EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
▇▇▇▇▇▇ COMMUNICATIONS, INC.
▇▇▇▇▇▇ AR ACQUISITION, LLC
▇▇▇▇▇▇ COMMUNICATIONS, INC.
AND
THE STOCKHOLDERS OF ▇▇▇▇▇▇ COMMUNICATIONS, INC. PARTY HERETO
March 25, 1998
TABLE OF CONTENTS
Page
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ARTICLE 1 - DEFINITIONS................................................................................. 1
1.1 Terms Defined in This Agreement............................................................. 1
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ARTICLE 2 - MERGER, EFFECTIVE TIME, CLOSING............................................................. 6
2.1 Merger...................................................................................... 6
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2.2 Effective Time.............................................................................. 6
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2.3 The Closing................................................................................. 6
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ARTICLE 3 - ARTICLES OF ORGANIZATION; BY-LAWS; DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.......... 6
3.1 Articles of Organization.................................................................... 6
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3.2 By-Laws..................................................................................... 6
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3.3 Directors and Officers...................................................................... 6
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ARTICLE 4 - CONSIDERATION; PAYMENT OF CONSIDERATION..................................................... 8
4.1 Cash Consideration.......................................................................... 8
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4.2 Share Consideration; Conversion or Cancellation of ▇▇▇▇▇▇ Common Shares..................... 8
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4.3 Payment of Share Consideration.............................................................. 8
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4.4 Fractional ▇▇▇▇▇▇ Common Shares............................................................. 8
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ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.......................................... 9
5.1 Authorization of Transaction................................................................ 9
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5.2 Noncontravention............................................................................ 9
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5.3 Investment.................................................................................. 9
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5.4 ▇▇▇▇▇▇ Common Shares........................................................................ 10
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ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND ▇▇▇▇▇▇.................................... 10
6.1 Organization of Acquisition and ▇▇▇▇▇▇...................................................... 10
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6.2 Capital Stock............................................................................... 10
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6.3 Authorization for Common Stock.............................................................. 10
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6.4 Authorization of Transaction................................................................ 10
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6.5 Noncontravention............................................................................ 11
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6.6 Brokers' Fees............................................................................... 11
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6.7 ▇▇▇▇▇▇ SEC Reports.......................................................................... 11
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6.8 Books and Records........................................................................... 11
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ARTICLE 7 - REPRESENTATIONS AND WARRANTIES CONCERNING ▇▇▇▇▇▇............................................ 12
7.1 Organization, Qualification, and Corporate Power............................................ 12
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7.2 Capitalization.............................................................................. 12
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7.3 Authorization of Transaction................................................................ 12
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7.4 Noncontravention............................................................................ 13
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7.5 Title to Assets............................................................................. 13
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7.6 Subsidiaries................................................................................ 13
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7.7 Financial Statements........................................................................ 13
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7.8 Events Subsequent to the Most Recent Fiscal Year End Statements............................. 14
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7.9 Undisclosed Liabilities..................................................................... 15
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7.10 Legal Compliance............................................................................ 16
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7.11 Taxes....................................................................................... 16
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7.12 Real Property............................................................................... 18
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7.13 Intellectual Property....................................................................... 19
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7.14 Tangible Assets............................................................................. 20
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7.15 Contracts................................................................................... 20
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7.16 Notes and Accounts Receivable............................................................... 21
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7.17 Powers of Attorney.......................................................................... 21
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7.18 Insurance................................................................................... 21
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7.19 Litigation.................................................................................. 22
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7.20 Employees................................................................................... 22
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7.21 Employee Benefits........................................................................... 22
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7.22 Guaranties.................................................................................. 24
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7.23 Environment, Health, and Safety............................................................. 24
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7.24 Relationships with Customers................................................................ 24
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7.25 Customers................................................................................... 24
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7.26 Relationships with Customers and Suppliers.................................................. 25
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7.27 Employee and Stockholder Indebtedness....................................................... 25
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7.28 Product Liability........................................................................... 25
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7.29 Bank Accounts............................................................................... 25
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7.30 Related Party Agreements.................................................................... 25
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7.31 Change in Control........................................................................... 25
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7.32 Brokers Fees................................................................................ 26
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7.33 Disclosure.................................................................................. 26
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7.34 Wolf Group.................................................................................. 26
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7.35 Phantom Equity.............................................................................. 26
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ARTICLE 8 - POST-CLOSING CONVENANTS..................................................................... 26
8.1 General..................................................................................... 26
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8.2 Litigation Support.......................................................................... 26
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8.3 Transition.................................................................................. 27
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8.4 Confidentiality............................................................................. 27
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8.5 Non-Solicitation and Non-Competition........................................................ 27
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8.6 ▇▇▇▇▇▇ Common Shares........................................................................ 28
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8.7 Pooling of Interests........................................................................ 29
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8.8 Stock Options............................................................................... 29
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8.9 Effect on Options to Acquire Company Common Stock........................................... 29
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ARTICLE 9 - CONDITIONS TO OBLIGATION TO CLOSE........................................................... 30
9.1 Conditions to Each Party's Obligation....................................................... 30
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9.2 Conditions to Obligation of Acquisition and ▇▇▇▇▇▇.......................................... 31
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9.3 Conditions to Obligation of the Stockholders and ▇▇▇▇▇▇..................................... 31
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ARTICLE 10 - INCOME TAX MATTERS.......................................................................... 32
10.1 Preparation of Tax Returns; Taxable Year.................................................... 32
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10.2 Section 338(h)(10) Election................................................................. 32
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10.3 Cooperation................................................................................. 33
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ARTICLE 11 - INDEMNIFICATION............................................................................. 34
11.1 Indemnity Obligations of the Stockholders................................................... 34
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11.2 Indemnity Obligations of ▇▇▇▇▇▇............................................................. 34
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11.3 Appointment of Representative............................................................... 34
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11.4 Notification of Claims...................................................................... 35
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11.5 Survival.................................................................................... 36
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11.6 Limitations................................................................................. 36
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11.7 Escrow...................................................................................... 37
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11.8 ▇▇▇▇▇▇ Payment of Stockholder Indemnity Claims.............................................. 37
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ARTICLE 12 - MISCELLANEOUS............................................................................... 37
12.1 Press Releases and Public Announcements..................................................... 37
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12.2 No Third Party Beneficiaries................................................................ 38
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12.3 Entire Agreement............................................................................ 38
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12.4 Succession and Assignment................................................................... 38
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12.5 Counterparts................................................................................ 38
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12.6 Headings.................................................................................... 38
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12.7 Notices..................................................................................... 38
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12.8 GOVERNING LAW............................................................................... 39
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12.9 Amendments and Waivers...................................................................... 39
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12.10 Severability................................................................................ 39
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12.11 Expenses.................................................................................... 39
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12.12 Construction................................................................................ 40
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12.13 Incorporation of Exhibits and Schedules..................................................... 40
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12.14 Specific Performance........................................................................ 40
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12.15 Dispute Resolution.......................................................................... 40
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12.16 Counterparts................................................................................ 41
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of March 25,
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1998, by and among ▇▇▇▇▇▇ Communications Inc., a Delaware corporation
("▇▇▇▇▇▇"), ▇▇▇▇▇▇ AR Acquisition, LLC, a Delaware limited liability company
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("Acquisition"), ▇▇▇▇▇▇ Communications, Inc., a Massachusetts corporation
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("▇▇▇▇▇▇"), and the voting stockholders of ▇▇▇▇▇▇ listed in Section 7.2 of the
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Disclosure Schedule (each individually a "Stockholder," and together
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collectively the "Stockholders"). ▇▇▇▇▇▇, Acquisition, ▇▇▇▇▇▇ and the
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Stockholders are referred to collectively herein as the "Parties" and each
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individually as a "Party."
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RECITALS:
WHEREAS, ▇▇▇▇▇▇ desires to acquire, and the stockholders of ▇▇▇▇▇▇ desire
to sell, all of the outstanding capital stock of ▇▇▇▇▇▇ for ▇▇▇▇▇▇ Common Shares
(as defined herein) and cash; and
WHEREAS, ▇▇▇▇▇▇ desires to acquire directly from the non-voting
stockholders of ▇▇▇▇▇▇ the portion of the capital stock of ▇▇▇▇▇▇ for which cash
will be paid (the "Cash Purchase") and to acquire from the Stockholders the
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balance of the outstanding capital stock of ▇▇▇▇▇▇ for ▇▇▇▇▇▇ Common Shares
pursuant to a merger whereby Acquisition will be merged with and into ▇▇▇▇▇▇,
with ▇▇▇▇▇▇ being the surviving corporation (the "Merger"); and
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WHEREAS, the Parties hereto desire to consummate the Merger upon the terms
and subject to the conditions of this Agreement and in accordance with the
Massachusetts Business Corporation Law (the "MBCL") and the Delaware Limited
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Liability Company Act (the "DLLCA"); and
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WHEREAS, the Parties hereto desire that the Cash Purchase and the Merger
occur simultaneously; and
WHEREAS, the Parties hereto intend that the transactions contemplated
hereby constitute a "qualified stock purchase" for purposes of Section 338 of
the Internal Revenue Code of 1986, as amended (the "Code"), and will be treated
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for tax purposes, in accordance with Section 338(h)(10) of the Code and
comparable provisions of state and local law, as a purchase of the assets of
▇▇▇▇▇▇.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and covenants herein contained, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in This Agreement. As used in this Agreement, the
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following terms shall have the respective meanings set forth below:
"Acquisition" has the meaning set forth in the preamble hereto.
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"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of (S)
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1504 of the Code, or any similar group defined under a similar provision of
state, local or foreign law.
"Agreement" has the meaning set forth in the preamble hereto.
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"▇▇▇▇▇▇" has the meaning set forth in the preamble hereto.
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"▇▇▇▇▇▇ Common Shares" means the voting and non-voting, no par value,
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common stock of ▇▇▇▇▇▇.
"▇▇▇▇▇▇ Share Certificates" has the meaning set forth in Section 4.2 below.
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"Basis" means any past or present fact, situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms the basis for any specified
consequence.
"Cash Consideration" has the meaning set forth in Section 4.1 below.
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"Cash Shares" has the meaning set forth in Section 4.1 below.
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"Certificate of Merger" has the meaning set forth in Section 2.2 below.
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"Closing" has the meaning set forth in Section 2.3 below.
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"Closing Date" has the meaning set forth in Section 2.3 below.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information concerning the businesses
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and affairs of ▇▇▇▇▇▇ or ▇▇▇▇▇▇ that is not already generally available to the
public.
"Deemed Escrow Value" has the meaning set forth in Section 11.7(b) below.
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"Disclosure Schedule" has the meaning set forth in the first paragraph of
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Article 7 below.
"Effective Time" has the meaning set forth in Section 2.2 below.
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"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
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retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
tax-qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) tax-qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)
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3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)
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3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
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Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery
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Act of 1976, and the Occupational Safety and Health Act of 1970, each as
amended, together with all other 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)
concerning pollution or protection of the environment, public health and safety,
or employee health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air, surface
water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"Escrow Deposit" has the meaning set forth in Section 11.7(a) below.
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"Extremely Hazardous Substance" has the meaning set forth in (S) 302 of the
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Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA (S) 3(21).
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"Financial Statements" has the meaning set forth in Section 7.7 below.
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"GAAP" means United States generally accepted accounting principles as in
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effect from time to time.
"Governmental Authority" means any court or tribunal or administrative,
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governmental or regulatory body, agency or authority, whether domestic or
foreign.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
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Act of 1976, as amended.
"Indemnification Threshold" has the meaning set forth in Section 11.6
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below.
"Intellectual Property" means (a) all inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and Confidential Information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" of ▇▇▇▇▇▇ or of the Stockholders means matters actually known
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by the Stockholders after reasonable investigation.
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"Liability" means any liability (whether known or unknown, whether asserted
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or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Material Adverse Effect" means, as to any Party, a material adverse effect
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on the business, properties, results of operations, condition (financial or
otherwise) or prospects of such Party.
"Merger" has the meaning set forth in the recitals hereto.
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"Merger Share Price" has the meaning set forth in Section 4.2 below.
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"Most Recent Balance Sheet" means the balance sheet contained within the
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Most Recent Year-End Statements.
"Most Recent Year-End" Statements means the Financial Statements as of and
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for the year ended as of the Most Recent Fiscal Year-End.
"Most Recent Fiscal Year End" has the meaning set forth in Section 7.7
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below.
"Multiemployer Plan" has the meaning set forth in ERISA (S) 3(37).
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"NYSE" means the New York Stock Exchange, Inc.
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"Non-Voting Stockholders" means the holders of non-voting stock of ▇▇▇▇▇▇,
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except that ▇. ▇▇▇▇▇▇▇, and ▇. ▇▇▇▇▇▇, who own both voting and non-voting
shares, will be deemed to be Stockholders with respect to all of their shares.
