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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
Dated as of July 31, 1998
BY AND AMONG
XXXXXX COMMUNICATIONS INC.
(formerly named Arista Marketing Associates, Inc.),
XXXXXX & PITTINOS, INC.,
J. XXXXXXX XXXXXX and XXXXXXXX X. XXXXXX
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Table of Contents
Page
ARTICLE I
DEFINITIONS 1
ARTICLE II
THE MERGER AND MERGER SHARES 5
2.1. The Merger 5
2.2. Effective Time of the Merger 6
2.3. Certificate of Incorporation of Surviving Corporation 6
2.4. By-laws of Surviving Corporation 6
2.5. Officers of Surviving Corporation 6
2.6. Directors of Surviving Corporation 6
2.7. Further Assurances 6
2.8. Status of Buyer Common Stock 7
2.9. Conversion of the Common Stock 7
2.10. Shares Held by the Company 7
2.11. No Rights as Stockholders 7
2.12. Surrender of Certificates 7
2.13. Status of Certificates 7
2.14. No Further Transfers 7
2.15. Escrow of Shares 8
ARTICLE III
STEPS PRELIMINARY TO THE MERGER 8
3.1. Asset Sale 8
3.2. Distribution 8
3.3. Contingent Purchase Price 9
ARTICLE IV
CLOSING 10
4.1. The Closing 10
ARTICLE V
REPRESENTATIONS AND WARRANTIES 10
5.1. Representations and Warranties of the Shareholders 10
5.2. Representations and Warranties of the Buyer 23
ARTICLE VI
CLOSING DOCUMENTS 26
6.1. The Company and the Shareholders 26
6.2. The Buyer 26
ARTICLE VII
POST-CLOSING COVENANTS 26
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7.1. Further Assurances 26
7.2. Repurchase Rights 27
7.3. Guarantees 28
7.4. Final Tax Returns 28
ARTICLE VIII
INDEMNIFICATION 28
8.1. Indemnification 28
8.3. Indemnifiable Losses 31
ARTICLE IX
CERTAIN SHAREHOLDER AGREEMENTS 32
9.1. Confidentiality 32
9.2. Non-Competition 33
9.3. Relief 34
ARTICLE X
MISCELLANEOUS 34
10.1. Press Releases and Public Announcements 34
10.2. No Third-Party Beneficiaries 34
10.3. Entire Agreement 34
10.4. Succession and Assignment 34
10.5. Counterparts 35
10.6. Headings 35
10.7. Notices 35
10.8. Governing Law 36
10.9. Amendments and Waivers 36
10.10. Severability 37
10.11. Survival of Representations and Warranties 37
10.12. Expenses 38
Exhibit A - Certificate of Merger
Exhibit B - Articles of Merger
Exhibit C - Joint Balance Sheet, Initial Cash
Distribution Amount and Accounts Receivable
Exhibit D - Method of Allocating Corporate Overhead
Schedule 7.3 - Equipment Leases
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 31, 1998, by and
among XXXXXX COMMUNICATIONS INC. (formerly named Arista Marketing Associates,
Inc.), a Delaware corporation (the "Buyer"), XXXXXX &: XXXXXXXX, INC., a
Pennsylvania corporation (the "Company") , and J. XXXXXXX XXXXXX ("Xxxxxx") and
XXXXXXXX 0. XXXXXX ("Xxxxxx") , the owners of all of the shares of the Company.
The Buyer, the Company, Xxxxxx and Xxxxxx are each referred to individually as a
"Party" and collectively as the "Parties". Xxxxxx and Xxxxxx are each referred
to individually as a "Shareholder" and collectively as the "Shareholders".
A. The Parties desire to have the Company merge with and into the
Buyer (the "Merger") on the terms and conditions and for the consideration
described in this Agreement (capitalized terms used in this Agreement without
definition shall have the meanings set forth in Article I);
B. The Boards of Directors of the Buyer and the Company have
determined that the Merger is consistent with and in furtherance of the
long-term business strategy of the Buyer and the Company, and is fair to, and in
the best interest of, the Buyer and the Company and their respective
shareholders;
C. In furtherance of the Merger, the Board of Directors and the
shareholders of the Company and the Board of Directors of the Buyer have
approved the Merger upon the terms and subject to the conditions set forth in
this Agreement; and
D. The Parties desire to make certain representations, warranties
and agreements in connection with the Merger.
In consideration of the premises and the representations, warranties and
agreements set forth in this Agreement, and intending to be legally bound, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first Person. "Control" (including the terms 'controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract, as trustee or executor,
or otherwise. With respect to
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the Company, "Affiliate" includes each of the Shareholders, and with respect to
the Shareholders, "Affiliate" includes all relatives of the Shareholders.
"Agreement" means this Agreement and Plan of Merger, including the schedules and
exhibits.
"Benefit Arrangement" means any employment, consulting, severance, change in
control or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including, but not limited to, any self-insured supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits or for deferred compensation, profit-sharing,
bonuses, stock options, restricted stock, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation or benefits) that (1) is not an employee benefit plan, within the
meaning of Section 3(3) of ERISA, (2) is entered into, maintained, contributed
to or required to be contributed to, as the case may be, by the Company or any
ERISA Affiliate and (3) covers any employee or former employee of the Company or
any ERISA Affiliate (with respect to the employee's or former employee's
relationship with the Company or ERISA Affiliate).
"Buyer Common Stock" means the common stock of the Buyer, par value $.01 per
share.
"Certificates" has the meaning set forth in Section 2.12.
"Certificate of Merger" has the meaning set forth in Section 2.2.
"Closing" has the meaning set forth in Section 4.1.
"Closing Date" has the meaning set forth in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended. Reference to any
section of the Code includes reference to any regulations issued thereunder as
well as to any comparable provisions of any legislation that amends, supplements
or replaces such section.
"Company Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Company Financial Statements" has the meaning set forth in Section 5.1(g).
"Company Most Recent Financial Statements" has the meaning set forth in Section
5.1(g).
"Company Most Recent Fiscal Period" has the meaning set forth in Section 5.1(g).
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"Confidential Information" has the meaning set forth in Section 9.1(b).
"Cut-Off Date" means the third anniversary of the Closing Date.
"Effective Time" has the meaning set forth in Section 2.2.
"Environmental Law" means all federal, state, local and foreign statutes,
ordinances, regulations, orders, directives, decrees and other requirements of
law and obligations arising under common law, concerning pollution or protection
of public health or the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
Reference to any section of the ERISA includes reference to any regulations
issued thereunder, as well as to any comparable provisions of any legislation
that amends, supplements or replaces such section.
"ERISA Affiliate" means any entity that is (or at any relevant time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, the Company, as defined
in Section 414 (d) (c), (m) or (o) of the Code.
"Escrow Agent" means Xxxxxx Xxxxxxxxx & Xxxxxxxxxxx LLP, as escrow agent under
the Escrow Agreement.
"Escrow Agreement" means the escrow agreement dated the Closing Date among the
Buyer, the Shareholders and the Escrow Agent.
"Escrow Shares" means the shares of Buyer Common Stock subject to the Escrow
Agreement.
"Final Balance Sheet" has the meaning set forth in Section 3.3(a).
"Final Cash Distribution Amount" has the meaning set forth in Section 3.3(a) .
"Financial Statements" has the meaning set forth in Section 5.2(f).
"GAAP" means United States generally accepted accounting principles as in effect
from time to time.
"Hazardous Substances" means "hazardous substances", "pollutants",
"contaminants", or "regulated substances" under any Environmental Law, or any
other substance considered toxic, hazardous or a potential threat to public
health or the environment, the presence of which might result in a Person
incurring liability under any Environmental Law.
"Initial Cash Distribution Amount" has the meaning set forth in Section 3.1(a).
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"IRS" means the Internal Revenue Service.
"Intellectual Property" means the United States and foreign trademarks, service
marks, trade names, trade dress, domain names, copyrights and similar properties
and rights, including registrations and applications to register or renew the
registration of any of the foregoing; United States and foreign letters patent
and patent applications; and inventions, processes, designs, formulae, trade
secrets, know-how, Confidential Information, computer software, data and
documentation and all similar intellectual property and related proprietary
rights.
"Joint Balance Sheet" has the meaning set forth in Section 3.1(a).
"Licenses" has the meaning set forth in Section 5.1(t).
"Material Adverse Effect" has the meaning set forth in Section 5.1(a).
"Merger" has the meaning set forth in the recitals of this Agreement.
"Merger Filing" has the meaning set forth in Section 2.2.
"Merger Shares" has the meaning set forth in Section 2.1.
"Most Recent Financial Statements" has the meaning set forth in Section 5.2(f).
"Most Recent Fiscal Period" has the meaning set forth in Section 5.2 (f)
"MPC" means The Medical Phone Company, Inc., a Delaware corporation and an
Affiliate of the Buyer.
"NCI" means NCI, Inc. (formerly named Xxxxxx Communications Inc.), a Delaware
corporation and an Affiliate of the Buyer.
"Ordinary Course of Business" means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).
"Person" means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity (or any department, agency
or political subdivision thereof).
"PTI" means Professional Telemarketing, Inc., a Missouri corporation and an
Affiliate of the Buyer.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations issued thereunder.
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"Security Interest" means any mortgage, pledge, lien, encumbrance, charge or
other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for taxes not yet due and payable, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and (d) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"SmithKline Litigation" means the action pending in the United States District
Court, Eastern District of Pennsylvania, titled Xxxxxx & Xxxxxxxx. Inc. v.
SmithKline Xxxxxxx Corporation (Civil Action No. 95-6619 (MK) and any related
counterclaims.
"Subsidiary" means each corporation, partnership, limited liability company or
other entity as to which 50% or more of the equity is owned, directly or
indirectly, by the Company.
