. . . . . . . . . .26
5.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.5 SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .28
5.7 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . .28
5.8 Absence of Adverse Changes . . . . . . . . . . . . . . . . . . . . .28
5.9 Actions and Proceedings. . . . . . . . . . . . . . . . . . . . . . .28
5.10 Proxy Statement and Registration Statement . . . . . . . . . . . . .28
5.11 Advisors' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.12. Company Shares and Acquisition Sub Interests . . . . . . . . . . . .29
5.13 Definition of Parent's Knowledge . . . . . . . . . . . . . . . . . .29
5.14 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
ARTICLE 6: COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
6.1 Conduct of Business by Company Pending the Merger. . . . . . . . . .29
6.2 Control of Operations. . . . . . . . . . . . . . . . . . . . . . . .32
6.3 No Solicitation by Company . . . . . . . . . . . . . . . . . . . . .32
6.4 Meeting of Company Stockholders and Meeting of SSI Stockholders. . .34
6.5 Agreement to Cooperate; \f C \l 2. . . . . . . . . . . . . . . . . .34
6.6 Access to Information. . . . . . . . . . . . . . . . . . . . . . . .35
6.7 Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . .35
6.8 Expenses and Fees. . . . . . . . . . . . . . . . . . . . . . . . . .36
6.9 Public Statements. . . . . . . . . . . . . . . . . . . . . . . . . .36
6.10 Company Employees. . . . . . . . . . . . . . . . . . . . . . . . . .36
6.11 Notification of Certain Matters; Supplemental Disclosure . . . . . .37
6.12 Reliance Upon Warranties, Representations and Agreements of Company 37
6.13 Reliance Upon and Enforcement of Representations, Warranties and
Agreements of Parent and Acquisition Sub . . . . . . . . . . . . . .38
6.14 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .38
6.15 Maintenance of Company Records . . . . . . . . . . . . . . . . . . .39
6.16 Stockholder Litigation . . . . . . . . . . . . . . . . . . . . . . .40
6.17 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
6.18 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
ARTICLE 7: CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
7.1 Conditions to Each Party's Obligation to Effect the Merger . . . . .40
7.2 Conditions to Obligation of Company to Effect the Merger . . . . . .40
7.3 Conditions to Obligations of Parent to Effect the Merger . . . . . .41
ARTICLE 8: TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . .42
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . .43
8.3 Termination Payment by Company . . . . . . . . . . . . . . . . . . .45
8.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
ARTICLE 9: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . .47
9.1 Non-Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
9.2 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . .48
9.5 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . .48
9.6 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
9.8 Parties In Interest. . . . . . . . . . . . . . . . . . . . . . . . .49
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
9.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .49
9.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .49
9.12 Section Headings; Construction . . . . . . . . . . . . . . . . . . .49
9.13 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
9.14 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . .50
9.15 Waiver of Trial by Jury. . . . . . . . . . . . . . . . . . . . . . .50
AGREEMENT AND PLAN OF MERGER
May 11, 2004