"Ordinary Course of Business" means the ordinary course of business
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consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" or "Parties" has the meaning set forth in the preamble hereto.
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"PBGC" means the Pension Benefit Guaranty Corporation.
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"Person" means an individual, a partnership, a corporation, an association,
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a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency or political subdivision
thereof).
"Phantom Stockholders" refers to ▇. ▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇ and P.
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▇▇▇▇▇▇, each of whom has value participation interests in ▇▇▇▇▇▇.
"Prohibited Transaction" has the meaning set forth in ERISA (S) 406 and
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Code (S) 4975.
"Reportable Event" has the meaning set forth in ERISA (S) 4043.
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"Representative" has the meaning set forth in Section 11.3 below.
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"SEC" means the Securities and Exchange Commission.
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"Section 338(h)(10) Elections" has the meaning set forth in Section 10.2
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below.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
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or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (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.
"Share Consideration" has the meaning set forth in Section 4.2 below.
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"▇▇▇▇▇▇" has the meaning set forth in the preamble hereto.
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"▇▇▇▇▇▇ Common Shares" has the meaning set forth in Section 6.2 below.
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"Stockholders" has the meaning set forth in the preamble hereto.
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"Subsidiary" means any corporation or other Person with respect to which a
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specified Person (or a Subsidiary thereof) owns a majority of the common stock
or other ownership interests or has the power to vote or direct the voting of
sufficient securities or interests to elect a majority of the directors.
"Surviving Corporation" has the meaning set forth in Section 2.1 below.
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"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts, levies or
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other assessments by any Governmental Authority, including all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any Governmental Authority, and shall
include any transferee or successor liability in respect of Taxes (whether by
contract or otherwise) and any liability in respect of any Tax as a result of
being a member of any Affiliated Group, including any consolidated, combined,
unitary or similar group.
"Tax Return" means any return (including any consolidated, combined or
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unitary return in which ▇▇▇▇▇▇ or any of its Subsidiaries is, or was, included
or includable), declaration, report, claim for refund, separate election or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 11.4 below.
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ARTICLE 2
MERGER; EFFECTIVE TIME; CLOSING
2.1 Merger. Subject to the terms and conditions of this Agreement and the
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MBCL and the DLLCA, at the Effective Time, Acquisition and ▇▇▇▇▇▇ shall
consummate the Merger in which (i) Acquisition shall be merged with and into
▇▇▇▇▇▇ and the separate existence of Acquisition shall thereupon cease, (ii)
▇▇▇▇▇▇ shall be the successor or surviving corporation in the Merger and shall
continue to be governed by the laws of the Commonwealth of Massachusetts and
(iii) the separate corporate existence of ▇▇▇▇▇▇ with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The corporation surviving the Merger is sometimes hereinafter referred
to as the "Surviving Corporation." The Merger shall have the effects set forth
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in the MBCL and the DLLCA.
2.2 Effective Time. On the Closing Date, subject to the terms and
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conditions of this Agreement, Acquisition and ▇▇▇▇▇▇ shall (i) cause to be
executed Articles of Merger in the form required by the MBCL and the DLLCA (the
"Certificate of Merger"), and (ii) cause the Articles of Merger to be filed with
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the Massachusetts Secretary of State and the Certificate of Merger with the
Delaware Secretary of State as provided in the MBCL and the DLLCA. The Merger
shall become effective at such time as the Articles of Merger has been duly
filed with the Massachusetts Secretary of State and the Certificate of Merger
with the Delaware Secretary of State or such other time as is agreed upon by the
Representative and ▇▇▇▇▇▇ and specified in the Certificate of Merger. Such time
is hereinafter referred to as the "Effective Time."
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2.3 The Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Posternak,
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▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, L.L.P., in Boston, Massachusetts commencing at 9:00 a.m.
local time on March 25, 1998 or such other place or time or on such other date
as ▇▇▇▇▇▇ and the Representative may agree or as may be necessary to permit the
fulfillment or waiver of the conditions set forth in Article 9 (the "Closing
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Date").
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ARTICLE 3
ARTICLES OF ORGANIZATION; BY-LAWS;
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
3.1 Articles of Organization. The articles of organization of ▇▇▇▇▇▇, as
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in effect immediately prior to the Effective Time, shall be the articles of
organization of the Surviving Corporation until thereafter amended as provided
therein and under the MBCL.
3.2 By-Laws. The by-laws of ▇▇▇▇▇▇, as in effect immediately prior to the
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Effective Time, shall be the by-laws of the Surviving Corporation.
3.3 Directors and Officers. The directors and officers of ▇▇▇▇▇▇
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immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, provided that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall also be duly
elected as a director, from and after the Effective Time and until their
successors have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the articles of organization
and by-laws of the Surviving Corporation.
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ARTICLE 4
CONSIDERATION; PAYMENT OF CONSIDERATION
4.1 Cash Consideration. On the Closing Date, as part of the transactions
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contemplated by this Agreement and immediately prior to the Effective Time, the
Non-Voting Stockholders shall sell, assign, transfer and deliver to ▇▇▇▇▇▇ and
▇▇▇▇▇▇ shall purchase, acquire and accept from them, 1,252.66 ▇▇▇▇▇▇ Common
Shares (the "Cash Shares"), free and clear of any Security Interest. In
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consideration for the sale, assignment, transfer and delivery of the Cash
Shares, ▇▇▇▇▇▇ shall pay to them cash in the amount of $2,091,516 (the "Cash
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Consideration"). The Cash Consideration shall be paid at the Closing, upon
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receipt by ▇▇▇▇▇▇ of the stock certificate or certificates representing the Cash
Shares, duly endorsed for transfer or accompanied by a duly executed stock
power, as appropriate, with required transfer stamps, if any, attached. The
purchase by ▇▇▇▇▇▇ of the Cash Shares for the Cash Consideration pursuant to
this Section 4.1 shall be a condition precedent to the Closing.
4.2 Share Consideration; Conversion or Cancellation of ▇▇▇▇▇▇ Common
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Shares. At the Effective Time, by virtue of the Merger and without any action
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by the Parties, (A) all of the outstanding ▇▇▇▇▇▇ Common Shares other than the
Cash Shares shall be converted into the right to receive 2,696,213 ▇▇▇▇▇▇ Common
Shares which number was determined by dividing $113,240,958 by $42 (the "Merger
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Share Price") (the aggregate number of ▇▇▇▇▇▇ Common Shares to be received by
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the holders of the ▇▇▇▇▇▇ Common Shares being the "Share Consideration"), (B)
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all of the outstanding ▇▇▇▇▇▇ Common Shares shall cease to be outstanding, and
shall be cancelled and retired and shall cease to exist, and each Stockholder,
as the holder of certificates representing such ▇▇▇▇▇▇ Common Shares (the
"▇▇▇▇▇▇ Share Certificates"), shall cease to have any rights with respect
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thereto, except the right to receive ▇▇▇▇▇▇ Common Shares therefor upon the
surrender of such certificates in accordance with this Section 4.2 and cash in
lieu of fractional ▇▇▇▇▇▇ Common Shares as set forth in Section 4.4 and (C) the
outstanding membership interest in Acquisition shall be converted into one
hundred (100) shares of voting common stock of the Surviving Corporation, as
such shares of common stock are constituted immediately following the Effective
Time.
4.3 Payment of Share Consideration. At or promptly following the Closing,
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upon surrender to ▇▇▇▇▇▇ of the ▇▇▇▇▇▇ Share Certificates by the Stockholders
for cancellation, together with any other required documents, the Stockholders
shall receive the ▇▇▇▇▇▇ Common Shares issuable in the Merger, less the shares
to be placed in escrow as provided in Section 11.7.
4.4 Fractional ▇▇▇▇▇▇ Common Shares. No certificates representing
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fractional ▇▇▇▇▇▇ Common Shares shall be issued upon surrender of any ▇▇▇▇▇▇
Share Certificates. In lieu of any fractional ▇▇▇▇▇▇ Common Shares, there shall
be paid to the holder of ▇▇▇▇▇▇ Shares who otherwise would be entitled to
receive a fractional ▇▇▇▇▇▇ Common Share an amount of cash (without interest)
determined by multiplying such fraction by the Merger Share Price.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder severally represents and warrants to Acquisition and
▇▇▇▇▇▇ that the statements contained in this Article 5 as to such Stockholder
are correct and complete as of the date hereof.
7
5.1 Authorization of Transaction. Such Stockholder has full power and
----------------------------
authority to execute and deliver this Agreement and to perform such
Stockholder's obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of such Stockholder, enforceable in accordance with
its terms and conditions. Such Stockholder is not required to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or Governmental Authority in order to consummate the transactions
contemplated by this Agreement, except in connection with the filing of the
Articles of Merger with the Massachusetts Secretary of State and the Certificate
of Merger with the Delaware Secretary of State.
5.2 Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any law, constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government
or Governmental Authority to which such Stockholder is subject, or (ii) 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 such Stockholder is a party or by which such
Stockholder is bound or to which any of such Stockholder's assets is subject.
5.3 Investment. Such Stockholder (i) understands that the ▇▇▇▇▇▇ Common
----------
Shares acquired by such Stockholder pursuant to this Agreement have not been
registered under the Securities Act, or under any state securities laws, and are
being exchanged in reliance upon federal and state exemptions for transactions
not involving a public offering, (ii) is acquiring the ▇▇▇▇▇▇ Common Shares
solely for his own account for investment purposes, and not with a view towards
the distribution thereof, (iii) is a sophisticated investor with knowledge and
experience in business and financial matters and qualifies as an "accredited
investor" as defined in Regulation D under the Securities Act, (iv) has received
certain information concerning ▇▇▇▇▇▇, including, without limitation, (A)
▇▇▇▇▇▇'▇ annual report on Form 10-K for the period ended December 31, 1996, (B)
▇▇▇▇▇▇'▇ recent quarterly reports on Form 10-Q for the periods ended March 31,
1997, June 30, 1997 and September 30, 1997, (C) each current report on Form 8-K
filed by ▇▇▇▇▇▇ since December 31, 1996, in each case as filed by ▇▇▇▇▇▇ under
the Securities Exchange Act, and (D) the most recent annual report to
stockholders of ▇▇▇▇▇▇ for the year ended December 31, 1996 (collectively the
"▇▇▇▇▇▇ SEC Reports"), and has had the opportunity to obtain additional
---------------------
information as desired in order to evaluate the merits and the risks inherent in
holding ▇▇▇▇▇▇ Common Shares, and (v) is able to bear the economic risk and lack
of liquidity inherent in holding ▇▇▇▇▇▇ Common Shares which have not been
registered under the Securities Act.
5.4 ▇▇▇▇▇▇ Common Shares. Such Stockholder holds of record and owns
--------------------
beneficially the number of ▇▇▇▇▇▇ Common Shares set forth next to such
Stockholder's name in Section 7.2 of the Disclosure Schedule, free and clear of
any restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. Such
Stockholder is not a party to any option, warrant, purchase right, or other
contract or commitment that could require such Stockholder to sell, transfer, or
otherwise dispose of any ▇▇▇▇▇▇ Common Shares (other than pursuant to this
Agreement) or is a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any of the ▇▇▇▇▇▇ Common Shares.
8
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION AND ▇▇▇▇▇▇
Acquisition and ▇▇▇▇▇▇ jointly and severally represent and warrant to
▇▇▇▇▇▇ and the Stockholders that the statements contained in this Article 6 are
correct and complete as of the date hereof.
6.1 Organization of Acquisition and ▇▇▇▇▇▇. ▇▇▇▇▇▇ is a corporation duly
--------------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware. Acquisition is an LLC duly organized, validly existing and in good
standing under the laws of the State of Delaware.
6.2 Capital Stock. The authorized capital stock of ▇▇▇▇▇▇ consists of
-------------
120,000,000 shares of common stock, $.001 par value (the "▇▇▇▇▇▇ Common
-------------
Shares"), of which 56,761,086 shares are outstanding as of March 20, 1998, and
5,000,000 shares of preferred stock, of which no shares are outstanding as of
the date hereof. Since March 20, 1998, ▇▇▇▇▇▇ has not issued any shares of
capital stock except pursuant to the exercise of options outstanding on such
date to purchase ▇▇▇▇▇▇ Common Shares. All outstanding ▇▇▇▇▇▇ Common Shares
are, and all ▇▇▇▇▇▇ Common Shares issuable under stock option plans of ▇▇▇▇▇▇
will be when issued in accordance with the terms thereof, duly authorized,
validly issued, fully paid and nonassessable. All of the Unit interests of
Acquisition are owned 100% by ▇▇▇▇▇▇.