"Surviving Corporation" has the meaning set forth in Section 2.1. Following the
Merger and a transfer of the assets and business of the Company to MPC, the term
"Surviving Corporation" shall mean MPC.
"Taxes" means any federal, state, local or foreign income, payroll, sales, gross
receipts, use, property or other tax, including any interest, penalty or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto.
ARTICLE II
THE MERGER AND MERGER SHARES
2.1. The Merger. In accordance with and subject to the terms and
provisions of this Agreement, at the Effective Time: (a) the Company shall be
merged with and into the Buyer, the separate existence of the Company shall
cease, and the Buyer shall be the surviving corporation (the "Surviving
Corporation") and shall continue its corporate existence under the laws of
Delaware; and (b) the Merger shall have the effects set forth in Sections 259
and 261 of the Delaware General Corporation Law. The Parties intend that the
Merger will meet the "tax-free reorganization" requirements of Section 368(a)
(1) (A) of the Code. The Merger Shares (the "Merger Shares") shall be an
aggregate of three hundred forty-eight thousand seven hundred four (348,704)
shares of Buyer Common Stock. Subject to Section 2.15, the Merger Shares shall
be allocated and distributed to the Shareholders in proportion to their
ownership of Company Common Stock.
2.2. Effective Time of the Merger. The Merger shall become effective at
such time (the "Effective Time") as shall be stated in the Certificate of Merger
and Articles of Merger (each, a
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"Certificate of Merger"), in substantially the forms attached to this Agreement
as Exhibits A and B, to be filed with the Secretary of State of Delaware and the
Secretary of the Commonwealth of Pennsylvania (together with any other documents
required to be filed by applicable law, the "Merger Filing"). The Merger Filing
shall be made simultaneously with or as soon as practicable after the Closing of
the transactions contemplated by this Agreement in accordance with Section 4.1.
2.3. Certificate of Incorporation of Surviving Corporation. As of the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall remain the Certificate of Incorporation of the Buyer immediately prior to
the Effective Time.
2.4. By-laws of Surviving Corporation. As of the Effective Time, the
By-laws of the Surviving Corporation shall remain the Bylaws of the Buyer
immediately prior to the Effective Time.
2.5. Officers of Surviving Corporation. At the Effective Time, the
officers of the Surviving Corporation shall be the persons in office on the date
of this Agreement, and such officers shall serve, subject to the By-laws of the
Surviving Corporation, until the next annual meeting of the Board of Directors
of the Surviving Corporation and thereafter until their respective successors
are duly elected. The Board of Directors of the Surviving Corporation may
designate such other officers as it determines in accordance with the By-laws.
2.6. Directors of Surviving Corporation. At the Effective Time, the
directors of the Surviving Corporation shall be the persons in office on the
date of this Agreement, and such directors shall serve, subject to the By-laws
of the Surviving Corporation, until the next annual meeting of the stockholders
of the Surviving Corporation and thereafter until their respective successors
are duly elected.
2.7. Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or documents are necessary,
desirable or proper (a) to vest, perfect or confirm of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, immunities, powers, purposes, franchises, properties or
assets of the Company, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to solicit in the name of the Company any
third party consents or other documents required to be delivered by any
third-party, to execute and deliver, in the name and on behalf of the Company,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of the Company, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, immunities, powers, purposes,
franchises,
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properties or assets of the Company and otherwise to carry out the purposes of
this Agreement.
2.8. Status of Buyer Common Stock. At the Effective Time, by virtue of the
Merger, each share of Buyer Common Stock outstanding immediately prior to the
Merger shall remain outstanding as one share of Buyer Common Stock as the
Surviving Corporation in the Merger.
2.9. Conversion of the--Common Stock. The Company Common Stock outstanding
and owned by Xxxxxx and Xxxxxx immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holders thereof,
be converted into, in the aggregate, the Merger Shares.
2.10. Shares Held by the Company. Each share of Company Common Stock that
at the Effective Time is held in the treasury of the Company shall, by virtue of
the Merger and without any action on the part of the Company, be canceled and
retired and cease to exist, without any conversion thereof.
2.11. No Rights as Stockholders. The holders of Certificates (as defined
in Section 2.12) representing shares of Company Common Stock shall, as of the
Effective Time, cease to have any rights as Company shareholders, and their sole
right shall be the right to receive their portion of the Merger Shares, as
determined and distributed in the manner set forth in this Agreement.
2.12. Surrender of Certificates. At the Effective Time, each holder of an
outstanding certificate or certificates that prior thereto represented
outstanding Company Common Stock (the "Certificates") shall surrender such
Certificates to the Surviving Corporation and be entitled to the portion of the
Merger Shares into which the aggregate number of shares of Company Common Stock
previously represented by such Certificate or Certificates so surrendered shall
have been converted pursuant to this Agreement.
2.13. Status of Certificates. Until surrendered in accordance with the
provisions of Section 2.12, from and after the Effective Time, each Certificate
(other than Certificates representing former shares of Company Common Stock held
in the treasury of the Company) shall represent for all purposes only the right
to receive a portion of the Merger Shares as determined and distributed in the
manner set forth in this Agreement.
2.14. No Further Transfers. After the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no transfers on the
stock transfer books of the surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for a portion of the Merger
Shares as provided in Section 2.12.
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2.15. Escrow of Shares. At the Effective Time, the Buyer shall deposit 10%
of the Merger Shares with the Escrow Agent to be held and disbursed by the
Escrow Agent in accordance with the Escrow Agreement. Such shares shall be
deducted pro rata from the Merger Shares allocable to each Shareholder.
ARTICLE III
STEPS PRELIMINARY TO THE MERGER
3.1. Asset Sale. During the week prior to the Merger, the accountants for
the Company, Xxxxxxxxx Xxxx Xxxxx Xxxxxx Company ("Xxxxxxxxx Xxxx"), and the
accountants for the Buyer, Xxxxx Xxxxxx LLP ("Xxxxx Xxxxxx"), prepared a
mutually agreed to preliminary balance sheet of the Company as of June 30, 1998
(the "Joint Balance Sheet"), a copy of which is attached to this Agreement as
Exhibit C. On the Closing Date, and prior to the Merger, based on the Joint
Balance Sheet the Company shall have (i) determined the excess of (A) the sum of
its current assets plus security deposits plus prepaid expenses plus agreed-upon
fixed assets acquired of $19,481 over (B) the sum of its current liabilities
(excluding the current portion of its lease payables and any lines of credit)
plus any non-current deferred revenues, as shown on the Joint Balance Sheet (the
"Initial Cash Distribution Amount"), (ii) provided the Buyer with a copy of the
calculation of the Initial Cash Distribution Amount and (iii) identified to
the Buyer on Exhibit C accounts receivable of the Company (the "Purchased
Accounts Receivable") the aggregate net present value of which (applying an
agreed discount rate of 7% per annum and assuming that all such accounts
receivable will be collected within forty-five (45) days after the date of
invoice) is at least 100% of the Initial Cash Distribution Amount. Prior to the
Merger, the Buyer shall purchase from the Company the Purchased Accounts
Receivable for a purchase price equal to the sum of the Initial Cash
Distribution Amount plus the amount (if any) to be received in accordance with
Section 3.3(b), subject to downward adjustment and refund as described in
Section 3.3 (c) (the "Purchase Price"), on the Closing Date, the Buyer shall
transfer to the Company cash in an amount equal to the Initial Cash Distribution
Amount.
3.2. Distribution. On the day of the Merger, and prior to the Effective
Time, the Company shall declare and pay in cash to the Shareholders a dividend
in an amount equal to the Initial Cash Distribution Amount. Such amount is
subject to refund to the Company in accordance with Section 3.3(c). Prior to the
Merger, the Company shall also declare a dividend with respect to any increases
in the Purchase Price determined in accordance with Section 3.3(b), such
dividend (if any) to be payable to the Shareholders after the Merger.
3.3. Contingent Purchase Price. (a) Within twenty (20) days after receipt
from the Company of a preliminary balance sheet of
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the Company as of the Closing Date, Xxxxx Xxxxxx shall (i) prepare a final
balance sheet of the Company as of the Closing Date in accordance with GAAP and
in a manner consistent with the accounting methodology utilized and agreed to by
the Parties with respect to the preparation of the Joint Balance Sheet (the
"Final Balance Sheet") and (ii) within such 20-day period, deliver to the Buyer,
the Shareholders and Xxxxxxxxx Xxxx a copy of such Final Balance Sheet and,
based on that Final Balance Sheet and using the same method of calculation as
described in Section 3.1, either deliver a revised calculation of the Initial
Cash Distribution Amount or confirm to such Persons that there should be no
change in the Initial Cash Distribution Amount (the "Final Cash Distribution
Amount"), In the event that either the Buyer or the Shareholders shall dispute
the Final Cash Distribution Amount, as so determined by Xxxxx Xxxxxx, such Party
shall, within thirty (30) days after receipt of Xxxxx Xxxxxx'x determination,
submit the Final Cash Distribution Amount to Deloitte & Touche LLP for
determination in accordance with the methodology described above. Deloitte &
Touche shall, within thirty (30) days thereafter, either deliver a revised
calculation of the Final Cash Distribution Amount or confirm to such Persons
that there should be no change in the Final Cash Distribution Amount determined
by Xxxxx Xxxxxx. The Final Cash Distribution Amount, as so determined by
Deloitte & Touche, shall be final, conclusive and binding on the Parties and
shall not be subject to judicial review. The expenses of Xxxxx Xxxxxx shall be
borne by the Buyer. The expenses of Xxxxxxxxx Xxxx shall be borne by the
Shareholders. The expenses of Deloitte & Touche shall be borne in equal shares
by the Buyer, on the one hand, and the Shareholders, on the other hand.