6.3 Authorization for Common Stock. The Share Consideration will, when
------------------------------
issued, be duly authorized, validly issued, fully paid and nonassessable, and no
stockholder of ▇▇▇▇▇▇ will have any preemptive right or similar rights of
subscription or purchase in respect thereof. The Share Consideration will,
subject to the accuracy of the Stockholders' representations contained in
Section 5.3 hereof, be exempt from registration under the Securities Act and
will be registered or exempt from registration under all applicable state
securities laws.
6.4 Authorization of Transaction. Each of Acquisition and ▇▇▇▇▇▇ has full
----------------------------
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its respective obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of each of
Acquisition and ▇▇▇▇▇▇, enforceable in accordance with its terms and conditions.
Neither Acquisition nor ▇▇▇▇▇▇ need give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
Governmental Authority in order to consummate the transactions contemplated by
this Agreement, except in connection with the filing of the Articles of Merger
with the Massachusetts Secretary of State and the Certificate of Merger with the
Delaware Secretary of State.
6.5 Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any law, constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government
or Governmental Authority to which either Acquisition or ▇▇▇▇▇▇ is subject or
any provision of the certificate of incorporation or by-laws of ▇▇▇▇▇▇ or the
certificate of formation, limited liability company agreement or other similar
documents of Acquisition or (ii) 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,
9
contract, lease, license, instrument, or other arrangement to which either
Acquisition or ▇▇▇▇▇▇ is a party or by which it is bound or to which any of its
assets is subject.
6.6 Brokers' Fees. Neither Acquisition nor ▇▇▇▇▇▇ has any Liability or
-------------
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement as a result of any
actions taken by ▇▇▇▇▇▇ or any of its Stockholders or Affiliates.
6.7 ▇▇▇▇▇▇ SEC Reports. The ▇▇▇▇▇▇ SEC Reports referred to in Section 5.3
------------------
did not contain when filed any untrue statement of a material fact or omit to
state a material fact required to be stated or incorporated by reference
therein, or necessary in order to make the statements or information therein, in
light of the circumstances under which they were made, not misleading.
6.8 Books and Records. ▇▇▇▇▇▇ shall retain after the Closing Date all
-----------------
material books and records pertaining to the business of ▇▇▇▇▇▇ prior to the
Closing consistent with ▇▇▇▇▇▇'▇ current records retention policy for at least 5
years. After the Closing, the Representative shall be entitled at all
reasonable times and upon reasonable notice to ▇▇▇▇▇▇ to have access to and to
make copies of all such books and records to the extent necessary in connection
with the preparation and filing of, or any audit of ▇▇▇▇▇▇'▇ or the
Stockholders' tax returns. In the event ▇▇▇▇▇▇ desires to destroy within 5
years after Closing any of such books and records that may be required in
connection with the preparation or audit of the tax returns of ▇▇▇▇▇▇ or the
Stockholders, ▇▇▇▇▇▇ shall first give the Representative 30 days prior written
notice and the Representative shall within 30 days of such notice have the right
to remove and retain said books and records, and any books and records not so
removed by the Representative may thereafter be destroyed by ▇▇▇▇▇▇.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES CONCERNING ▇▇▇▇▇▇
The Stockholders and ▇▇▇▇▇▇ represent and warrant to Acquisition and ▇▇▇▇▇▇
that the statements contained in this Article 7 are correct and complete as of
the date hereof, except as set forth in the disclosure schedule delivered by the
Stockholders and ▇▇▇▇▇▇ to Acquisition and ▇▇▇▇▇▇ on the date hereof (the
"Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs
--------------------
corresponding to the lettered and numbered paragraphs contained in this Article
7.
7.1 Organization, Qualification, and Corporate Power. Each of ▇▇▇▇▇▇ and
------------------------------------------------
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts. Each of ▇▇▇▇▇▇
and its Subsidiaries 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 failure to so qualify or obtain authorization would
not have a Material Adverse Effect on ▇▇▇▇▇▇ or any of its Subsidiaries, and
each such jurisdiction is listed in Schedule 7.1(a) of the Disclosure Schedule.
Each of ▇▇▇▇▇▇ and its Subsidiaries has full corporate power and authority and
all material licenses, permits, and authorizations necessary to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Section 7.1(b) of the Disclosure Schedule lists the directors and
officers of ▇▇▇▇▇▇. ▇▇▇▇▇▇ has delivered to Acquisition and ▇▇▇▇▇▇ correct and
complete copies of the articles of organization and by-laws of ▇▇▇▇▇▇ and its
Subsidiaries (as amended to date). The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
10
▇▇▇▇▇▇ in the forms in which they have been provided to ▇▇▇▇▇▇ are correct and
complete. Each of ▇▇▇▇▇▇ and its Subsidiaries is not in default under or in
violation of any material provision of its articles of organization or by-laws.
7.2 Capitalization. The entire authorized capital stock of ▇▇▇▇▇▇
--------------
consists of 200,000 shares of Voting Common Stock, no par value and 100,000
shares of Non-Voting Common Stock, no par value, of which 65,257.95 voting
shares, and 3,631.16 non-voting shares, are issued and outstanding. All of the
issued and outstanding ▇▇▇▇▇▇ Common Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
Stockholders as set forth in Section 7.2 of the Disclosure Schedule. Except as
set forth in Section 7.2 of the Disclosure Schedule, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
▇▇▇▇▇▇ to issue, sell, or otherwise cause to become outstanding any of its
capital stock, nor are there are any outstanding or authorized stock
appreciation, phantom stock, value participation, or similar rights with respect
to ▇▇▇▇▇▇. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the ▇▇▇▇▇▇ Common Shares.
7.3 Authorization of Transaction. ▇▇▇▇▇▇ has full power and authority
----------------------------
(including 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 ▇▇▇▇▇▇, enforceable in accordance
with its terms and conditions. ▇▇▇▇▇▇ is not required give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or Governmental Authority in order to consummate the transactions
contemplated by this Agreement, except in connection with the filing of the
Articles of Merger with the Massachusetts Secretary of State and the Certificate
of Merger with the Delaware Secretary of State.
7.4 Noncontravention. Except as set forth in Section 7.4 of the
----------------
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any law, constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any Governmental Authority to
which ▇▇▇▇▇▇ or any Subsidiary of ▇▇▇▇▇▇ is subject or any provision of the
articles of organization or by-laws of ▇▇▇▇▇▇ or any Subsidiary of ▇▇▇▇▇▇ or
(ii) 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 ▇▇▇▇▇▇ or any Subsidiary of ▇▇▇▇▇▇ is
a party or by which it is bound (excluding agreements with clients of ▇▇▇▇▇▇ for
the provision of services) or to which any of its assets is subject (or result
in the imposition of any Security Interest upon any of its assets).
7.5 Title to Assets. Except as set forth in Section 7.5 of the Disclosure
---------------
Schedule, each of ▇▇▇▇▇▇ and its Subsidiaries has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
7.6 Subsidiaries. (a) Section 7.6 of the Disclosure Schedule sets forth,
------------
as of the date hereof, a true and complete list of all of ▇▇▇▇▇▇'▇ Subsidiaries,
including the jurisdiction of incorporation or organization of each Subsidiary
and the percentage of each Subsidiary's
11
outstanding capital stock or other ownership interest owned by ▇▇▇▇▇▇ or another
Subsidiary of ▇▇▇▇▇▇ or by any other Person.
(b) All of the outstanding shares of capital stock of each Subsidiary have
been validly issued and are fully paid and nonassessable and are owned
beneficially and of record by ▇▇▇▇▇▇ free and clear of all Encumbrances. ▇▇▇▇▇▇
will not at the Closing, directly or indirectly, own any capital stock of or
other equity interests in any corporation, partnership or other Person and
neither ▇▇▇▇▇▇ nor any of its Subsidiaries is a member of or participant in a
partnership, joint venture or similar Person.
7.7 Financial Statements. ▇▇▇▇▇▇ has delivered (collectively, the
--------------------
"Financial Statements") to ▇▇▇▇▇▇ its audited consolidated balance sheets and
---------------------
statements of income, changes in stockholders' equity and cash flow as of and
for the fiscal years ended December 31, 1995 and 1996 and unaudited consolidated
balance sheet and statement of income, as of and for the fiscal year ended
December 31, 1997 (the "Most Recent Fiscal Year End.") The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, present fairly the
consolidated financial condition of ▇▇▇▇▇▇ and its Subsidiaries as of such dates
and the results of operations of ▇▇▇▇▇▇ and its Subsidiaries for such periods,
and are consistent with the books and records of ▇▇▇▇▇▇ and its Subsidiaries;
provided, however that the Most Recent Fiscal Year End Statements are subject to
normal year-end auditor's adjustments (none of which shall be materially
adverse) and the provision of footnotes.
7.8 Events Subsequent to the Most Recent Fiscal Year End Statements.
---------------------------------------------------------------
Except as set forth in Section 7.8 of the Disclosure Schedule, since December
31, 1997 there has not been any event, occurrence or circumstance outside the
Ordinary Course of Business. Without limiting the generality of the foregoing,
since that date:
(a) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other than
for a fair consideration in the Ordinary Course of Business;
(b) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) outside the Ordinary Course of Business, or
except for contracts to furnish services to clients in the Ordinary Course of
Business, involving more than $100,000;
(c) No party (including ▇▇▇▇▇▇ or any of its Subsidiaries) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) to which ▇▇▇▇▇▇
or any of its Subsidiaries is a party or by which it is bound;
(d) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has imposed any Security
Interest upon any of its assets, tangible or intangible;
(e) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either involving more
than $50,000 or outside the Ordinary Course of Business;
12
(f) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments, loans, and
acquisitions);
(g) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has issued any note, bond or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(h) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary Course of
Business;
(i) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has canceled, compromised,
waived or released any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
(j) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has granted any license or
sublicense of any rights under or with respect to any Intellectual Property;
(k) There has been no change made or authorized in the articles of
organization or by-laws of ▇▇▇▇▇▇ or any of its Subsidiaries;
(l) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock, except for capital stock issued
in connection with the exercise of options provided that such stock is reflected
on Schedule 7.2 as outstanding;
(m) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has declared, set aside or
paid any dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased or otherwise acquired any of
its capital stock;
(n) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has experienced any damage,
destruction or loss (whether or not covered by insurance) to its property;
(o) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors, officers or
employees outside the Ordinary Course of Business;
(p) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has entered into any
employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement outside the
Ordinary Course of Business;
(q) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has granted any increase in
the compensation of any of its directors, officers, or employees outside the
Ordinary Course of Business;
(r) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors, officers,
and employees (or taken any such action with respect to any other Employee
Benefit Plan);
13
(s) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has made any other change in
employment terms for any of its directors, officers or employees outside the
Ordinary Course of Business or in the terms of its agreements with any
independent contractors;
(t) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has made or pledged to make
any charitable or other capital contribution outside the Ordinary Course of
Business;
(u) There has not been any other material occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of Business
involving ▇▇▇▇▇▇ or any of its Subsidiaries; and
(v) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries is under any legal
obligation, whether written or oral, to do any of the foregoing.
7.9 Undisclosed Liabilities. Except as disclosed herein or in the
-----------------------
Disclosure Schedules, neither ▇▇▇▇▇▇ nor any of its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
it giving rise to any Liability), except for (i) Liabilities set forth in the
Most Recent Fiscal Year End Statements or in any notes to the Fiscal Year End
1996 balance sheet and (ii) Liabilities which have arisen after December 31,
1997 in the Ordinary Course of Business (none of which to the Knowledge of
▇▇▇▇▇▇ or the Stockholders, results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law).
7.10 Legal Compliance. ▇▇▇▇▇▇ and its Subsidiaries have complied in all
----------------
material respects 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),
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against ▇▇▇▇▇▇ or any of
its Subsidiaries alleging any failure so to comply.
7.11 Taxes.
-----
(a) (i) All federal, state, local and foreign Tax Returns required to be
filed by, or on behalf of, ▇▇▇▇▇▇ and each of its Subsidiaries have been filed
on a timely basis with the appropriate governmental authorities in all
jurisdictions in which such Tax Returns are required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and all
such Tax Returns were true, correct and complete in all material respects; (ii)
all Taxes due and payable in respect of such Tax Returns (whether or not shown
on such returns) have been fully and timely paid or are adequately provided for
in the Financial Statements; (iii) all Taxes for which liability has accrued but
which are not yet due and payable by ▇▇▇▇▇▇ and each of its Subsidiaries have
been fully accrued on its books and adequate reserves have been established
therefor, and all such Taxes not yet due and payable for all periods covered by
the Financial Statements have been adequately provided for in the Financial
Statements; and (iv) all material payments made to Affiliates were properly
reported on such Tax Returns.
(b) Each of ▇▇▇▇▇▇ and its Subsidiaries has duly and timely withheld and
paid over to the appropriate taxing authorities all Taxes and other amounts
required to be so withheld and paid over for all periods under all applicable
laws in connection with amounts paid or owing to any employee, independent
contractor, lender, stockholder or other third party.
14
(c) Section 7.11(c) of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed by, or on behalf of, ▇▇▇▇▇▇ and each
of its Subsidiaries since January 1, 1997. Section 7.11(c) of the Disclosure
Schedule also lists any Tax Returns that currently are the subject of audit
(including any jurisdictions for which only a written notice of audit has been
received) or as to which there are other pending administrative or court
proceedings with respect to any Taxes for which such company may be liable.
▇▇▇▇▇▇ has delivered to Acquisition and ▇▇▇▇▇▇ complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by either ▇▇▇▇▇▇ or any of its Subsidiaries. All positions
taken on such federal income Tax Returns that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code have been disclosed in such Tax Returns in accordance with Section 6662.
(d) Except as set forth in Section 7.11(d) of the Disclosure Schedule, (i)
the Stockholders do not expect any Governmental Authority to assess any
additional Taxes for ▇▇▇▇▇▇ or any of its Subsidiaries for any period for which
Tax Returns have been filed; (ii) there are no pending requests for rulings from
any Governmental Authority with respect to Taxes of ▇▇▇▇▇▇ or any of its
Subsidiaries; (iii) no claim has ever been made by a Governmental Authority in
a jurisdiction where ▇▇▇▇▇▇ or any of its Subsidiaries does not file Tax Returns
that ▇▇▇▇▇▇ or any of its Subsidiaries is or may be subject to taxation by that
jurisdiction; (iv) there is no dispute or claim concerning any Tax Liability of
▇▇▇▇▇▇ or any of its Subsidiaries claimed or raised by any Governmental
Authority during any presently pending audit or proceeding; and (v) no waiver or
extension of any statute of limitations has been given or requested with respect
to ▇▇▇▇▇▇ or any of its Subsidiaries in connection with any Tax Returns of
▇▇▇▇▇▇ or any of its Subsidiaries.
(e) There are no Security Interests on any of the assets of ▇▇▇▇▇▇ or any
of its Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(f) Except as set forth in Section 7.11(f) of the Disclosure Schedule,
neither ▇▇▇▇▇▇ nor any of its Subsidiaries is a party to or bound by any
agreement providing for the allocation, sharing or indemnification of Taxes.
(g) Except as set forth in Section 7.11(g) of the Disclosure Schedule, (i)
neither ▇▇▇▇▇▇ nor any of its Subsidiaries has been a member of any "Affiliated
Group" and (ii) neither ▇▇▇▇▇▇ nor any of its Subsidiaries has liability for the
Taxes of any Person under Treasury Regulation (S) 1.1502-6 (or any similar
provision of state, local or foreign law).
(h) Except as set forth in Section 7.11(h) of the Disclosure Schedule, the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or subsequent event) result in any payment that
would constitute an "excess parachute payment" within the meaning of Section
280G of the Code.
(i) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has, or has had, a permanent
establishment (within the meaning of the applicable tax treaty) in any foreign
country or has engaged in a trade or business in any foreign country.
(j) No portion of the cost of any of the assets of ▇▇▇▇▇▇ or any of its
Subsidiaries was financed directly or indirectly from the proceeds of any tax-
exempt state or local government obligation described in Section 103(a) of the
Code.
15
(k) Except as set forth in Section 7.11(k) of the Disclosure Schedule,
neither ▇▇▇▇▇▇ nor any of its Subsidiaries is a party to any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for federal income tax purposes.
(l) ▇▇▇▇▇▇ is not currently, has not been within the last five years and
does not anticipate becoming a "United States real property holding corporation"
within the meaning of Section 897(c) of the Code.
(m) None of the Stockholders is a foreign person within the meaning of
Section 1445 of the Code.
(n) ▇▇▇▇▇▇ (and any predecessor of ▇▇▇▇▇▇) has since January 1, 1990 been
and will be, up to and including the Closing Date, an S Corporation within the
meaning of Section 1361 of the Code and, except as set forth in Section 7.11(n)
of the Disclosure Schedule, under all corresponding provisions of applicable
state and local Tax laws to the extent they recognize S corporation status.
(o) Each Subsidiary of ▇▇▇▇▇▇ is a "qualified subchapter S subsidiary"
within the meaning of Section 1361 of the Code.
(p) Neither ▇▇▇▇▇▇ nor any predecessor of ▇▇▇▇▇▇ has incurred, or will
incur, any Liability for income Taxes under, or as a result of, Section 1374 of
the Code or any comparable provisions of state or local law (including in
connection with the deemed sale of the assets of ▇▇▇▇▇▇, including the assets of
any qualified subchapter S subsidiary, caused by the Section 338(h) Elections)
in the aggregate in excess of $1 million; and ▇▇▇▇▇▇ and each of its
Subsidiaries has paid all income Taxes imposed on them for the periods during
which they were not an S corporation or, in the case of state and local Taxes,
similarly so treated under comparable provisions of state or local law. Except
as set forth in Section 7.11(p) of the Disclosure Schedule, neither ▇▇▇▇▇▇ nor
any Subsidiary of ▇▇▇▇▇▇ that is a qualified subchapter S subsidiary has, in the
past 10 years, (i) acquired assets from another corporation in a transaction in
which the tax basis for the acquired assets was determined, in whole or in part,
by reference to the tax basis of the acquired assets (or any other property) in
the hands of the transferor or (ii) acquired the stock of any corporation which
is a qualified subchapter S subsidiary.
(q) Except as set forth in Section 7.11(q) of the Disclosure Schedule,
neither ▇▇▇▇▇▇ nor any of its Subsidiaries nor any other Person on behalf of
▇▇▇▇▇▇ or any of its Subsidiaries (i) has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by ▇▇▇▇▇▇ or any of its Subsidiaries; (ii) has
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law or any other agreement relating to Taxes with any
Governmental Authority; or (iii) has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by ▇▇▇▇▇▇ or any of its Subsidiaries, nor has the IRS proposed any such
adjustment or change in accounting method, or has any application pending with
any Governmental Authority requesting permission for any changes in accounting
methods that relate to the business or operations of ▇▇▇▇▇▇ or any of its
Subsidiaries.
16
(r) Except as set forth in Section 7.11(r) of the Disclosure Schedule, none
of the assets of ▇▇▇▇▇▇ or any of its Subsidiaries is (i) property required to
be treated as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986; (ii) "tax-
exempt use property" within the meaning of Section 168(h)(l) of the Code; or
(iii) tax exempt bond financed property within the meaning of Section 168(g) of
the Code.
7.12 Real Property. Section 7.12(a) of the Disclosure Schedule lists and
-------------
describes briefly all real property owned, leased or subleased to ▇▇▇▇▇▇ or its
Subsidiaries. Each of ▇▇▇▇▇▇ and its Subsidiaries has delivered to Acquisition
and ▇▇▇▇▇▇ correct and complete copies of the leases and subleases listed in
Section 7.12(b) of the Disclosure Schedule (as amended to date). With respect
to each lease and sublease listed in Section 7.12(b) of the Disclosure Schedule:
(a) such lease or sublease is legal, valid, binding, enforceable, and in
full force and effect;
(b) except as set forth in Section 7.12(b) of the Disclosure Schedule, no
consent is required with respect to such lease or sublease as a result of this
Agreement, and the actions contemplated by this Agreement will not result in the
change of any terms of any lease or sublease or otherwise affect the ongoing
validity of any lease or sublease;
(c) neither ▇▇▇▇▇▇ nor any of its Subsidiaries nor, to the Knowledge of the
Stockholders and ▇▇▇▇▇▇, any other party to the lease or sublease is in breach
or default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(d) no party to such lease or sublease has repudiated any provision
thereof;
(e) to the Knowledge of the Stockholders and ▇▇▇▇▇▇, there are no disputes,
oral agreements, or forbearance programs in effect as to such lease or sublease;
(f) to the Knowledge of the Stockholders and ▇▇▇▇▇▇, with respect to each
such sublease, the representations and warranties set forth in subsections (a)
through (e) above are true and correct with respect to the underlying lease;
(g) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(h) to the Knowledge of the Stockholders and ▇▇▇▇▇▇, all facilities leased
or subleased thereunder have received all approvals of governmental authorities
(including licenses and permits) required by ▇▇▇▇▇▇ or its Subsidiaries in
connection with the operation thereof and have been operated and maintained by
▇▇▇▇▇▇ and its Subsidiaries in accordance with applicable laws, rules, and
regulations; and
(i) to the Knowledge of the Stockholders and ▇▇▇▇▇▇, all facilities leased
or subleased thereunder are supplied with utilities and other services necessary
for the operation of said facilities.
17
7.13 Intellectual Property.
---------------------
(a) Each of ▇▇▇▇▇▇ and its Subsidiaries owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property used in the operation of the business of ▇▇▇▇▇▇ and its Subsidiaries as
presently conducted. Each item of Intellectual Property owned or used by ▇▇▇▇▇▇
and its Subsidiaries immediately prior to the Closing hereunder will be owned or
available for use by the Surviving Corporation on identical terms and conditions
immediately subsequent to the Closing hereunder.
(b) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and to the Knowledge of the
Stockholders and ▇▇▇▇▇▇ none of the Stockholders or the directors and officers
(and employees with responsibility for Intellectual Property matters) of ▇▇▇▇▇▇
or any of its Subsidiaries has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that ▇▇▇▇▇▇ or any of its
Subsidiaries must license or refrain from using any Intellectual Property rights
of any third party). To the Knowledge of the Stockholders and ▇▇▇▇▇▇, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of ▇▇▇▇▇▇ or any of its
Subsidiaries.
(c) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has a patent or registration
which has been issued with respect to any of its Intellectual Property.
(d) Section 7.13(d) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that ▇▇▇▇▇▇ or any of its
Subsidiaries uses pursuant to license, sublicense, agreement, or permission.
▇▇▇▇▇▇ has delivered to Acquisition and ▇▇▇▇▇▇ correct and complete copies of
all such licenses, sublicenses, agreements, and permissions (as amended to
date).
(e) To the Knowledge of the Stockholders and ▇▇▇▇▇▇, nothing will interfere
with, infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the continued
operation of the business as presently conducted of ▇▇▇▇▇▇ or any of its
Subsidiaries.
7.14 Tangible Assets. Each of ▇▇▇▇▇▇ and its Subsidiaries owns or leases
---------------
all buildings, machinery, equipment, and other tangible assets used in the
conduct of its business as presently conducted and as presently proposed to be
conducted. All of the Company's computer software and hardware are generally in
good operating condition and repair and are and have been during the last year
in a condition to satisfactorily service the needs of the business. All of the
Company's furniture, fixtures and other equipment are being sold in an "as is"
condition.
7.15 Contracts. Section 7.15 of the Disclosure Schedule lists the
---------
following contracts and other agreements to which ▇▇▇▇▇▇ or any of its
Subsidiaries is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $50,000 per annum which cannot be terminated without penalty in less than one
year from the date hereof;
(b) any agreement concerning a partnership or joint venture;
18
(c) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation or under which a Security Interest has been
imposed on any of its assets, tangible or intangible;
(d) any agreement concerning confidentiality or noncompetition;
(e) any agreement with any Stockholders or any Affiliate of its
Stockholders;
(f) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other material plan or arrangement for the
benefit of its current or former directors, officers, and employees;
(g) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in excess of
$100,000 or providing severance benefits; or
(h) any agreement under which it has borrowed, advanced or loaned any
amount to any of its directors, officers and employees outside the Ordinary
Course of Business.
(i) other than agreements with clients entered into in the Ordinary Course
of Business, any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on ▇▇▇▇▇▇ or any of its
Subsidiaries.
(j) any agreements with employees or consultants for the provision of any
material goods or services other than on arms-length terms and in the Ordinary
Course of Business.
▇▇▇▇▇▇ has delivered to Acquisition and ▇▇▇▇▇▇ a correct and complete copy of
each written agreement listed in Section 7.15 of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in Section 7.15 of the Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) to the Knowledge of the
Stockholders and ▇▇▇▇▇▇, no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (C) no party has repudiated any provision of the agreement. To
the Stockholders' and ▇▇▇▇▇▇'▇ Knowledge, the consummation of the transaction
described herein shall not have a Material Adverse Effect on the business of
▇▇▇▇▇▇ or any of its Subsidiaries.
7.16 Notes and Accounts Receivable. All notes and accounts receivable of
-----------------------------
▇▇▇▇▇▇ and each of its Subsidiaries are reflected properly on its books and
records, are valid receivables and to the Knowledge of the Stockholders and
▇▇▇▇▇▇, subject to no setoffs or counterclaims, except for the reserve for bad
debts set forth on the face of the Most Recent Fiscal Year End Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of ▇▇▇▇▇▇ and
its Subsidiaries which reserve has been established and maintained in accordance
with GAAP consistently applied.