(b) If the Final Cash Distribution Amount exceeds the Initial Cash Distribution
Amount, the Purchase Price of the accounts receivable listed on Exhibit c shall
be adjusted to be equal to the Final Cash Distribution Amount, and the Surviving
Corporation, as successor in interest to the Company, shall pay the dividend
declared in accordance with Section 3.2 within 10 days after the final
determination of the Final Cash Distribution Amount.
(c) If the Final Cash Distribution Amount is less than the Initial Cash
Distribution amount, the Purchase Price of the accounts receivable listed on
Exhibit C shall be decreased by such difference, and the Shareholders shall,
within 10 days after the final determination of the Final Cash Distribution
Amount, pay such amount to the Surviving Corporation, as successor in interest
to the Company, in proportion to the Company Common Stock owned by the
Shareholders.
ARTICLE IV
CLOSING
4.1. The Closing. The closing of the transactions contemplated
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by this Agreement (the "Closing) shall take place at the offices of Xxxxxx
Xxxxxxxxx & Xxxxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
commencing at 10:00 a.m. local time on the date of execution and delivery of
this Agreement and shall be deemed effective as of the Effective Time (the
"Closing Date").
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Shareholder. Except as set
forth on the disclosure schedule (the "Disclosure Schedule") delivered to the
Buyer on or before the date of this Agreement that specifically identifies the
relevant provisions of this Agreement to which such exceptions relate (which
exceptions shall be deemed to be representations and warranties of the
Shareholders as if made in this Agreement and shall, to the extent applicable,
amend the representations and warranties set forth below), the Shareholders
jointly make the following representations and warranties to the Buyer:
(a) Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the Commonwealth of Pennsylvania. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required (each of which jurisdictions is listed on
the Disclosure Schedule), except where the lack of such qualification would not
have a material adverse effect on the condition (financial or otherwise),
results of operations, assets, business or prospects (a "Material Adverse
Effect") of the Company. The Company has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use the property
owned and used by it. The Company has no Subsidiaries. The Certificate of
Incorporation (as amended) and Bylaws (as amended) of the Company are in the
respective forms of the certified copies previously provided to the Buyer. The
minute books of the Company accurately reflect all material action taken (and
required to be taken) by the Company's Shareholders and directors from the date
of its incorporation to the Closing Date. The Company has delivered to the Buyer
true and complete copies of all minutes, consents and related documents
contained in the Company's minute books.
(b) Authorization of Transaction. The Company has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Company and the Shareholders, enforceable in accordance with its terms.
Except as required for the Merger Filing, neither the Company nor the
Shareholders need give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency or
other Person in order to consummate the transactions contemplated by this
Agreement.
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(c) Capitalization. The entire authorized capital stock of the Company consists
of one hundred thousand(100,000) shares of Company Common Stock, of which ten
thousand twenty (10,020) shares of Company Common Stock are issued and
outstanding and owned by the Shareholders as set forth on the Disclosure
Schedule. All of the issued and outstanding shares of Company Common Stock have
been duly authorized, are validly issued, fully paid and nonassessable, are
owned beneficially and of record by the Shareholders free of all claims and
Security Interests and were issued in compliance with all applicable federal and
state securities laws. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights or
other contracts or commitments that could require the Company or the
Shareholders to issue, sell, transfer or otherwise cause to become outstanding
any of the Company's capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Company.
(d) Noncontravention. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental agency,
court or arbitral panel to which the Company is subject or any provision of the
Certificate of Incorporation or By-laws of the Company, or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any Person the right to accelerate, terminate, modify or cancel or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which the Company is a party or by which it is bound or to
which any of its assets are subject (or result in the imposition of any Security
Interest upon any of its assets).
(e) Broker's Fees. Neither the Company nor the Shareholders have incurred a
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(f) Tangible Assets. The Company has good and marketable title to, or a valid
leasehold interest in, the tangible assets used in the conduct of its business,
free of all Security Interests. All such tangible assets are in good condition
and repair and are adequate and sufficient to carry on the business of the
Company. The Disclosure Schedule contains an accurate list and summary
description of all property and assets of the Company as of June 30, 1998 where
the value of an individual item exceeds $1,000 or where an aggregate of similar
items exceeds $1,000. The property and assets listed on the Disclosure Schedule
constitute substantially all of the property and assets used in or necessary to
the conduct of the Company's business. All such property and assets conforms in
all material respects to all applicable laws and regulations relating to their
construction, use and
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operation. Except pursuant to leases described on the Disclosure Schedule, no
Person other than the Company owns any vehicles, equipment or other property or
assets used by the Company. The Company owns no real property.
(g) Financial Statements. The Company has delivered to the Buyer the following
financial statements (collectively, the "Company Financial Statements"): (i)
reviewed balance sheets and profit and loss statements and statements of cash
flows as of and for the fiscal years ended September 30, 1995, 1996 and 1997 for
the Company; and (ii) unaudited balance sheet and profit and loss statements and
statements of cash flows (collectively, the "Company Most Recent Financial
Statements") as of and for the six months ended March 31, 1998 (the "Company
Most Recent Fiscal Period") for the Company. The Company Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and present
fairly in all material respects the financial condition of the Company as of
such dates and the results of operations of the Company for such periods;
provided, however, that the Company Most Recent Financial Statements are subject
to normal year-end adjustments and lack notes and other presentation items.
(h) Events Subsequent to Company Most Recent Fiscal Period. Since the Company
Most Recent Fiscal Period, there has not been:
(i) any change in the condition (financial or otherwise), results of operations,
assets, business or prospects of the Company from that reflected in the Company
Most Recent Financial Statements, except for changes in the Ordinary Course of
Business that have not been, in the aggregate, materially adverse;
(ii) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the condition (financial or otherwise),
results of operations, assets, business or prospects of the Company;
(iii) any waiver by the Company of a valuable right or debt owed to it;
(iv) any Security Interest created on any of the Company's properties or assets;
(v) any sale, assignment or transfer of any of the Company's properties or
assets, except in the Ordinary Course of Business;
(vi) any material amendment or termination of any material agreement to which
the Company is a party or by which it is bound, except in the Ordinary Course of
Business;
(vii) any increase in the compensation payable or benefits available, or to
become payable or available, to any of the Company's officers, directors,
employees or consultants;
16
(viii) any incurrence of any debt for borrowed money or any guaranty of the debt
or obligations of a third party;
(ix) any capital expenditures in excess of $5,000 that have not been previously
approved by the Buyer of NCI in writing;
(x) any transaction or commitment of the Company except in the Ordinary Course
of Business;
(xi) any commitment to enter into or do any of the foregoing; or
(xii) any other event or condition of any character that might result in a
Material Adverse Effect on the Company.
(i) Absence of Undisclosed Liabilities. Except to the extent (a) reflected or
reserved against in the Company Most Recent Financial Statements, or (b)
incurred with Persons other than any Affiliate of the Company or the
Shareholders in the Ordinary Course of Business after the date of the Company
Most Recent Financial Statements, the Company has no liabilities or obligations
of any nature, whether accrued, absolute, contingent or otherwise (including,
but not limited to, liabilities, as guarantor or otherwise, in respect of
obligations of others) other than performance obligations with respect to
contracts and commitments that would not be required to be reflected or reserved
against in a balance sheet prepared in accordance with GAAP.
(j) Legal Compliance. The Company has complied and is in compliance with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings and charges thereunder) of federal, state,
local and foreign governments (and all agencies thereof), except where the
failure to comply, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(k) Books of Account; Tax Matters.
(i) The books of account of the Company fairly reflect: (A) all transactions
relating to the Company and (B) all items of income and expense, assets and
liabilities and accruals relating to the Company. The Company has not engaged in
any transaction, maintained any bank account or used any corporate funds except
for transactions, bank accounts and funds that are reflected in the
normally maintained books of account and records of the Company.
(ii) The Company has filed in a timely manner all Tax Returns that it has been
required to file, and has paid in a timely manner all Taxes shown thereon as
owing. The provision for Taxes in the Company Most Recent Financial Statements
is adequate for the payment of all Tax liabilities for the period covered by
such Statements.
17
(iii) All Tax Returns of the Company for taxable periods ended on or before
September 30, 1991 are closed to the assessment of additional Taxes under the
applicable statute of limitations (except for possible allegations of fraud),
and none of the other Tax Returns of the Company has been, or is currently, the
subject of audit by any governmental authority. The Company and the Shareholders
know of no Tax deficiency or claim for additional Taxes asserted or threatened
to be asserted against the Company by any taxing authority and the Company and
the Shareholders know of no grounds for any such assessment. The Company has
delivered to the Buyer correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company since October 1, 1994.
(iv) The Company has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v) Prior to the closing, the Company has duly elected to be taxed as, and is
and has been eligible to be taxed as, a "small business corporation" ("S"
corporation) under the provisions of Section 1361 et seq. of the Code.
(1) Intellectual Property. The Disclosure Schedule identifies (i) each patent or
registration that has been issued to the Company with respect to any of its
Intellectual Property, (ii) each pending patent application or application for
registration that the Company has made with respect to any of its Intellectual
Property, and (iii) each license, agreement or other permission that the Company
has granted to any third party with respect to any of its Intellectual Property.
The Company has all necessary title to and ownership of all its Intellectual
Property (including, but not limited to, the registered service xxxx "The
Medical Phone Company") necessary or desirable for its business and to the
knowledge of the Company and the Shareholders, without any conflict with or
infringement on the rights of any other Person. The Disclosure Schedule contains
a list and summary description of all options, licenses and agreements of or
relating to Intellectual Property granted by the Company to any Person (and as
to which true and complete copies of all relevant documents have been delivered
to the Buyer). To the knowledge of the Company and the Shareholders, the Company
is not bound by or a party to any options, licenses or agreements of any kind
with respect to the Intellectual Property of any other Person. To the knowledge
of the Company and the Shareholders, the Company has not violated and is not in
violation of any of the Intellectual Property rights of any other Person. To the
knowledge of the Company and the Shareholders, none of the activities of the
employees of the Company on behalf of the Company violates any agreements or
arrangements that any such employees have with former employers.
(m) Contracts. The Disclosure Schedule sets forth a complete list of all
contracts, leases and other agreements (oral or written)
18
to which the Company is a party. The Company has delivered to the Buyer a
correct and complete copy of each written contract, lease or other agreement
listed on the Disclosure Schedule. The Disclosure Schedule contains an accurate
summary of each oral contract, lease and agreement. All of the contracts, leases
and agreements listed on the Disclosure Schedule are valid and in full force and
effect, and the Company is not in default or breach of any such contract, lease
or agreement. Neither the Company nor the Shareholders has notice of any default
or breach on the part of any other party to any such contract, lease or
agreement. No approval or consent of any Person is needed in order that each
such contract, lease and agreement will continue in full force and effect
subsequent to the consummation of the transactions contemplated by this
Agreement and, upon consummation of such transactions, will be enforceable by
the Buyer in accordance with its terms.
(n) Litigation. No litigation, arbitration, action, suit, proceeding or
investigation (whether conducted by any judicial or regulatory body, arbitrator
or other Person) is pending or, to the knowledge of the Company or the
Shareholders, threatened against the Company (nor is there any basis therefor
known to the Company or the Shareholders). There are no outstanding orders,
awards, judgments, injunctions, decrees or other requirements of any court,
arbitrator or governmental or regulatory body against the Company or its assets.
(o) Certain Business Relationships with the Company. The Shareholders and their
Affiliates have not been involved in any business arrangement or relationship
with the Company or any supplier, client or competitor of the Company within the
past 36 months, other than serving as an employee, officer and/or director of
the Company, and neither the Shareholders nor any of their Affiliates owns any
asset, tangible or intangible, that is used in the business of the Company.
(p) ERISA
(i) Schedule of Plans. The Disclosure Schedule sets forth a correct and complete
list of each written "employee benefit plan," within the meaning of section 3(3)
of ERISA, of the Company and each Benefit Arrangement of the Company
(collectively, the "Company Plans"). The Company has delivered to the Buyer
correct and complete copies of all written Company Plans, all related trusts or
other funding agreements, and all amendments to the Company Plans, the most
recent IRS Form 5500 filed in respect of each such Company Plan and any material
employee, IRS and U.S. Department of Labor communications with respect to any
and all Company Plans (including, but not limited to, summary plan descriptions
and summaries of material modifications). Except as disclosed on the Disclosure
Schedule, each Company Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS as to its
qualification under the Code (a correct and
19
complete copy of which has been delivered to the Buyer) and (A) no amendment has
been made to any such Company Plan since the date of its most recent
determination letter that would result in the disqualification of such Company
Plan and (B) no other event has occurred with respect to any such Company Plan
that may adversely affect the qualification of such Company Plan.
(ii) No Minimum Funding Standards. Except as disclosed on the Disclosure
Schedule, no Company Plan is subject to the minimum funding standards of Section
302 of ERISA or Section 412 of the Code. No Company Plan is a multi-employer
plan (as defined in section 3(37) of ERISA) or a multiple employer plan and no
Company Plan is maintained in connection with any trust described in Section
501(c)(9) of the Code. No liability has been incurred pursuant to the provisions
of Title I or IV of ERISA by the Company or any ERISA Affiliate and no condition
or event exists or has occurred that may result in any such liability.
(iii) Operation of the Company Plans. Each of the Company Plans has been
operated and administered in compliance with its terms and all applicable law,
including, but not limited to, ERISA and the Code. There are no claims pending
or, to the knowledge of the Company and the Shareholders, threatened by or on
behalf of an employee of the Company involving any Company Plan or its assets
(other than routine claims for benefits under the terms of any such Company
Plan). All contributions required to have been made to any Company Plan subject
to Title IV of ERISA by the Company or any ERISA Affiliate pursuant to
applicable law (including, but not limited to, ERISA and the Code) have been
made within the time required by applicable law.
(iv) No Prohibited Transactions. Neither the Company nor any ERISA Affiliate has
any liability with respect to any transaction including a Company Plan in
violation of Section 406 of ERISA or any "prohibited transaction," as defined in
Section 4975(c) (1) of the Code, for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the Code. Neither the Company nor any
ERISA Affiliate has participated in a violation of Part 4 of Title I, Subtitle B
or ERISA by any plan fiduciary of any Company Plan and has any unpaid civil
liability under Section 502(l) of ERISA. There are no suits, investigations or
other proceedings pending or threatened by any governmental authority of or
against any Company Plan, the trustee of any assets held thereunder or the
Company, relating to the Company Plans.
(v) Market Value. The market value of assets under each Company Plan that is a
Company Pension Plan, as defined below, is not less than the present value of
all benefit liabilities within the meaning of Section 4001(a)(a) of ERISA, as
determined in accordance with Pension Benefit Guaranty Corporation ("PBGC")
methods, factors and assumptions applicable to a pension plan terminating on the
last day of the plan year immediately preceding the date of this Agreement. For
purposes of this
20
Section, "Company Pension Plan shall mean a funded employee pension benefit
plan, as defined in Section 3(2) of ERISA, established or maintained by the
Company or any ERISA Affiliate that is not an individual account plan within the
meaning of Section 3(34) of ERISA. Neither the Company nor any ERISA Affiliate
is required to provide security to a Company Pension Plan under Section
402(a)(29) of the Code.
(vi) Reportable Event. No Company Pension Plan has been the subject of a
reportable event within the meaning of Section 4043(c) of ERISA as to which
notices would be required to be filed with the PBGC.
(vii) No Increase in Expense. There has been no amendment to, written
interpretation or announcement (whether or not written) or change in employee
participation or coverage under any Company Plan that would increase materially
the expense of maintaining such Company Plan above the level of expense incurred
in respect of such Company Plan for the most recently completed plan year.
(viii) No Liability. No liability has been incurred by the Company or any ERISA
Affiliate for any tax, penalty or other liability with respect to any Company
Plan.
(ix) Required Contributions. The Company has made all required contributions
under each Company Plan on a timely basis or, if not due yet, adequate accruals
therefor have been provided for in the Company Most Recent Financial Statements.
No Company Pension Plan has incurred any "accumulated funding deficiency" within
the meaning of Section 302 of ERISA or Section 412 of the Code and no Company
Plan that is a Company Pension Plan has applied for or received a waiver of the
minimum funding standards imposed by Section 412 of the Code.
(x) No Termination. There has been no termination or partial termination, as
defined in Section 411(d) of the Code, of any Company Plan. No filing has been
made by the Company or any ERISA Affiliate with the PBGC and no proceeding has
been commenced by the PBGC to terminate any Company Pension Plan. No condition
exists and no event has occurred that could constitute grounds for the
termination of any Company Pension Plan by the PBGC or which could reasonably be
expected to result in any material liability of the Company or of any ERISA
Affiliate to the PBGC with respect to any Company Pension Plan, other than
liabilities for premium payments.
(xi) Welfare Plans. The employee welfare benefit plans, as defined in Section
3(l) of ERISA, that are group health plans (as defined for the purposes of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA
("COBRA")) have complied with the requirements of COBRA to provide healthcare
continuation coverage to qualified beneficiaries who have elected, or may elect
to have, such coverage. The Company, or its agents who administer any of the
welfare plans, have complied with the
21
notification and written notice requirements of COBRA and the Health Insurance
Portability and Accountability Act of 1997. Except as disclosed on the
Disclosure Schedule, no Company Plan provides life insurance or medical benefits
coverage to former or retired employees of the Company or any ERISA Affiliate.
(q) Environmental Matters.
(i) The Company has been and is in compliance with all Environmental Laws.
(ii) No events, facts or conditions will prevent, hinder or limit continued
compliance by the Company with applicable Environmental Laws, and no
expenditures or commitments by the Company are necessary to maintain continued
compliance by the Company as of the date of this Agreement or beyond the
Effective Time.
(iii) The Company has obtained all permits, licenses and authorizations required
pursuant to applicable Environmental Laws to carry on its business as now
conducted; all such permits are in full force and effect and are not subject to
any appeals or to any unsatisfied conditions; and no such permits are subject to
any pending or threatened modification, suspension, revocation, rescission or
cancellation.
(iv) The Company is not liable under any applicable Environmental Laws with
respect to the release, threatened release or presence of any Hazardous
Substance.
(v) No Hazardous Substance that may require response or corrective action or
remediation under any Environmental Law is present at, threatened or emanating
from any property owned or operated by the Company, or was present at or
emanating from any other property when previously owned or operated by the
Company.
(vi) The Company is not subject to any pending or threatened claim nor obligated
to comply with any judgment, order, ruling, settlement or agreement arising
under any Environmental Law.
(vii) The Company has not entered into any negotiations or agreements relating
to any response or corrective action or remediation relating to liabilities or
potential liabilities arising under any Environmental Law or providing any
indemnification for any liabilities arising under any Environmental Law.
(r) Insurance. All of the property and assets of the Company that is of an
insurable character is insured by responsible insurance companies against loss
or damage by fire and other risks to its full replacement value, and the Company
is insured against liability, errors and omissions to the extent and in the
manner customary for companies engaged in similar businesses or owning similar
assets. The Company has all insurance required by applicable law. The Disclosure
Schedule contains a correct and
22
complete list of the Company's insurance, all of which is in full force and
effect. Correct and complete copies of all insurance policies have been
delivered to the Buyer. The Company is not in default with respect to any
provision or requirement of such insurance, nor has it failed to give any notice
or present any claim under any such insurance. All premiums on such insurance
have been paid.