7.17 Powers of Attorney. Except as set forth in Section 7.17 of the
------------------
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of ▇▇▇▇▇▇ or any of its Subsidiaries.
19
7.18 Insurance. Section 7.18 of the Disclosure Schedule identifies each
---------
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) currently
in effect to which ▇▇▇▇▇▇ or any of its Subsidiaries is a party, a named
insured, or otherwise the beneficiary of coverage. With respect to each such
insurance policy: (A) the policy is legal, valid, binding, enforceable, and in
full force and effect; (B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) to the Knowledge of
the Stockholders and ▇▇▇▇▇▇, neither ▇▇▇▇▇▇, any of its Subsidiaries, nor any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) no
party to the policy has repudiated any provision thereof. Each of ▇▇▇▇▇▇ and
its Subsidiaries has been covered during the past five years by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. Section 7.18 of the Disclosure
Schedule describes any self-insurance arrangements affecting ▇▇▇▇▇▇ or any of
its Subsidiaries.
7.19 Litigation. Section 7.19 of the Disclosure Schedule sets forth each
----------
instance in which ▇▇▇▇▇▇ or any of its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 7.19 of the Disclosure Schedule could
reasonably be expected to result in any Material Adverse Effect on ▇▇▇▇▇▇ or any
of its Subsidiaries. Except as set forth in Section 7.19 of the Disclosure
Schedule, none of the Stockholders, ▇▇▇▇▇▇, or any of its Subsidiaries has any
Basis to believe that any action, suit, proceeding, hearing, or investigation
will be brought or threatened against ▇▇▇▇▇▇ or any of its Subsidiaries.
7.20 Employees. Except as set forth in Section 7.20 of the Disclosure
---------
Schedule, to the Knowledge of the Stockholders and ▇▇▇▇▇▇, no executive, key
employee, or group of employees currently has any plans to terminate employment
with ▇▇▇▇▇▇ or any of its Subsidiaries independently of or as a result of this
Agreement. Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has committed any unfair
labor practice. None of the Stockholders or ▇▇▇▇▇▇ has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of ▇▇▇▇▇▇ or any of its Subsidiaries.
7.21 Employee Benefits.
-----------------
(a) Section 7.21(a) of the Disclosure Schedule lists each Employee Benefit
Plan that ▇▇▇▇▇▇ or any of its Subsidiaries maintains or to which ▇▇▇▇▇▇ or any
of its Subsidiaries contributes.
(b) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of
20
Subtitle B of Title 1 of ERISA and of Code (S) 4980B have been met with respect
to each group health plan (as defined in Section 607(1) of ERISA and Section
4980B(g)(2) of the Code).
(d) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of ▇▇▇▇▇▇ and its Subsidiaries.
All premiums or other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(e) Each such Employee Benefit Plan which is an Employee Pension Benefit
Plan meets the requirements of a "qualified plan" under Code (S) 401(a) and (i)
in the case of any "standardized form plan" (as defined in Rev. ▇▇▇. ▇▇-▇ which
is a defined contribution plan, a favorable opinion letter has been issued and
(ii) in the case of all other qualified plans, a favorable determination letter
has been received by the plan within the last two years from the Internal
Revenue Service.
(f) The market value of assets under each such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than any Multiemployer Plan), subject
to Title IV of ERISA, equals or exceeds the present value of all vested and
nonvested Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(g) ▇▇▇▇▇▇ has delivered to Acquisition and ▇▇▇▇▇▇ correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
(h) With respect to each Employee Benefit Plan that ▇▇▇▇▇▇ or any of its
Subsidiaries maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan), subject to Title IV of ERISA, has been
completely or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No proceeding by
the PBGC to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or threatened.
(ii) There have been no Prohibited Transactions with respect to any such
Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or threatened. None of the Stockholders, ▇▇▇▇▇▇,
or any of its Subsidiaries has any Knowledge of any Basis for any such action,
suit, proceeding, hearing, or investigation.
21
(iii) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has incurred, and none
of the Stockholders or the directors and officers (and employees with
responsibility for employee benefits matters) of ▇▇▇▇▇▇ or any of its
Subsidiaries has any reason to expect that ▇▇▇▇▇▇ or any of its Subsidiaries
will incur, any Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal Liability) or under
the Code with respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(i) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries contributes to, has ever
contributed to or has ever been required to contribute to any Multiemployer Plan
or has any Liability (including withdrawal Liability) under any Multiemployer
Plan.
(j) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries maintains or contributes to,
has ever maintained or contributed to, or has ever been required to contribute
to, any Employee Welfare Benefit Plan providing medical, health or life
insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code (S) 4980B).
7.22 Guaranties. Except as set forth in Section 7.22 of the Disclosure
----------
Schedule, neither ▇▇▇▇▇▇ nor any of its Subsidiaries is a guarantor or is
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person.
7.23 Environment, Health, and Safety.
-------------------------------
(a) Each of ▇▇▇▇▇▇ and its Subsidiaries has complied with all material
Environmental, Health, and Safety Laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against it alleging any failure so to comply. Without
limiting the generality of the preceding sentence, each of ▇▇▇▇▇▇ and its
Subsidiaries has obtained and been in compliance with all of the material terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety Laws.
(b) Neither ▇▇▇▇▇▇ nor any of its Subsidiaries has any Liability or has
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against ▇▇▇▇▇▇
giving rise to any Liability for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any employee
or other individual, or for any reason under any Environmental, Health, and
Safety Law.
(c) To the Knowledge of the Stockholders and ▇▇▇▇▇▇, all properties and
equipment used in the business of ▇▇▇▇▇▇ and its Subsidiaries have been free of
asbestos, PCB's, methylene chloride, trichloroethylene,1,2-trans-
dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous Substances.
7.24 Relationships with Customers. Except as set forth in Section 7.24 of
----------------------------
the Disclosure Schedule, the Stockholders and ▇▇▇▇▇▇ believe that the
relationships of each of ▇▇▇▇▇▇ and its Subsidiaries with its existing customers
are sound, and there is no Basis to believe that any of the primary customers of
▇▇▇▇▇▇ or any of its Subsidiaries will materially and adversely change the
manner in which they currently conduct business with ▇▇▇▇▇▇ or any of its
22
Subsidiaries; provided, however, that neither ▇▇▇▇▇▇ nor the Stockholders make
any representation or warranty that any of its clients actually will continue to
do business with ▇▇▇▇▇▇ in the future. ▇▇▇▇▇▇ understands and acknowledges that
advertising clients from time to time solicit reviews from competitors of ▇▇▇▇▇▇
or otherwise terminate their relationship for no reason or for perceived good
reason.
7.25 Customers. The names and addresses of all customers of ▇▇▇▇▇▇ and
---------
each of its Subsidiaries during fiscal year 1997 and all customers known as of
the Closing Date who will be customers during fiscal 1998 are listed in Section
7.25 of the Disclosure Schedule. All contracts and agreements with such
customers are valid, effective and enforceable and the Disclosure Schedule sets
forth all customers who have account balances that are in excess of 90 days past
due.
7.26 Relationships with Customers and Suppliers. ▇▇▇▇▇▇ does not know of
------------------------------------------
any written or oral communication, fact, event or action which exists or has
occurred within 120 days prior to the date of this Agreement which would
indicate that any of the following shall terminate or materially reduce its
business with ▇▇▇▇▇▇ or any of its Subsidiaries, as the case may be:
(i) any current customer of ▇▇▇▇▇▇ or any of its Subsidiaries which
accounted for over 1% of total consolidated net sales of ▇▇▇▇▇▇ for its most
recently completed fiscal year; or
(ii) any current supplier to ▇▇▇▇▇▇ or any of its Subsidiaries of
items essential to the conduct of the business, which items cannot be replaced
at comparable cost and the loss of which could reasonably be expected to have an
adverse effect on ▇▇▇▇▇▇ or any of its Subsidiaries.
Since the Most Recent Balance Sheet Date, (A) each of ▇▇▇▇▇▇ and its
Subsidiaries has retained all sales personnel employed in connection with the
operation of the business and (B) no customer (or group of customers) purchasing
in the aggregate of $50,000 in products and services on a yearly basis has
terminated its relationship with ▇▇▇▇▇▇ or any of its Subsidiaries.
7.27 Employee and Stockholder Indebtedness. Section 7.27 of the
-------------------------------------
Disclosure Schedule sets forth all indebtedness to ▇▇▇▇▇▇ and its Subsidiaries
of the Stockholders or the officers, directors or employees of ▇▇▇▇▇▇ or any of
its Subsidiaries. Any credit cards issued for the account of ▇▇▇▇▇▇ or any of
its Subsidiaries used for non-business purposes shall be canceled prior to the
Closing Date and, upon cancellation, paid in full by the Stockholders.
7.28 Product Liability. Except to the extent covered by insurance,
-----------------
neither ▇▇▇▇▇▇ nor any of its Subsidiaries has any Liability (and, to the
Knowledge of ▇▇▇▇▇▇ and the Stockholders, there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against ▇▇▇▇▇▇ or any of its Subsidiaries giving rise to any
Liability) arising out of any injury to individuals or property as a result of
the ownership, possession or use of any product manufactured, sold, leased
delivered, promoted, advertised or marketed by ▇▇▇▇▇▇ or any of its
Subsidiaries.
7.29 Bank Accounts. Section 7.29 of the Disclosure Schedule sets forth
-------------
all bank accounts and marketable securities (both debt and equity) of ▇▇▇▇▇▇ and
each of its Subsidiaries.
7.30 Related Party Agreements. Section 7.30 of the Disclosure Schedule
------------------------
sets forth all agreements between ▇▇▇▇▇▇ or any of its Subsidiaries with (i) any
Stockholders or any of their
23
respective Affiliates or (ii) any officer or director of ▇▇▇▇▇▇ or any of its
Subsidiaries or any of their respective Affiliates.
7.31 Change in Control. Except as set forth in Section 7.31 of the
-----------------
Disclosure Schedule and except for agreements with clients of ▇▇▇▇▇▇ for the
provision of services, neither ▇▇▇▇▇▇ nor any of its Subsidiaries is a party to
any contract or arrangement which contains a "change in control," "potential
change in control" or similar provision, and the consummation of the
transactions contemplated hereby shall not (either alone or upon the occurrence
of additional acts or events) result in any payment or payments becoming due
from ▇▇▇▇▇▇ or any of its Subsidiaries to any person or give any person the
right to terminate or alter the provisions of any agreement to which ▇▇▇▇▇▇ or
any of its Subsidiaries is a party.
7.32 Brokers Fees. Neither ▇▇▇▇▇▇, any of its officers, directors or
------------
employees, nor any Stockholder has any Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, except for the fees and expenses of AdMedia
Partners, Inc. in the aggregate amount of $2,600,000.
7.33 Disclosure. The representations and warranties contained in this
----------
Article 7 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 7 not misleading.
7.34 Wolf Group. The execution of this agreement and the consummation of
----------
the transactions contemplated hereunder will not give rise to any liability of
▇▇▇▇▇▇, ▇▇▇▇▇▇ or any of its Affiliates under the letter of intent with Wolf
Group Integrated Communications, Ltd. dated September 5, 1997.
7.35 Phantom Equity; Wolf Liabilities. Neither ▇▇▇▇▇▇ nor any of ▇▇▇▇▇▇
--------------------------------
or its Affiliates shall sustain or bear any cost, expense, charge or other
liability (A) in respect of any existing phantom stock or value participation
plan of ▇▇▇▇▇▇ in an aggregate amount in excess of $3,484,244 due to the Phantom
Stockholders which will be satisfied with ▇▇▇▇▇▇ Shares, or (B) relating to the
business of ▇▇▇ ▇▇▇▇▇ Associates or the obligations undertaken by ▇▇▇▇▇▇ in
connection with the acquisition of ▇▇▇ ▇▇▇▇▇ Associates, including without
limitation (i) pursuant to any promissory note or other obligation to BWA
Liquidation Trust, (ii) for use of office space, health insurance or
indemnities or other obligations to the successors to ▇▇▇ ▇▇▇▇▇ Associates,
(iii) pursuant to any lease or sublease of real property or (iv) to any
employees transferred to ▇▇▇ ▇▇▇▇▇ Associates in connection with ▇▇▇▇▇▇'▇
spinoff thereof, or (C) relating to North Castle Communications, Inc. including
without limitation pursuant to any lease of real property with First Stamford
Place or its successors.
ARTICLE 8
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
8.1 General. In the event that 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, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Article 11 below). The Stockholders acknowledge and agree that from and after
the Closing,
24
the Surviving Corporation and ▇▇▇▇▇▇ will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to ▇▇▇▇▇▇ or any of its Subsidiaries.
8.2 Litigation Support. In the event and for so long as any Party
------------------
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving ▇▇▇▇▇▇ or any of its Subsidiaries, each of the
other Parties will cooperate reasonably with such Party and its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article 11 below).
8.3 Transition. The Stockholders will not take any action that is
----------
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of ▇▇▇▇▇▇ or any of its
Subsidiaries from maintaining the same business relationships with the Surviving
Corporation after the Closing as it maintained with ▇▇▇▇▇▇ or any of its
Subsidiaries prior to the Closing.
8.4 Confidentiality. Each Stockholder will treat and hold as such all of
---------------
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
▇▇▇▇▇▇ or destroy, at the request and option of ▇▇▇▇▇▇, all tangible embodiments
(and all copies) of the Confidential Information which are in his possession.
In the event that any Stockholder is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, such Stockholder will notify ▇▇▇▇▇▇ promptly of the
request or requirement so that ▇▇▇▇▇▇ may seek an appropriate protective order
or waive compliance with the provisions of this Section 8.4. If, in the absence
of a protective order or the receipt of a waiver hereunder, the Stockholder is,
on the advice of counsel, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, then such Stockholder may
disclose the Confidential Information to such tribunal; provided, however, that
-------- -------
the disclosing Stockholder shall use his best efforts to obtain, at the request
of ▇▇▇▇▇▇, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as ▇▇▇▇▇▇ shall designate. The foregoing provisions shall not apply
to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
8.5 Non-Solicitation and Non-Competition. Each of the Stockholders agrees
------------------------------------
as to himself as follows:
(a) Except in the course of his employment by the Surviving Corporation or
▇▇▇▇▇▇ after the Closing, for a period of five years from and after the Closing
Date, ▇▇▇▇▇▇▇▇▇▇▇ will not engage or participate, directly or indirectly, as
principal, agent, executive, director, proprietor, joint venturer, trustee,
employee, employer, consultant, stockholder, partner or in any other capacity
whatsoever, in the conduct or management of, or own any stock or any stock or
any other equity investment in or debt of, any business that the Surviving
Corporation conducts as of the Closing Date, including without limitation any
business involving the provision of
25
advertising, design and media, direct marketing, database management and public
relations services (the "Advertising and Marketing Services"); provided,
----------------------------------
however, that the foregoing shall not prohibit ▇▇▇▇▇▇▇▇▇▇▇ from owning less than
one (1%) percent of any publicly traded security, or from being engaged in the
business of agency selection or review.
(b) During the Non-Competition Period, such Stockholder will not, for his
own benefit or for the benefit of any person or entity other than the Surviving
Corporation, (i) solicit, or assist any person or entity other than the
Surviving Corporation to solicit, any officer, director, executive or employee
of the Surviving Corporation to leave his employment, (ii) hire or cause to be
hired any present officer, director, executive or employee of the Surviving
Corporation during the twelve-month period following such person's termination
with the Surviving Corporation, or (iii) engage any present officer, director,
executive or employee of the Surviving Corporation as a partner, contractor,
sub-contractor, employee or consultant during the twelve-month period following
such person's termination with the Surviving Corporation.
(c) For a period of three (3) years after the Closing Date (the "Non-
Competition Period"), such Stockholder will not solicit, or assist any person or
entity other than the Surviving Corporation to solicit, any person or entity
that is a client of the Surviving Corporation on the Closing Date, or has been a
client of the Surviving Corporation during the prior twelve (12) months, to
provide Advertising and Marketing Services or (ii) disparage or intentionally
cause any harm to any of the Surviving Corporation's business relationships.
(d) Such Stockholder acknowledges that (i) the markets served by the
Surviving Corporation are national and international in scope and are not
dependent on the geographic location of the executive personnel or the
businesses by which they are employed; and (ii) the above covenants are
manifestly reasonable on their face, and the parties expressly agree that such
restrictions have been designed to be reasonable and no greater than is required
for the protection of the Surviving Corporation and are a significant element of
the consideration hereunder.
(e) Such Stockholder shall not (for such Stockholder's own benefit or the
benefit of any person or entity other than the Surviving Corporation) use or
disclose any of the Surviving Corporation's trade secrets or other confidential
information. The term "trade secrets or other confidential information"
includes, by way of example, matters of a technical nature, "know-how," computer
programs (including documentation of such programs), research projects, and
matters of a business nature, such as proprietary information about costs,
profits, markets, sales, lists of customers, and other information of a similar
nature to the extent not available to the public and to the extent not
independently generated by such Stockholder or others without any reference to
any of such Stockholder's trade secrets or other confidential information, and
such materials constituting plans for future development.
(f) If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 8.5 is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
8.6 ▇▇▇▇▇▇ Common Shares. Each certificate issued to the Stockholder
--------------------
representing the ▇▇▇▇▇▇ Common Shares will be imprinted with a legend
substantially in the following form:
26
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION CONTAINED IN SECTION 4(2) OF THE 1933 ACT
AND REGULATION D OF THE RULES AND REGULATIONS PROMULGATED UNDER THE 1933
ACT, AND IN RELIANCE UPON THE REPRESENTATION BY THE HOLDER THAT THEY HAVE
BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO RESALE OR
FURTHER DISTRIBUTION IN VIOLATION OF APPLICABLE LAW. SUCH SHARES MAY NOT
BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, HYPOTHECATED, NOR WILL ANY
ASSIGNEE OR ENDORSEE HEREOF BE RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER
FOR ANY PURPOSE, UNLESS A REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT
OR UNLESS THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION SHALL BE
ESTABLISHED TO THE REASONABLE SATISFACTION OF COUNSEL OF THE ISSUER.
If any Stockholder desires to transfer any of the ▇▇▇▇▇▇ Common Shares received
in connection with the Merger, other than in a registered offering or pursuant
to a sale which counsel for ▇▇▇▇▇▇ confirms is in compliance with Rule 144 of
the Securities Act, such Stockholder must first furnish ▇▇▇▇▇▇ with (i) a
written opinion satisfactory to ▇▇▇▇▇▇ in form and substance from counsel
reasonably satisfactory to ▇▇▇▇▇▇ to the effect that such Stockholder may
transfer the ▇▇▇▇▇▇ Common Shares as desired without registration under the
Securities Act and (ii) a written undertaking executed by the desired transferee
reasonably satisfactory to ▇▇▇▇▇▇ in form and substance agreeing to be bound by
the restrictions on transfer contained herein.
8.7 Pooling of Interests. No Stockholder shall take any action which
--------------------
would prevent the transactions contemplated by this Agreement from being
accounted for as a pooling of interests for financial reporting purposes.
Without limiting the foregoing, each Stockholder agrees not to sell or otherwise
reduce his risk (within the meaning of the Securities and Exchange Commission's
Financial Reporting Release No. 1, "Codification of Financial Reporting
Policies," Section 201.01 [47 F.R. 2028] (May 17, 1982) with respect to any
▇▇▇▇▇▇ Common Shares received pursuant to this Agreement until after such time
as consolidated financial results which reflect at least 30 days of post-merger
combined operations of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ have been published by ▇▇▇▇▇▇. ▇▇▇▇▇▇
shall publish such combined results for the month of April 1998 on or prior to
May 31, 1998.
8.8 Stock Options. 550,000 non-qualified stock options (with four year
-------------
vesting), pursuant to ▇▇▇▇▇▇'▇ Incentive Stock Option Plan, will be granted, at
or promptly after the Closing Date, to such of ▇▇▇▇▇▇'▇ employees as the
Representative shall determine.
8.9 Effect on Options to Acquire Company Common Stock. At the Effective
-------------------------------------------------
Time, each outstanding and unexpired option to purchase shares of Company Common
Stock (a "Company Option") which Company Options are listed on Section 7.2 of
the Disclosure Schedule, whether vested or unvested, shall (except to the extent
exercised prior to the Effective Time) automatically and without further action
on the part of the holder thereof be exercisable on the same terms and subject
to the same conditions as were applicable under such Company Option (including
term, exercisability and vesting schedule) for the same number of whole shares
27
of ▇▇▇▇▇▇ Common Stock as the holder of such Company Option would have been
entitled to receive in the Merger (whether or not vested or exercisable) had
such holder exercised such Company Option in full immediately prior to the
Effective Time for shares of Company Common Stock, at a price per share of
▇▇▇▇▇▇ Common Stock equal to the per share exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such Company Option
divided by the Exchange Ratio; provided, however, that in the case of any option
to which Section 421 of the Code applies by reason of its qualification under
any of Sections 422 through 424 of the Code, the exercise price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be adjusted, if necessary, in order to comply with
Section 424 of the Code; and provided, further, however, that the number of
shares of ▇▇▇▇▇▇ Common Stock that may be purchased upon exercise of any such
option shall not include any fractional share and, upon exercise of such option
following the Effective Time, a cash payment shall be made for any fractional
share based upon the average of the closing prices per share of ▇▇▇▇▇▇ Common
Stock, as reported on the NYSE Composite Tape during the twenty consecutive
Trading Days ending on the Trading Day prior to the date of exercise. At or
prior to the Effective Time, ▇▇▇▇▇▇ shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of ▇▇▇▇▇▇ Common Stock for
delivery upon exercise of such Company Options in accordance with this Section
8.9, and not later than 180 days following the Closing Date, ▇▇▇▇▇▇ shall use
its best efforts to cause a Registration Statement on Form S-8 to be filed with
respect to such Company Options.
ARTICLE 9
CONDITIONS TO OBLIGATION TO CLOSE
9.1 Conditions to Each Party's Obligation. The respective obligations of
-------------------------------------
▇▇▇▇▇▇, Acquisition, ▇▇▇▇▇▇ and the Stockholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions, which conditions may be
waived upon the written consent of ▇▇▇▇▇▇ and the Stockholder:
(a) Governmental Approvals. The Parties shall have received any material
----------------------
authorizations, consents, and approvals of governments and Governmental
Authorities referred to in Section 5.1, Section 6.4, and Section 7.3 above and
all applicable waiting periods (and any extensions thereof) under the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been terminated.
(b) No Injunction or Proceedings. There shall not be in effect any action,
----------------------------
suit, or proceeding pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge that would, in the reasonable judgment of ▇▇▇▇▇▇ or
▇▇▇▇▇▇, (A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (C) affect adversely the right of ▇▇▇▇▇▇ to
own the capital stock of the Surviving Corporation, or (D) affect adversely the
right of the Surviving Corporation to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or charge
is in effect).
(c) Employment Agreements. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ shall have entered into a
---------------------
mutually satisfactory employment agreement with the Surviving Corporation.
28
(d) Registration Rights Agreement. A registration rights agreement shall
-----------------------------
have been executed and delivered by the parties thereto and the Phantom
Stockholders.
(e) Escrow Agreement. ▇▇▇▇▇▇ and the Representative shall have executed
----------------
and delivered counterparts of the Escrow Agreement together with any
counterparts signed by the Escrow Agent and blank stock powers executed by the
Representative with respect to the ▇▇▇▇▇▇ Common Shares to be held in the Escrow
Deposit.
9.2 Conditions to Obligation of Acquisition and ▇▇▇▇▇▇. The obligations
--------------------------------------------------
of Acquisition and ▇▇▇▇▇▇ to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(a) Acquisition and ▇▇▇▇▇▇ shall have received an opinion dated as of the
Closing Date from Posternak, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, L.L.P., counsel to the
Stockholders and ▇▇▇▇▇▇, addressed and in form satisfactory to Acquisition and
▇▇▇▇▇▇;
(b) Acquisition and ▇▇▇▇▇▇ shall have received an opinion from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, certified public accountants and independent accountants to
Acquisition and ▇▇▇▇▇▇, addressed to Acquisition and ▇▇▇▇▇▇, and dated as of the
Closing Date, to the effect that the transactions contemplated by this Agreement
shall be accounted for as a pooling of interests for financial reporting
purposes;
(c) ▇▇▇▇▇▇ shall have received the resignations, effective as of the
Closing, of each director and officer of ▇▇▇▇▇▇ whom ▇▇▇▇▇▇ shall have specified
in writing prior to the Closing;
(d) ▇▇▇▇▇▇ shall have received a certificate of non-foreign person status
in the form prescribed by United States Treasury Regulation (S) 1.1445-
2(b)(2)(iii) with respect to each Stockholder in form and substance acceptable
to ▇▇▇▇▇▇; and
(e) The Stockholders shall have delivered to ▇▇▇▇▇▇ five executed copies of
Internal Revenue Form 8023, and any comparable forms under state or local law,
completed in form and substance reasonably satisfactory to ▇▇▇▇▇▇, and having
provided all information requested relating to the Section 338(h)(10) Elections
described in Section 10.2 of this Agreement.