(s) Labor Agreements and Actions. The Company enjoys generally good
employer-employee relations. The Company is not delinquent in any payments to
its employees or consultants for wages, salaries, commissions, bonuses or other
compensation. The Company is not bound by or subject to any written or oral,
express or implied, contract, commitment or arrangement with any labor union,
and no labor union has requested or, to the knowledge of the Company or the
Shareholders, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company or the Shareholders,
threatened, nor are the Company or the Shareholders aware of any labor
organization activity involving the Company's employees. Neither the Company nor
the Shareholders are aware that any key employee, or any group of key employees,
intends to terminate his or their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the fore
going persons. The employment of each employee of the Company is terminable at
the will of the Company, without any obligation for severance pay or other
payments (other than accrued salary, vacation and sick pay in accordance with
the Company's normal policies).
(t) Compliance With Applicable Law. The Company holds all material licenses,
franchises, permits and authorizations (collectively, "Licenses") necessary for
the lawful conduct of its business, and is not in default or violation under any
such License or any applicable law, order, rule, regulation, policy and/or
guideline of any governmental agency or authority. The Company has not received
any notice of any claim of default or violation with respect to any such License
where such default or violation could result in a Material Adverse Effect on the
Company. Except as otherwise governed by law, all such Licenses are renewable
by their terms or in the Ordinary Course of Business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine filing fees. The Disclosure Schedule contains a complete and correct
list of all Licenses. The Company is not subject to any written or oral
agreement or understanding with any governmental agency or authority that
imposes any restriction on its business or operations.
(u) Shareholder Claims. Neither the Shareholders nor any Affiliate have any
claims against the Company for any monetary or contractual or other obligation
(oral or in writing).
23
(v) Distributions. Except as described in Article III of this Agreement, since
October 1, 1997, the Company has not made any distributions to its shareholders
or paid any bonuses or other extraordinary compensation to its employees,
consultants or any other Persons.
(w) Accounts-Receivables. All of the accounts receivable of the Company arose in
the Ordinary Course of Business of the Company and are valid and bona fide
obligations. Such accounts receivable (net of any reserves reflected on the
Company Most Recent Balance Sheet) will be collected in full in the Ordinary
Course of Business without resort to an attorney or collection agency. Such
accounts receivable are not subject to counterclaim or offset and do not require
any future performance obligation on the part of the Company. Immediately prior
to the Closing, all of the Purchased Accounts Receivable are valid and bona fide
obligations and will be collectible in the Ordinary Course of Business within
sixty (60) days after the Closing.
(x) Clients. No client of the Company that accounted for $200,000 or more of the
Company's sales or revenues for the fiscal year ended September 30, 1997 has
cancelled or otherwise terminated or curtailed its business or relationship with
the Company or notified the Company that it intends to do so. The Disclosure
Schedule contains, with respect to each client of the Company that, to the
Shareholders, knowledge, is expected to generate revenues of $200,000 or more in
the fiscal year ending September 30, 1998, information as to the revenues billed
to such client through March 31, 1998 and, to the knowledge of the Shareholders,
the projected revenues for the balance of fiscal 1998 (based on commitments on
hand as of the Closing Date). The Shareholders have no reason to believe that
any of such commitments will be terminated or materially reduced.
(y) Bank Accounts. The Disclosure Schedule contains a correct and complete list
of (i) each bank account and other account where funds of the Company or any
Company Plan or related trust are deposited, (ii) each safe deposit box and
vault where property of the Company may be stored, (iii) each power of attorney
granted by the Company, and (iv) the signatories for each account, safe deposit
box, vault and power of attorney.
(z) Disclosure. No representation or warranty of the Company or the Shareholders
in this Agreement (including the exhibits and schedules), or any of the other
agreements to be executed and delivered by the Company and the Shareholders as
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not false
or misleading. There is no fact that the Company or the Shareholders have not
disclosed to the Buyer in writing that materially adversely affects or may
affect the condition (financial or otherwise), results of operations, assets,
business or prospects of the Company or the ability of
24
the Company or the Shareholders to perform its or their obligations under this
Agreement or to consummate any of the transactions contemplated hereby.
(aa) Accreditation, Due Diligence and Sophistication Matters.
(i) The Shareholders are each acquiring the Merger Shares pursuant to the Merger
and this Agreement solely for their own investment accounts and not with a view
to or for sale in connection with any distribution of all or any part of such
Merger Shares. The Shareholders acknowledge the Buyer's understanding that the
delivery of such Merger Shares hereunder is intended to be exempt from
registration under the Securities Act. The Shareholders agree that they will
not, directly or indirectly, offer, transfer, sell, pledge or otherwise dispose
of any Merger Shares, unless such offer, transfer, sale, pledge or other
disposition is either (i) pursuant to an effective registration statement under
the Securities Act and registered under any applicable state laws, or (ii)
effected only after a Shareholder has furnished the Buyer with an opinion of
counsel, which counsel shall be satisfactory to the Buyer and which opinion
shall be in form and substance satisfactory to the Buyer, stating that no such
registration of the Merger Shares is required because of the availability of an
exemption from registration under the Securities Act and under applicable state
laws.
(ii) The Shareholders have been advised that (A) the Merger Shares have not been
registered under the Securities Act or any state laws; (B) the Merger Shares
must be held indefinitely and the Shareholders must continue to bear the
economic risk of holding the Merger Shares unless (1) the Merger Shares are
subsequently registered for sale under the Securities Act and any applicable
state laws, or (2) an exemption from such registration is available, or (3) the
Shareholders exercise their rights under Section 7.2 of this Agreement; (C)
there is presently no public market for the Merger Shares and there is no
assurance that a public market for the Merger Shares will develop; (D) Rule 144
promulgated under the Securities Act ("Rule 14411) is not currently available
with respect to sales of Merger Shares, and the Buyer has made no agreement with
the Shareholders to make Rule 144 available; (E) if and when the Merger Shares
may be disposed of in reliance on Rule 144, such disposition may be made only in
limited amounts in accordance with the terms and conditions of Rule 144; (F) if
the Rule 144 exemption is not available, public sale of the Merger Shares
without registration will require the availability of another exemption under
the Securities Act; (G) a notation will be made in the records of the Buyer and
any transfer agent that the Merger Shares are subject to restrictions on
transfer; and (H) a restrictive legend will be placed on the certificates
representing the Merger Shares in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
25
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND THE REGISTRATION REQUIREMENTS OF ANY
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, OR (B) IF XXXXXX
COMMUNICATIONS INC. (THE "COMPANY") HAS PREVIOUSLY BEEN FURNISHED WITH AN
OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER,
SALE, PLEDGE OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE
ACT AND THE RULES AND REGULATIONS THEREUNDER AND SUCH STATE SECURITIES OR
"BLUE SKY" LAWS. THE TRANSFER OF SUCH SHARES MAY ALSO BE SUBJECT TO
CONTRACTUAL RESTRICTIONS UNDER ONE OR MORE AGREEMENTS, COPIES OF WHICH ARE
ON FILE AT THE OFFICES OF THE COMPANY.
(iii) The Shareholders have been provided an opportunity to ask questions of,
and have received answers thereto satisfactory to them from, the Buyer and its
representatives regarding the terms and conditions of this Agreement, the Buyer,
NCI, PTI, the Merger, the Merger Shares and other matters pertaining to this
transaction, and the Shareholders have obtained all additional information
requested of the Buyer and its representatives. The Shareholders have
investigated and are familiar with the affairs, financial condition and
prospects of the Buyer and its Affiliates and have been given sufficient access
to and have acquired sufficient information and documents as requested by the
Share holders, including, but not limited to, financial information, about the
Buyer and its Affiliates to reach an informed and knowledgeable decision to
acquire such Merger Shares.
(iv) The Shareholders have such knowledge and experience in financial affairs
that they are capable of evaluating the merits and risks of this transaction.
The Shareholders have not relied in connection with this transaction upon any
representations, warranties or agreements other than those set forth in this
Agreement. The Shareholders, respective financial situations are such that they
can each afford to bear the economic risk of holding such Merger Shares for an
indefinite period of time.
(v) Neither the Buyer nor any officer, employee, agent or Affiliate of the Buyer
has made any representations or warranties to the Shareholders, other than as
set forth in this Agreement. Although the Buyer has previously furnished the
Shareholders with certain projections and other forward-looking information, the
Shareholders acknowledge that (A) such projections and information are based on
estimates and that actual results or events could differ materially from that
anticipated or projected, (B) the Buyer is not making any representations or
warranties concerning such projections and other forward-looking information,
and (C) the Shareholders have not relied on any such projections and
forward-looking information in entering into this Agreement.
5.2. Representations and warranties of the Buyer. The Buyer represents and
warrants to the Shareholders as follows:
26
(a) Organization. The Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
The Buyer is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required, except where
the lack of such qualification would not have a Material Adverse Effect on the
Buyer. The Buyer has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it.
(b) Authorization of Transaction. The Buyer has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms. Except as required for the
Merger Filing, the Buyer need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
(c) Capitalization. The entire authorized capital stock of the Buyer consists of
one hundred million (100,000,000) shares of Buyer Common Stock and two million
(2,000,000) shares of preferred stock, of which 23,988,969 shares of Buyer
Common Stock (excluding the Merger Shares) are issued and outstanding. All of
the issued and outstanding shares of Buyer Common Stock have been duly
authorized, are validly issued, fully paid and nonassessable. All of the Merger
Shares to be issued in connection with the Merger will be duly authorized,
validly issued and fully paid and nonassessable. The Certificate of
Incorporation (as amended) and By-laws (as amended) of the Buyer are in the
respective forms of the certified copies previously provided to the
Shareholders.
(d) Noncontravention. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any government, governmental
agency or court to which the Buyer is subject or any provision of the
Certificate of Incorporation or By-laws of the Buyer or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which the Buyer is a party or by which the Buyer is bound
or to which any of the assets of the Buyer is subject (or result in the
imposition of any Security Interest upon any of the assets of the Buyer).
(e) Brokers, Fees. The Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
27
(f) Financial Statements. The Buyer has delivered to the Shareholders the
following financial statements (collectively the "Financial Statements") audited
consolidated balance sheets and statements of income and cash flow as of and for
the fiscal years ended December 31, 1996 and December 31, 1997 (the "Most Recent
Fiscal Period") for NCI and unaudited consolidating balance sheets and
statements of income and cash flow as of and for the fiscal years ended December
31, 1996 and 1997 for PTI (such latter statements, the "Most Recent Financial
Statements"), The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of each of
NCI and PTI as of such dates and the results of operations of each of NCI and
PTI for such periods.
(g) Absence of Undisclosed Liabilities. Except to the extent reflected or
reserved against in the balance sheets of the Most Recent Financial Statements,
NCI and PTI have no material liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise (including, but not limited to,
liabilities, as guarantor or otherwise, in respect of obligations of others)
other than performance obligations with respect to contracts and commitments
that would not be required to be reflected or reserved against in a balance
sheet prepared in accordance with GAAP.
(h) Events Subsequent to Most Recent Fiscal Period. Since the Most Recent Fiscal
Period, there has not been any material adverse change in the consolidated
condition (financial or otherwise), results of operations, assets, business or
prospects of NCI and PTI, taken as a whole.
(i) Litigation. No litigation, arbitration, action, suit, proceeding or
investigation (whether conducted by any judicial or regulatory body, arbitrator
or other Person) is pending or, to the knowledge of the Buyer, threatened
against NCI, PTI or the Buyer (nor is there any basis therefor known to NCI, PTI
or the Buyer). There are no outstanding orders, awards, judgments, injunctions,
decrees or other requirements of any court, arbitrator or governmental or
regulatory body against NCI, PTI or the Buyer or their assets.
(j) Compliance With Applicable Law. NCI, PTI and the Buyer hold all material
licenses, franchises, permits and authorizations (collectively, the "Permits")
necessary for the lawful conduct of their businesses, and are not in default or
violation under any such Permit or any applicable law, order, rule, regulation,
policy and/or guideline of any governmental agency or authority. Neither NCI,
PTI nor the Buyer has received any notice of any claim of default or violation
with respect to any such Permit where such default or violation could result in
a Material Adverse Effect on NCI, PTI or the Buyer. Except as otherwise governed
by law, all such Permits are renewable by their terms or
28
in the Ordinary Course of Business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
Neither NCI, PTI nor the Buyer is subject to any written or oral agreement or
understanding with any governmental agency or authority that imposes any
restriction on its business or operations.
(k) Disclosure. No representation or warranty of the Buyer in this Agreement, or
any of the other agreements to be executed and delivered by the Buyer as
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not false
or misleading. There is no fact that the Buyer has not disclosed to the
Shareholders in writing that materially adversely affects or may affect the
consolidated condition (financial or otherwise), results of operations, assets,
business or prospects of NCI, PTI or the Buyer or the ability of the Buyer to
perform its obligations under this Agreement or to consummate any of the
transactions contemplated hereby.
ARTICLE VI
CLOSING DOCUMENTS
6.1. The Company and the Shareholders. At the Closing, the Company and the
Shareholders are delivering to the Buyer the following:
(a) Employment agreements between each of Xxxxxx and Xxxxxx and MPC, signed by
Xxxxxx and Xxxxxx.
(b) Xxxxxx'x and Xxxxxx'x Certificates.
(c) A Secretary's Certificate.
(d) The minute book, stock book and corporate seal of the Company.
(e) Good standing certificates of the Company in the Commonwealth of
Pennsylvania and each jurisdiction in which the Company is qualified to do
business.
(f) The resignation of Xxxxxx as trustee of the trusts under the Company Plans.
(g) The Merger Filing, signed on behalf of the Company.
(h) The Escrow Agreement, signed by the Shareholders.
6.2. The Buyer. At or prior to the Closing, the Buyer is delivering to the
Shareholders and the Company the following:
29
(a) Employment agreements between each of Xxxxxx and Xxxxxx and the Buyer,
signed on behalf of MPC.
(b) A Secretary's Certificate.
(c) The Escrow Agreement, signed by the Buyer and the Escrow Agent.
(d) The Merger Filing, signed on behalf of the Buyer.
(e) The Merger Shares.
(f) The Initial Cash Distribution Amount.
ARTICLE VII
POST-CLOSING COVENANTS
7.1. Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request.
7.2. Repurchase Rights. (a) After the Closing, the Buyer presently intends
to consummate an initial public offering of shares of Buyer Common Stock (the
"IPO")
(b) In the event that the IPO is not consummated by December 31,
1999 (i.e., shares of Buyer Common Stock are not traded on a national securities
exchange, the NASDAQ National Market System or in the over-the-counter market by
such date), then each of the Shareholders who at the time own Buyer Common Stock
shall have the option (the "Re-purchase Option") to require the Buyer to
repurchase all (and not less than all) of such shares (the "Repurchased Shares")
for an aggregate cash purchase price in an amount equal to the sum of (i) ten
times the "Average Post-Tax Profits 11 (as defined below) of the Buyer (or that
division or direct or indirect subsidiary of the Buyer as shall operate solely
the business of the Company after the Merger) and (ii) $120,000.00, such
purchase price to be pro rated if the Merger Shares of only one of the
Shareholders are repurchased. The Shareholders (to the extent they own the
Repurchased Shares) shall give the Buyer written notice (the "Exercise Notice")
of their intent to exercise the Repurchase Option no earlier than January 1,
2000 and no later than February 28, 2000. Time shall be of the essence with
respect to the giving of the Exercise Notice.
(c) If the Repurchase Option shall be timely exercised, (i) the closing of the
repurchase of the Repurchased Shares shall take place at a time and place
designated by the Buyer within 120 days after the Buyer's receipt of the
Exercise Notice, and (ii) at the
30
closing, the holders of the Repurchased Shares shall deliver to the Buyer (or
its assignee) the certificates representing the Repurchased Shares, duly
endorsed for transfer and warranted to be free of all liens, claims, security
interests and encumbrances, against payment of the purchase price by certified
or bank cashier's checks or wire transfers.
(d) As used in this Agreement, the term "Average Post-Tax Profits" shall mean,
with respect to the Buyer (or that division or direct or indirect subsidiary of
the Buyer as shall operate solely the business of the Company after the Merger),
the average of its net income (if any) or loss, determined in accordance with
generally accepted accounting principles, applied on a consistent basis, after
provision for all Taxes, for the years ending December 31, 1998 and 1999
(including any net income or loss of the Company from January 1, 1998 through
the Closing Date), except that the following shall not be included in the
determination of "Average Post-Tax Profits": (a) any gains or losses from sales
of assets or securities and other transactions not in the Ordinary Course of
Business, or (b) the proceeds of any life or disability insurance. Corporate
overhead allocations used in determining Average Post-Tax Profits shall be
consistent with the method of allocations generally used by the Buyer's
Affiliates, as reflected on Exhibit D to this Agreement. For purposes of this
Agreement, Average Post-Tax Profits shall be determined by the firm of
independent certified public accountants then auditing the books and records of
the Buyer and its Affiliates, and the determinations of such firm shall be
final, binding and conclusive on the Parties and shall not be subject to
judicial review.
7.3. Guarantees. Xxxxxx has advised the Buyer that he has personally
guaranteed on behalf of the Company certain office equipment leases of the
Company as listed on Schedule 7.3 to this Agreement (the "Equipment Leases")
After the Closing, the Buyer agrees (a) to use its best efforts to cause the
lessors of the Equipment Leases to release Xxxxxx from such guarantees, and (b)
to indemnify Xxxxxx and hold him harmless from any loss, liability, damage and
expense arising out of such guarantees (in the manner and to the extent provided
in Section 8.1(b)).
7.4. Final Tax Returns. The Shareholders shall, on a timely basis and at
their expense, cause the preparation and filing of the final income tax returns
(federal and state) of the Company for the period ending on the Closing Date.
Such tax returns shall include, as appropriate, the sale of the accounts
receivable as provided in Article III of this Agreement. The Shareholders shall
provide the Buyer with copies of its proposed tax returns at least 15 days
before the respective filing due dates, with extensions, for the Buyer's review
and comments.
ARTICLE VIII
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INDEMNIFICATION
8.1. Indemnification. (a) The Shareholders, jointly, agree to indemnify
and hold the Buyer and the Company harmless from and against any and all loss,
liability, damage and expense (including, but not limited to, reasonable
attorneys, fees and disbursements and court costs and any reasonable attorneys,
fees and disbursements and court costs incurred by the Buyer and the Company in
establishing the Shareholders, liability under this indemnity and in collecting
amounts payable under this indemnity) arising out of or resulting from (i) any
misrepresentation or alleged misrepresentation or breach or alleged breach of
any warranty, agreement or covenant by the Company or the Share holders in this
Agreement, and (ii) without limiting the generality of the foregoing indemnity,
any liability, damage or expense arising out of or in connection with the
SmithKline Litigation.
(b) The Buyer agrees to indemnify and hold the Shareholders harmless from and
against any and all loss, liability, damage and expense (including, but not
limited to, reasonable attorneys' fees and disbursements and court costs and any
reasonable attorneys, fees and disbursements and court costs incurred by the
Shareholders in establishing the Buyer's liability under this indemnity and in
collecting amounts payable under this indemnity) arising out of or resulting
from any misrepresentation or alleged misrepresentation or breach or alleged
breach of any warranty, agreement or covenant by the Buyer in this Agreement.