▇▇▇▇▇▇ may waive any condition specified in this Section 9.2 if it executes a
writing so stating at or prior to the Closing.
9.3 Conditions to Obligation of the Stockholders and ▇▇▇▇▇▇. The
-------------------------------------------------------
obligation of the Stockholders and ▇▇▇▇▇▇ to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(a) ▇▇▇▇▇▇ shall have furnished to its transfer agent irrevocable
instructions to deliver the Share Consideration to such accounts as may be
specified in writing by the Stockholders in accordance with Section 4.3.
(b) the Stockholders shall have received an opinion dated as of the Closing
Date from Weil, Gotshal & ▇▇▇▇▇▇ LLP, counsel to Acquisition and ▇▇▇▇▇▇,
addressed and in form satisfactory to the Stockholders.
The Stockholders and ▇▇▇▇▇▇ may waive any condition specified in this Section
9.3 if they execute a writing so stating at or prior to the Closing.
29
ARTICLE 10
INCOME TAX MATTERS
10.1 Preparation of Tax Returns; Taxable Year.
----------------------------------------
(a) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Boston Office ("▇▇▇▇▇▇▇▇"), on behalf of the
Stockholders, shall prepare and file, or cause to be prepared and filed, all Tax
Returns of ▇▇▇▇▇▇ and each of its Subsidiaries for all periods ending on or
prior to the Closing Date in a manner consistent with prior Tax Returns except
as the Representative and ▇▇▇▇▇▇ may otherwise agree or as otherwise required by
law. Each Tax Return thus prepared will be provided to ▇▇▇▇▇▇, for its review
thereof and comment thereon, at least thirty (30) business days prior to the due
date for the filing of such Tax Return. The Representative and ▇▇▇▇▇▇ shall
attempt in good faith mutually to resolve any disagreement regarding such Tax
Return. Any disagreement that is not resolved at least twenty (20) business
days prior to the due date for the filing of such Tax Return shall be promptly
resolved in an arbitration by a Big Six accounting firm mutually agreed upon by
the Representative and ▇▇▇▇▇▇, and the resolution by such accounting firm shall
be binding on the Stockholders, ▇▇▇▇▇▇ and ▇▇▇▇▇▇. The Stockholders shall
include any income, gain, loss, deduction or other tax items for such periods on
their Tax Returns (including any items resulting from the Section 338(h)(10)
Elections) in a manner consistent with the Schedule K-1's furnished by ▇▇▇▇▇▇▇▇
to the Stockholders for such periods to the extent permitted by applicable law.
(b) Except to the extent prohibited by law, the Stockholders and ▇▇▇▇▇▇
shall close the taxable period of ▇▇▇▇▇▇ and its Subsidiaries as of the Closing
Date. In any case in which a Tax is assessed or is payable with respect to a
taxable period which begins before the Closing Date and ends after the Closing
Date (a "Straddle Period"), the period up to and including the Closing Date
---------------
shall be deemed a separate taxable year for purposes of Section 7.11. Any
allocation of income or deductions required to determine any Taxes attributable
to any Straddle Period shall be made by means of a closing of the books and
records of the Company as of the close of business on the Closing Date, provided
that exemptions, allowances or deductions on any Taxes (such as property or
similar Taxes) that are calculated on an annual basis shall be allocated on a
pro rata basis between the portion of the year ending as of the Closing Date and
the remainder of the year (by number of days).
(c) The tax deduction relating to the issuance of ▇▇▇▇▇▇ Common Shares by
▇▇▇▇▇▇ directly to the Phantom Stockholders, which stock shall be issued on the
Closing Date, shall be claimed in the final S corporation Tax Return of ▇▇▇▇▇▇.
10.2 Section 338(h)(10) Elections
----------------------------
(a) ▇▇▇▇▇▇ and the Stockholders shall take all actions necessary and
appropriate (including timely filing such forms, tax returns, elections,
schedules and other documents as may be required) to effect and preserve a
timely and valid election under Code Section 338(h)(10) in accordance with the
requirements of Section 338 of the Code and under any comparable provisions of
state or local tax law (collectively, including any amendments, supplements or
corrections thereto, the "Section 338(h)(10) Elections") with respect to ▇▇▇▇▇▇
----------------------------
and each of its Subsidiaries that is a "qualified subchapter S subsidiary"
within the meaning of Section 1361 of the Code. ▇▇▇▇▇▇ shall be responsible for
the filing of all forms and documents in connection with the making of the
Section 338(h)(10) Elections, and shall provide the Stockholders with copies of
such filings. At the request of ▇▇▇▇▇▇, the Stockholders shall execute and
deliver to
30
▇▇▇▇▇▇ within 10 days after such request such documents or forms as are
reasonably requested by ▇▇▇▇▇▇ to complete properly the Section 338(h)(10)
Elections. ▇▇▇▇▇▇ shall not make an election to treat Acquisition as an entity
taxable as a corporation for federal income tax purposes.
(b) The amount paid by ▇▇▇▇▇▇ for the ▇▇▇▇▇▇ Common Shares and the
liabilities of ▇▇▇▇▇▇ and its qualified subchapter S subsidiaries and other
relevant items shall be allocated among the assets of ▇▇▇▇▇▇ and its qualified
subchapter S subsidiaries in accordance with Section 338(b)(5) of the Code and
the Treasury Regulations promulgated thereunder, in such a manner as ▇▇▇▇▇▇
shall reasonably determine (the "Purchase Price Allocation"). Subject to any
-------------------------
allocation required by the Treasury Regulations to be made to Class I and Class
II assets (as defined therein), the allocation will be first to tangible assets
and the balance will be allocated to ▇▇▇▇▇▇'▇ goodwill. The parties hereto
agree that the fair market value of the tangible assets of ▇▇▇▇▇▇ and its
qualified Subchapter S subsidiaries is equal to net tax basis. ▇▇▇▇▇▇ shall
provide ▇▇▇▇▇▇ and the Representative with such allocation within 60 days after
the Closing Date.
(c) ▇▇▇▇▇▇, ▇▇▇▇▇▇ and the Stockholders shall file all Tax Returns in a
manner consistent with the Section 338(h)(10) Elections and the Purchase Price
Allocation, and shall take no position contrary thereto or inconsistent
therewith (including, without limitation, in any amended return or claim for
refund, any examination or audit by any taxing authority, or any other
proceeding). ▇▇▇▇▇▇ shall pay, or cause to be paid, any Tax imposed on ▇▇▇▇▇▇
or its Subsidiaries attributable to the Section 338(h)(10) Elections,
(including, without limitation, but not in excess of $1,000,000 in the
aggregate, any Tax under, or as a result of, Section 1374 of the Code or any
comparable provisions of state or local law), and shall indemnify the
Stockholders against any adverse consequences arising out of any failure to pay
any such Taxes.
10.3 Cooperation. ▇▇▇▇▇▇ and the Stockholders agree to furnish or cause
-----------
to be furnished to each other, upon written request, and each at their own
expense, as promptly as practicable, such information (including access to books
and records) and assistance relating to ▇▇▇▇▇▇ or any of its Subsidiaries as is
reasonably necessary for the preparation and timely filing of any Tax Return
(including, without limitation, the Section 338(h)(10) Elections and any amended
return), for the preparation for any audit, and for the prosecution or defense
of any claim, suit or proceeding relating to any adjustment or proposed
adjustment with respect to Taxes, including making employees available on a
mutually convenient basis to provide additional information and explanations of
any material provided hereunder.
31
ARTICLE 11
INDEMNIFICATION
11.1 Indemnity Obligations of the Stockholders. Subject to the limitation
-----------------------------------------
for "several" liability in Article 5 and to Sections 11.5 and 11.6, each
Stockholder hereby agrees to indemnify and hold ▇▇▇▇▇▇ and the Surviving
Corporation, and each of their respective officers, directors, employees, agents
and advisors, harmless from, and to reimburse ▇▇▇▇▇▇ and the Surviving
Corporation and such other indemnified parties for, any ▇▇▇▇▇▇ Indemnity Claims
arising under the terms and conditions of this Agreement. For purposes of this
Agreement, the term "▇▇▇▇▇▇ Indemnity Claim" shall mean any loss, damage,
deficiency, claim, liability, obligation, suit, action, fee, cost or expense of
any nature whatsoever resulting from (i) any breach of any representation and
warranty of the Stockholders or ▇▇▇▇▇▇ which is contained in this Agreement or
any Schedule, Exhibit or certificate delivered pursuant thereto; (ii) any breach
or non-fulfillment of, or any failure to perform, any of the covenants,
agreements or undertakings of the Stockholders or ▇▇▇▇▇▇ which are contained in
or made pursuant to this Agreement; and (iii) all interest, penalties and costs
and expenses (including, without limitation, all reasonable fees and
disbursements of counsel) arising out of or related to any indemnification made
under this Section 11.1.
11.2 Indemnity Obligations of ▇▇▇▇▇▇. ▇▇▇▇▇▇ and the Surviving
-------------------------------
Corporation hereby jointly and severally agree to indemnify and hold each of the
Stockholders, and each of their respective officers, directors, employees,
agents and advisors, harmless from, and to reimburse the Stockholders and such
other indemnified parties for, any Stockholder Indemnity Claims arising under
the terms and conditions of this Agreement. For purposes of this Agreement, the
term "Stockholder Indemnity Claim" shall mean any loss, damage, deficiency,
claim, liability, suit, action, fee, cost or expense of any nature whatsoever
incurred by the Stockholder resulting from (i) any breach of any representation
and warranty of Acquisition and ▇▇▇▇▇▇ which is contained in this Agreement or
any Schedule, Exhibit or certificate delivered pursuant thereto; (ii) any breach
or non-fulfillment of, or failure to perform, any of the covenants, agreements
or undertakings of Acquisition or ▇▇▇▇▇▇ which are contained in or made pursuant
to the terms and conditions of this Agreement; and (iii) all interest,
penalties, costs and expenses (including, without limitation, all reasonable
fees and disbursements of counsel) arising out of or related to any
indemnification made under this Section 11.2.
11.3 Appointment of Representative. Each Stockholder hereby appoints
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ as its exclusive agent to act on its behalf with respect to
all of the transactions contemplated under this Agreement, including without
limitation, the Registration Rights Agreement, the Escrow Agreement and any and
all Stockholder Indemnity Claims and any and all ▇▇▇▇▇▇ Indemnity Claims
("Claim" or "Claims") arising under this Agreement, or such other representative
as may be hereafter appointed by a majority in interest of the Stockholders.
Such agent is hereinafter referred to as the "Representative." The
--------------
Representative shall take, and each Stockholder agrees that the Representative
shall take, any and all actions which the Representative believes are necessary
or appropriate under this Agreement for and on behalf of each Stockholder, as
fully as if such Stockholder were acting on his own behalf, including, without
limitation, executing on their behalf all documents required to close this
Agreement, asserting Stockholder Indemnity Claims against ▇▇▇▇▇▇, defending all
▇▇▇▇▇▇ Indemnity Claims, consenting to, compromising or settling all Claims,
conducting negotiations with ▇▇▇▇▇▇ and its representatives regarding such
Claims, dealing with ▇▇▇▇▇▇ and the Escrow Agent under the Escrow Agreement
referred to in Section 11.7(a) below with respect to all matters arising under
the Escrow Agreement, taking any and all other actions specified in or
contemplated by this Agreement and engaging counsel, accountants or other
representatives in connection with the
32
foregoing matters. ▇▇▇▇▇▇ shall have the right to rely upon all actions taken
or omitted to be taken by the Representative pursuant to this Agreement, all of
which actions or omissions shall be legally binding upon the Stockholders. The
Representative, acting pursuant to this Section 11.3, shall not be liable to any
Stockholder for any act or omission, except in connection with any act or
omission that was the result of the Representative's bad faith or gross
negligence.