8.2. Claims Procedure. Claims for indemnification under this Agreement
shall be made and resolved as follows:
(a) Third Party Claims. (i) In the event that any claim or demand for which any
Party would be entitled to indemnification under this Agreement is asserted or
sought to be collected by a third party, the Party seeking indemnity (the
"Indemnitee") shall give a Claim Notice (as described below) to the Party or
Parties from whom indemnity is sought (the "Indemnitor"). The Indemnitor shall
have twenty (20) days from the date of delivery of the Claim Notice (the "Notice
Period") to notify the Indemnitee whether or not the right to indemnity for such
claim or demand is disputed and, if disputed, the reasons therefor.
(ii) Unless disputed by the Indemnitor by written notice to the Indemnitee given
within twenty (20) days after receipt of the Claim Notice stating (in reasonable
detail) the reasons therefor, each claim under this Section shall be
conclusively deemed to be a liability of the Indemnitor and shall be paid within
twenty (20) days after the date of receipt of the Claim Notice therefor. If any
claim under Section 8.2(a) shall not be paid within such twenty (20) day period,
or if the Indemnitor disputes such claim by written notice to the Indemnitee
within such first twenty (20) day period stating (in reasonable detail) the
reasons therefor, the Indemnitee shall have the right to commence legal
proceedings
32
for the enforcement of its rights hereunder, and shall be entitled to recover
interest thereon at the rate of ten percent (10?c) per annum from the date the
claim or demand arose. If there shall be a dispute as to the amount or manner of
determination of any indemnity obligation owed under Section 8.2(a), the
Indemnitor shall nevertheless pay when due such portion, if any, of the
obligation as shall not be subject to dispute. The excess, if any, of the amount
of the obligation ultimately determined as properly payable under this Section
8.2(a)(ii) over the portion, if any, theretofore paid shall bear interest as
provided in this Section 8.2(a)(ii).
(iii) Whether or not the right to indemnity is disputed by the Indemnitor, the
Buyer shall assume the control and defense and/or settlement of such claim or
demand with counsel reasonably acceptable to the Shareholders. The amount of any
settlement or judgment and the reasonable costs and expenses of such defense
shall be included as part of the indemnification obligations of the Indemnitor
under Section 8.1 of this Agreement. In any case where the Shareholders are the
Indemnitor with respect to a Claim Notice, the Buyer (as Indemnitee) shall be
reimbursed for any Indemnifiable Losses (as defined below) (A) first, from and
out of the Escrow Shares (if and to the extent such shares are then available)
in accordance with the terms and conditions of the Escrow Agreement, and (B)
thereafter, by the Shareholders in cash. Notwithstanding the foregoing, (X) the
Shareholders may, in their sole discretion, elect to satisfy any Indemnifiable
Losses under Article VIII of this Agreement by cash payment to the Indemnitee
instead of by releasing Escrow Shares and (Y) the Shareholders shall have no
liability under the provisions of Article VIII of this Agreement with respect to
Indemnifiable Losses claimed by an Indemnitee if and to the extent that such
Indemnifiable Losses (or any part thereof) are covered by insurance (net of any
costs incurred in the collection of such insurance). The Parties shall cooperate
in seeking all reasonable remedies against all applicable insurers. If the
Shareholders shall desire to participate in or assume control over any such
defense, the Shareholders may do so at their sole cost and expense with counsel
reasonably acceptable to the Indemnitee. No settlement of any claim or demand
which would adversely affect the rights of the Indemnitee may be made without
the written consent(s) of the Indemnitee, which consent(s) may not be
unreasonably withheld or delayed. Without limiting the generality of the
foregoing, it shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other relief against the Indemnitee or its
assets, employees or businesses.
(iv) The Indemnitee shall, on reasonable notice during business hours, make
available to the Indemnitor and its attorneys and accountants all books and
records of the Indemnitee and the Company relating to any such claim or demand
and the parties agree to render to each other such assistance as they may
reasonably require in order to permit the proper and adequate
33
defense of any such claim or demand.
(b) Non-third Party and Other Claims. In the event of a claim or demand for
which any Party would be entitled to indemnification under this Agreement which
does not involve a claim or demand being asserted or sought to be collected by a
third party, the Indemnitee shall give a Claim Notice with respect to such claim
or demand to the Indemnitor. Unless disputed by the Indemnitor by written notice
within twenty (20) days after receipt of the Claim Notice to the Indemnitee
stating (in reasonable detail) the reasons therefor, each claim under this
Section shall be conclusively deemed to be a liability of the Indemnitor and
shall be paid within twenty (20) days after the date of receipt of the Claim
Notice therefor. If any claim under this Section 8 shall not be paid within such
twenty (20) day period, or if the Indemnitor disputes such claim by written
notice to the Indemnitee within such first twenty (20) day period stating (in
reasonable detail) the reasons therefor, the Indemnitee shall have the right to
commence legal proceedings for the enforcement of its rights hereunder, and
shall be entitled to recover interest thereon at the rate of ten percent (10%)
per annum from the date the claim or demand arose. If there should be a dispute
as to the amount or manner of determination of any indemnity obligation owed
under this Section 8, the Indemnitor shall nevertheless pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
difference, if any, between the amount of the obligation ultimately determined
as properly payable under this Section 8 and the portion, if any, theretofore
paid shall bear interest as provided in this Section 8.2(b). Any Indemnifiable
Losses payable under this Section 8.2(b) by the Shareholders shall first be
satisfied from and out of the Escrow Shares (if and to the extent such shares
are then available) in accordance with the terms and conditions of the Escrow
Agreement, and thereafter by the Shareholders in cash. Notwithstanding the
foregoing, (X) the Shareholders may, in their sole discretion, elect to satisfy
any Indemnifiable Losses under this Article VIII by cash payment to the
Indemnitee instead of by releasing Escrow Shares, and (Y) the Shareholders shall
have no liability under the provisions of Article VIII of this Agreement with
respect to Indemnifiable Losses claimed by the Indemnitee if and to the extent
that such Indemnifiable Losses (or any part thereof) are covered by insurance
(net of any costs incurred in the collection of such insurance). The Parties
shall cooperate in seeking all reasonable remedies against all applicable
insurers.
(c) Timing of Claim Notice. Each Claim Notice shall be given by the Indemnitee
as promptly as practicable after the Indemnitee becomes aware of the claim or
demand and the facts indicating that a claim for indemnification in respect of
the same may be warranted. Each Claim Notice shall specify in reasonable detail
the nature of the claim or demand, the applicable provisions) of this Agreement
or other instrument under which the claim for indemnity arises and the amount or
the estimated amount thereof.
34
No failure or delay in giving a Claim Notice and no failure to include any
specific information or any reference to the provisions of this Agreement or
other instrument under which the claim for indemnification arises shall affect
the obligation of the Indemnitor under this Section 8, except to the extent that
such failure or delay shall adversely affect the ability of the Indemnitor to
defend, settle or satisfy the claim or demand.
(d) Contingent Claims. Nothing in this Section 8.2 shall prevent any Indemnitee
from making a claim hereunder on or prior to the Cut-Off Date for potential or
contingent claims or demands based on facts known to the Indemnitee on such
date, provided the Claim Notice sets forth the basis for any such potential or
contingent claim or demand and the estimated amount thereof to the extent then
feasible.
8.3. Indemnifiable Losses. An Indemnitor shall have liability for
indemnification to an Indemnitee under Section 8.1 only if the aggregate of all
such Indemnitee's claimed loss, liability, damage and expense ("Indemnifiable
Losses") shall exceed $10,000 (the 'Minimum Loss'); provided, however, that the
Minimum Loss requirement shall not be applicable with respect to claims for
breach of the representation and warranty in Section 5.1(w). Once the Minimum
Loss has been exceeded, the Indemnitee shall be entitled to recover all
Indemnifiable Losses from the first dollar of such Indemnifiable Losses;
provided, however, that the aggregate of the Indemnifiable Losses for which the
Shareholders (collectively) or the Buyer shall have liability shall not, in each
case, exceed $2,300,000.
ARTICLE IX
CERTAIN SHAREHOLDER AGREEMENTS
9.1. Confidentiality. (a) Each Shareholder understands and acknowledges
that, as a firm in a highly competitive industry, the Company follows (and the
Surviving Corporation, as successor to the Company, will follow) a policy
intended to fully protect its Confidential Information (as defined below). In
the course of his employment with the Company, each Shareholder has had, and
will have, access to Confidential Information, the use or disclosure of which
would be seriously damaging to the Surviving Corporation's business after the
Merger. Such information is the Surviving Corporation's property and is not
readily ascertainable from public sources, and it is essential to the Surviving
Corporation's continued success after the Merger that each Shareholder not use
any such Confidential Information or disclose any such Confidential Information
to anyone, except as necessary to perform a Shareholder's obligations as an
employee of the Surviving Corporation. Each Shareholder's access to
Confidential Information has been, and is expected to be, essential to the
performance of his duties for the Surviving Corporation.
35
(b) Accordingly, each Shareholder agrees that he will not, at any time during
the course of his employment with the Surviving Corporation or thereafter
(except in furtherance of the Surviving Corporation's business), directly or
indirectly use, disclose or make available to anyone any Confidential
Information concerning the Surviving Corporation or its business or clients.
Such Confidential Information relates generally to four types of information:
information about clients and their service requirements; information about
employees and agents of the Surviving Corporation; information about the
business and financial affairs of the Surviving Corporation; and information
about technical data, processes and equipment of the Surviving Corporation. Such
Confidential Information includes (but is not limited to) computer programs
(source and object codes), systems and technology; client and prospective client
names, leads and information; information supplied by clients to the Surviving
Corporation in confidence; prices charged or proposed to be charged to clients;
cost information; supplier information; employee names, compensation, benefits
and related data; engineering and technical data and equipment specifications;
client service requirements; information regarding equipment and facilities;
the Surviving Corporation's business policies and plans; and the Surviving
Corporation's banking, financial, tax and accounting information. Confidential
Information does not include (i) information already known to, or readily
ascertainable by, the public or which be comes known to the public other than as
a result of disclosure by a Shareholder, or (ii) information which is lawfully
obtained in good faith by a Shareholder from a third party independent of the
Surviving Corporation without the obligation of nondisclosure.
(c) At the Surviving Corporation's request at any time, each Shareholder shall
promptly make all disclosures, execute all documents and perform all acts
necessary or reasonably requested by the Surviving Corporation in connection
with preserving the confidentiality of any Confidential Information, including,
but not limited to, surrendering to the Surviving Corporation all papers, files,
lists, computer disks and other documents (in all media, including all copies
and notes and memoranda made by each Shareholder) relating to or containing
Confidential Information.
9.2. Non-Competition. (a) Each Shareholder acknowledges that the business
in which the Surviving Corporation engages is unique and has benefitted from the
Shareholder's specialized expertise, who has performed, and is expected to
perform, unique services for the Surviving Corporation, as successor to the
Company. In carrying on its business, the Surviving Corporation has developed
goodwill throughout the territory in which it does business, which extends
throughout the United States (the "Territory"). In performing his services for
the Surviving Corporation, each Shareholder has had, and is expected to have,
access to all of the Surviving Corporation's clients, suppliers and Confidential
Information. Accordingly, in order to preserve the value of the Surviving
Corporation upon the Merger and to preserve the goodwill of the Surviving
Corporation, each Shareholder agrees
36
that he will not (alone, or as a partner, employee, officer, agent,
representative, director, stockholder, lender or investor of or in any person or
entity), directly or indirectly (a) any time while he is employed by the
Surviving Corporation or any Affiliate and for a period of two (2) years after
termination of such employment (regardless of the circumstances of such
termination), engage in any activity, anywhere in the Territory, that involves
the telemarketing of medical, pharmaceutical or healthcare products or services,
or otherwise engage in or assist another Person in any business that relates to
telemarketing of services or products as to which such Shareholder was involved
or exposed to at any time while he was an employee of the Surviving Corporation
or any Affiliate; or (b) at any time solicit, induce or encourage any of the
employees of, or consultants to, the Surviving Corporation or any Affiliate to
terminate his employment or consultancy or to work for a competitor of the
Surviving Corporation or any Affiliate or engage any of such persons to work for
a competitor of the Surviving Corporation or any Affiliate; or (c) at any time
solicit, induce or encourage any client or supplier of the Surviving Corporation
or any Affiliate who was a client or supplier of the Surviving Corporation or
any Affiliate at any time during the term of such Shareholder's employment with
the Surviving Corporation or any Affiliate to modify, discontinue, terminate or
cancel any contract, agreement, service or relationship with the Surviving
Corporation or any Affiliate in effect or proposed at the time of the
termination of employment of such Shareholder with the Surviving Corporation or
any Affiliate; or (d) at any time solicit, induce or encourage any Person that
was a prospective client or supplier of the Surviving Corporation or any
Affiliate during the term of such Shareholder's employment with the Surviving
Corporation or any Affiliate not to enter into a relationship with the Surviving
Corporation or any Affiliate.
9.3. Relief. Each Shareholder acknowledges that a breach or threatened
breach of this Article will cause the Surviving Corporation and its Affiliates
irreparable injury and damage. Each Shareholder therefore agrees that, in
addition to any other remedies that may be available, the Surviving Corporation
and its Affiliates shall be entitled to an injunction and/or other equitable
relief (without the requirement of posting a bond or other security) to prevent
a breach or threatened breach of this Section and to secure its enforcement.
ARTICLE X
MISCELLANEOUS
10.1. Press Releases and Public Announcements. Neither the Company nor the
Shareholders shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Buyer.
37
10.2. No Third-Party Beneficiaries. Except as specifically provided in
this Agreement, this Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
assigns.
10.3. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter of
this Agreement (including, but not limited to, a Letter of Intent dated November
13, 1997).
10.4. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors (including
any entity with which a corporate Party shall merge or consolidate or to which
it shall sell or transfer all or substantially all of its assets and any entity
to which the assets and business of the Surviving Corporation shall be
transferred after the Merger) and permitted assigns. Where the context requires,
references in this Agreement to the Buyer shall mean and include the Surviving
Corporation after the Merger. The Shareholders may not assign either this
Agreement or any of their rights, interests or obligations hereunder without the
prior written approval of the Buyer.
10.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6. Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
personally delivered (against receipt) or sent by registered or certified mail,
return receipt requested, postage prepaid, or sent by prepaid recognized
overnight carrier, and addressed to the intended recipient as set forth below:
If to the Buyer:
c/x Xxxxxx Communications Inc.
00 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Att: Xxxxx X. Xxxxxxxx
With a copy to-
Xxxxxxx X. Xxxxxxxxx
38
Xxxxxx Xxxxxxxxx & Xxxxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
If to the Company:
Xxxxxx & Pittinos, Inc.
Dublin Hall
0000 Xxxxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxx Xxxx, XX 00000
With a copy to:
Xxxxxxx X. Xxxxxx
Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
If to Xxxxxx:
J. Xxxxxxx Xxxxxx
0000 Xxxxx Xxxx
Xxxxx Xxxxxxxx, XX 00000
With a copy to:
Xxxxxxx X. Xxxxxx
Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
If to Xxxxxx:
Xxxxxxxx 0. Xxxxxx
000 Xxxxxx Xxxxx
Xxxxxxx, XX 00000
With a copy to:
Xxxxxxx X. Xxxxxx
Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
No such notice, request, demand, claim, or other communication shall be deemed
to have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner set forth in this Section.
10.8. Governing Law. This Agreement shall be governed by and
39
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule. If a dispute
arises pertaining to this Agreement, the exclusive jurisdiction and venue for
the resolution of any such dispute shall be the Federal and State courts located
in New York County, New York. The parties irrevocably submit to the jurisdiction
of the State of New York. The Parties each waive any objection which it or he
may have based upon improper venue or forum nonconveniens to the conduct of any
proceeding in any such court and waives personal service of any process upon it
or him, and consent that all such service of process may be made in the manner
provided in Section 10.7.
10.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Party against whom such amendment is sought to be enforced. No waiver by any
Party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.10. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision shall not
affect the validity and enforceability of any other provision. If any provision
of this Agreement is finally held to be invalid or unenforceable by a court of
competent jurisdiction, such provision shall be appropriately limited and
reduced (in time, duration, geographical scope, activity or subject) and given
effect to the extent it may be enforceable in accordance with applicable law.
The rights and remedies of the parties are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
10.11. Survival of Representations and Warranties. Notwithstanding any
right of any Party to fully investigate the affairs of another Party and
notwithstanding any knowledge of facts determined or determinable by such Party
pursuant to such investigation or right of investigation, each Party has the
right to rely fully upon the representations, warranties, covenants, indemnities
and agreements of each other Party in this Agreement or in any certificate,
financial statement or other document delivered by any Party pursuant to this
Agreement. The representations and warranties of the Parties shall survive the
execution and delivery of this Agreement, the Closing and the Effective Time and
shall expire on the Cut-Off Date; provided, however, that (a) any matter that is
the subject of a Claim Notice given on or prior to the CutOff Date (including,
but not limited to, any Claim Notices given pursuant to Section 8.2(d)) shall
continue in effect for purposes of the indemnification provisions of Section 8.1
until resolved or judicially determined, and (b) the representations and
warranties of the Company and the Shareholders in Sections 5.1(k), 5.1(p) and
5.1(q) of this Agreement shall continue in effect and shall not
40
expire.
10.12. Expenses. Each of the Parties will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, except that the Buyer
shall pay up to $57,500 of the Shareholders' legal fees and expenses in
connection with this Agreement and such transactions. None of the expenses
relating to this Agreement and the transactions contemplated hereby shall be
paid by the Company.
XXXXXX COMMUNICATIONS INC.
(formerly Arista Marketing Associates, Inc.)
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxx
Chairman
XXXXXX & PITTINOS, INC.
By: /s/ J. Xxxxxxx Xxxxxx
-------------------------------------
J. Xxxxxxx Xxxxxx
President
/s/ J. Xxxxxxx Xxxxxx
----------------------------------------
J. Xxxxxxx Xxxxxx
/s/ Xxxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxxx X. Xxxxxx
The undersigned hereby certifies, pursuant to Section 251(f) of the General
Corporation Law of Delaware, that the foregoing Agreement and Plan of Merger has
been adopted by the Board of Directors of Xxxxxx Communications Inc. without any
vote of its stockholders and that the conditions specified in the first sentence
of Section 251(f) have been satisfied.
XXXXXX COMMUNICATIONS INC.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
Assistant Secretary
41
EXHIBITS AND SCHEDULE TO AGREEMENT
Pursuant to Item 601(b)(2) of Regulation S-K, Xxxxxx Communications Inc. agrees
to furnish supplementally a copy of any of the following omitted exhibits or
schedule to the Commission upon request:
Exhibit Description
------- -----------
A Certificate of Merger of Xxxxxx and Pittinos,
Inc., and Xxxxxx Communications Inc. (Delaware)
B Articles of Merger-Domestic Corporation
(Pennsylvania)
C Joint Balance Sheet, Initial Cash Distribution
Amount and Accounts Receivable
D Method of Allocating Corporate Overhead
Schedule Description
-------- -----------
7.3 Equipment Leases