11.4 Notification of Claims. Subject to the provisions of Section 11.5
----------------------
and Section 11.6, in the event of the occurrence of an event which any party
asserts constitutes a Claim, such party shall provide the indemnifying party
with prompt notice of such event and shall otherwise make available to the
indemnifying party all relevant information which is material to the Claim and
which is in the possession of the indemnified party. If such event involves the
claim of any third party (a "Third-Party Claim"), the indemnifying party shall
-----------------
have the right to elect to join in the defense, settlement, adjustment or
compromise of any such Third-Party Claim, and to employ counsel to assist such
indemnifying party in connection with the handling of such claim, at the sole
expense of the indemnifying party, and no such claim shall be settled, adjusted
or compromised, or the defense thereof terminated, without the prior consent of
the indemnifying party unless and until the indemnifying party shall have
failed, after the lapse of a reasonable period of time, but in no event more
than 30 days after written notice to it of the Third-Party Claim, to join in the
defense, settlement, adjustment or compromise of the same. An indemnified
party's failure to give timely notice or to furnish the indemnifying party with
any relevant data and documents in connection with any Third-Party Claim shall
not constitute a defense (in part or in whole) to any claim for indemnification
by such party, except and only to the extent that such failure shall result in
any material prejudice to the indemnifying party. If so desired by any
indemnifying party (other than in respect of any Tax for any Straddle Period and
any ▇▇▇▇▇▇ Indemnity Claim for Taxes with respect to a period ending prior to
the Closing Date), and, so long as the indemnifying party has acknowledged its
liability for such indemnification hereunder and furnished reasonable evidence,
if requested, of its ability to satisfy such obligation, such party may elect,
at such party's sole expense, to assume control of the defense, settlement,
adjustment or compromise of any Third-Party Claim, with counsel reasonably
acceptable to the indemnified parties, insofar as such claim relates to the
liability of the indemnifying party, provided that such indemnifying party shall
obtain the consent of all indemnified parties before entering into any
settlement, adjustment or compromise of such claims, or ceasing to defend
against such claims, if as a result thereof, or pursuant thereto, there would be
imposed on an indemnified party any material liability or obligation not covered
by the indemnity obligations of the indemnifying parties under this Agreement
(including, without limitation, any injunctive relief or other remedy) and the
indemnified party may participate fully in such defense, settlement, adjustment
or compromise with counsel acceptable to it. In connection with any Third-Party
Claim, the indemnified party, or the indemnifying party if it has assumed the
defense of such claim pursuant to the preceding sentence, shall diligently
pursue the defense of such Third-Party Claim.
33
11.5 Survival. All representations and warranties, and, except as
--------
otherwise provided in this Agreement, all covenants and agreements of the
Parties contained in or made pursuant to this Agreement, and the rights of the
Parties to seek indemnification with respect thereto, shall survive the Closing
Date. Such representations and warranties, and the rights of the Parties to
seek indemnification with respect thereto, shall expire, except with respect to
claims asserted prior to and pending at the time of such expiration, on the
earlier of (i) the first anniversary of the Closing Date or (ii) with respect
only to those matters that were discovered, or that normally and usually would
be discovered in a typical auditor review of the consolidated financial
statements of ▇▇▇▇▇▇ and its Subsidiaries, upon the release and delivery to the
Board of Directors of ▇▇▇▇▇▇ of the final audit opinion covering ▇▇▇▇▇▇'▇
consolidated financial statements for the year ended December 31, 1998;
provided, however, that the representations and warranties in Sections 5.4, 7.2
-------- -------
(exclusive of everything in that section after the words "capital stock" on the
fourth from last line), 7.11, 7.34, 7.35 and 12.11 (the "Surviving
Representations") shall survive until the expiration of the statute of
limitations, including under the Code, that could form the basis for a Claim
hereunder as a consequence of the breach of such representations and warranties.
11.6 Limitations.
-----------
(a) Notwithstanding the foregoing, any ▇▇▇▇▇▇ Indemnity Claim arising out
of a breach of any representation or warranty hereunder (other than any claims
arising as a consequence of a breach of the Surviving Representations) shall be
payable by the indemnifying party only in the event that the accumulated amount
of the ▇▇▇▇▇▇ Indemnity Claims in respect of such indemnifying party's
obligations to indemnify under this Agreement shall exceed $1,000,000 in the
aggregate (the "Indemnification Threshold"); provided, however, that after such
-------------------------
time as such accumulated amount of such Claims equals or exceeds the
Indemnification Threshold, any Claims made by ▇▇▇▇▇▇ may be made back to the
first dollar but only for Claims in excess of $25,000 each.
(b) No liability shall be enforced on a Claim to the extent of any
insurance proceeds received by the party seeking indemnification (net of self-
insured retention or deductible amounts). If the party seeking indemnification
receives any such insurance proceeds after a Claim shall have been paid, the
party seeking indemnification shall promptly return such payment to the extent
of such insurance proceeds received.
(c) All amounts due under Claims shall be net of all tax effects, including
tax effects on indemnification payments.
34
11.7 Escrow.
------
(a) The Stockholders shall deposit into escrow, with the Escrow Agent named
in the Escrow Agreement, ten percent (10%) of the ▇▇▇▇▇▇ Common Shares issued to
the Stockholders in connection with the Merger (such ▇▇▇▇▇▇ Common Shares
deposit being referred to as the "Escrow Deposit"). All ▇▇▇▇▇▇ Indemnity Claims
--------------
shall be satisfied solely out of the ▇▇▇▇▇▇ Common Shares or other property held
in the Escrow Deposit, as further provided under the terms of the Escrow
Agreement, and subject to the Indemnification Threshold. For purposes hereof,
all ▇▇▇▇▇▇ Common Shares returned to ▇▇▇▇▇▇ in settlement of any ▇▇▇▇▇▇
Indemnity Claims under the Escrow Agreement shall be valued at the Merger Share
Price. To the extent not inconsistent with pooling of interest restrictions,
the liability of the Stockholders for ▇▇▇▇▇▇ Indemnity Claims may be satisfied,
at the election of the Representative, through (i) the delivery of ▇▇▇▇▇▇ Common
Shares to ▇▇▇▇▇▇, such shares to be valued at the Merger Share Price, (ii) the
payment of cash or (iii) any combination of such ▇▇▇▇▇▇ Common Shares valued at
the Merger Share Price and cash. The Stockholders shall not be liable to ▇▇▇▇▇▇
(or the Surviving Corporation for the benefit of Acquisition) for any ▇▇▇▇▇▇
Indemnity Claims, or any other claims arising under or on account of this
Agreement, beyond the Escrow Deposit; provided, however, that the foregoing
-------- -------
limitations on the Stockholders' liability for ▇▇▇▇▇▇ claims shall not apply to
(i) Claims on the Surviving Representations beyond the Escrow Deposit and (ii)
other Claims beyond the Escrow Deposit in an amount up to the amount of Claims
on the Surviving Representations made against the Escrow Deposit, in each case
as to which Claims ▇▇▇▇▇▇ may pursue the Stockholders personally (but as to
Claims pursuant to Article 5, only against the Stockholder who is in breach),
using all available remedies at law or in equity after the Escrow Deposit has
either been exhausted or returned.
(b) For purposes of this Agreement, the term "Deemed Escrow Value" shall
-------------------
mean the value of the ▇▇▇▇▇▇ Common Shares to be transferred by the Stockholders
into the Escrow Deposit, determined by multiplying such number of ▇▇▇▇▇▇ Common
Shares by the Merger Share Price. With respect to any ▇▇▇▇▇▇ Common Shares to
be returned to ▇▇▇▇▇▇ by the Stockholders in settlement of ▇▇▇▇▇▇ Indemnity
Claims pursuant to this Section 11.7, any dividends previously paid in respect
of such returned ▇▇▇▇▇▇ Common Shares (whether paid in cash, ▇▇▇▇▇▇ Common
Shares or other property) shall also be returned to ▇▇▇▇▇▇, provided that the
value of such dividends shall not be taken into account for purposes of
determining the value of such returned ▇▇▇▇▇▇ Common Shares, as contemplated
under paragraph 47g of Accounting Principles Board Opinion No. 16
(Interpretation No. 121).
11.8 ▇▇▇▇▇▇ Payment of Stockholder Indemnity Claims. Notwithstanding
----------------------------------------------
anything to the contrary herein, any liability of Acquisition and ▇▇▇▇▇▇ under
this Agreement for Stockholder Indemnity Claims (other than pursuant to items
(ii) and (iii) of Section 11.2) shall be satisfied solely through the issuance
of additional ▇▇▇▇▇▇ Common Shares, such additional ▇▇▇▇▇▇ Common Shares to be
valued at the Merger Share Price.
ARTICLE 12
MISCELLANEOUS
12.1 Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of ▇▇▇▇▇▇
and the Representative; provided, however, that ▇▇▇▇▇▇ may make any public
-------- -------
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case
35
▇▇▇▇▇▇ will use its commercially reasonable efforts to advise the other Parties
prior to making the disclosure).
12.2 No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties, the Phantom
Stockholders, the Non-Voting Stockholders and their respective successors and
permitted assigns.
12.3 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 related in any way to the subject matter
hereof.
12.4 Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
rights, interests, or obligations hereunder without the prior written approval
of ▇▇▇▇▇▇ and the Representative; provided, however, that ▇▇▇▇▇▇ may (i) assign
-------- -------
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases ▇▇▇▇▇▇ nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
12.5 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.
12.6 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.
12.7 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to ▇▇▇▇▇▇ or the Stockholders:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
Posternak, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
36
If to ▇▇▇▇▇▇ and Acquisition:
A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
▇▇▇▇▇▇ Communications, Inc.
Two Democracy Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but 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 herein set forth.
12.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
12.9 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by
▇▇▇▇▇▇ and the Representative. 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.
12.10 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
12.11 Expenses. The Stockholders agree that ▇▇▇▇▇▇ has not borne and will
--------
not bear any of the Stockholders' costs and expenses (including any of their
legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby in excess of $3,000,000, all of which shall be
funded by the Surviving Corporation.
12.12 Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of
37
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Whenever the context
may require, any pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular forms of nouns and
pronouns shall include the plural, and vice versa. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
12.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
---------------------------------------
identified in this Agreement are incorporated herein by reference and made a
part hereof. Any fact or item in any portion of ▇▇▇▇▇▇'▇ Schedules or Exhibits
shall be deemed to be disclosed with respect to any other relevant Schedule or
Exhibit, whether or not an explicit cross-reference appears. Such Exhibits and
Schedules need not be physically attached hereto if they are appropriately
identified as such on their face.
12.14 Specific Performance. Each of the Parties acknowledges and agrees
--------------------
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which they may be
entitled, at law or in equity.
12.15 Dispute Resolution.
------------------
(a) Any Claim shall be settled by an amicable effort on the part of the
parties. An attempt to arrive at a settlement shall be deemed to have failed
thirty (30) days after either party so notifies the other party in writing and
the matter is not settled within that period, and neither party shall institute
arbitration until expiration of that notice period.
(b) If an attempt at settlement has failed, and written notice thereof has
been given as provided herein, any Claim shall be decided by binding arbitration
pursuant to the Commercial Arbitration Rules, as amended and in effect January
1, 1996, of the American Arbitration Association (the "Rules"), subject to the
following:
(i) The arbitration shall take place in New York City, and in no other
place.
(ii) The parties to any such arbitration shall be limited to ▇▇▇▇▇▇ and
the Representative. ▇▇▇▇▇▇ shall be entitled to designate one arbitrator and the
Representative shall be entitled to designate one arbitrator. Within thirty (30)
days after receipt by a party of a written notice of arbitration, each party
shall notify the other party of its designated arbitrator. The arbitrators so
chosen shall designate a third neutral arbitrator by unanimous vote within ten
(10) days of their designation. The neutral arbitrator shall act as Chair to the
arbitration. In the event that a neutral arbitrator is not designated pursuant
to this subsection within said 10-day period,
38
either party may request that the American Arbitration Association select such
neutral arbitrator using its normal procedures.
(iii) If a designated arbitrator cannot for any reason continue to serve
as an arbitrator, then the party that so designated that arbitrator shall have
the right to appoint a replacement for that arbitrator.
(iv) An arbitration hearing shall be conducted not later than sixty (60)
days after selection of the arbitrators. At the arbitration hearing, each party
may make written and oral presentations to the arbitration panel, present
testimony and written evidence, and examine witnesses. Legal privileges against
disclosure shall apply.
(v) The written decision of the arbitration panel shall be final and
binding, and may be entered and enforced in any court of competent jurisdiction.
Each party hereby waives any right to jury trial in connection with the
enforcement of such written decision.
(vi) Each party to the arbitration shall pay the fees and expenses of
the arbitrator it designates and one-half of the fees and expenses of the
neutral arbitrator and of the American Arbitration Association. Notwithstanding
the foregoing, the arbitration panel, by majority vote, may assess arbitration
costs and the costs and fees of the arbitrators against a party if it determines
such party has brought or defended a claim in bad faith.
12.16 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
39
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement under
seal as of the date first above written.
AGREEMENT AND PLAN OF MERGER
COUNTERPART SIGNATURE PAGE
--------------------------
▇▇▇▇▇▇ COMMUNICATIONS, INC.
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
▇▇▇▇▇▇ AR ACQUISITION, LLC
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
▇▇▇▇▇▇ COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Treasurer
40
AGREEMENT AND PLAN OF MERGER
COUNTERPART SIGNATURE PAGE
--------------------------
STOCKHOLDERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee of
The ▇▇▇▇▇▇▇▇▇▇▇ Family
Trust
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
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