APPENDIX A
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AGREEMENT AND PLAN OF MERGER
By and Among
PERFICIENT, INC.
PERFICIENT COMPETE, INC.,
COMPETE INC.,
and
THE SHAREHOLDERS OF COMPETE INC.
Dated as of February 16, 2000
TABLE OF CONTENTS
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PAGE
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ARTICLE I....................................................................................... A-1
THE MERGER...................................................................................... A-1
1.01 The Merger.......................................................................... A-1
1.02 Plan of Merger...................................................................... A-2
1.03 Effective Time...................................................................... A-2
1.04 Effect of the Merger................................................................ A-2
1.05 Conversion of Company Common Stock.................................................. A-2
1.06 Escrowed Consideration.............................................................. A-3
1.07 Certificate of Incorporation........................................................ A-4
1.08 Bylaws.............................................................................. A-4
1.09 Directors and Officers of the Surviving Corporation; Directors of Parent............ A-4
1.10 Additional Actions.................................................................. A-5
1.11 Accounting and Tax Treatment........................................................ A-5
ARTICLE II...................................................................................... A-5
PAYMENT OF MERGER CONSIDERATION................................................................. A-5
2.01 Exchange of Shares.................................................................. A-5
2.02 Forfeiture of Merger Consideration. ................................................ A-6
2.03 Adjustment of Merger Consideration ................................................. A-9
ARTICLE III...................................................................................... A-11
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS............................... A-11
3.01 Corporate Organization and Qualification............................................. A-11
3.02 Capitalization....................................................................... A-12
3.03 Authority; No Violation.............................................................. A-12
3.04 Consents and Approvals............................................................... A-13
3.05 Financial Statements................................................................. A-14
3.06 Absence of Certain Changes or Events................................................. A-15
3.07 Legal Proceedings.................................................................... A-15
3.08 Taxes and Tax Returns................................................................ A-15
3.09 Employee Benefit Plans............................................................... A-17
3.10 Compliance with Applicable Law; Certain Agreements; Licensing........................ A-19
3.11 Certain Contracts.................................................................... A-19
3.12 Agreements with Regulatory Agencies.................................................. A-20
3.13 Environmental Matters................................................................ A-21
3.14 Properties........................................................................... A-21
3.15 Insurance............................................................................ A-22
3.16 Labor Matters........................................................................ A-22
3.17 Intellectual Property................................................................ A-23
3.18 Broker's Fees........................................................................ A-23
A-i
3.19 Bank Accounts........................................................................ A-23
3.20 Year 2000............................................................................ A-23
3.21 Disclosure........................................................................... A-23
ARTICLE IV....................................................................................... A-24
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB................................................. A-24
4.01 Corporate Organization and Qualification............................................. A-24
4.02 Capitalization....................................................................... A-24
4.03 Authority; No Violations............................................................. A-25
4.04 Consents And Approvals............................................................... A-26
4.05 Broker's Fees........................................................................ A-26
4.06 Sec Reports.......................................................................... A-26
4.07 Voting Requirements.................................................................. A-27
4.08 No Prior Activities.................................................................. A-27
4.09 Labor Matters........................................................................ A-27
ARTICLE V........................................................................................ A-28
COVENANTS RELATING TO CONDUCT OF BUSINESS........................................................ A-28
5.01 Covenants of the Company............................................................. A-28
5.02 No Solicitation; Disclosure.......................................................... A-30
5.03 Employee Retention................................................................... A-31
5.04 Covenants of Parent and Sub.......................................................... A-31
5.05 All Necessary Action................................................................. A-32
5.06 Notification......................................................................... A-32
ARTICLE VI....................................................................................... A-33
ADDITIONAL AGREEMENTS............................................................................ A-33
6.01 Regulatory Matters................................................................... A-33
6.02 Securities Laws Matters.............................................................. A-33
6.03 Shareholder Approval................................................................. A-33
6.04 Access to Information................................................................ A-35
6.05 Legal Conditions to Merger........................................................... A-35
6.06 Additional Agreements................................................................ A-35
6.07 Disclosure Supplements............................................................... A-35
6.08 No Inconsistent Actions.............................................................. A-35
6.09 Tax Matters.......................................................................... A-36
6.10 Noncompetition Agreements; Employment Agreements..................................... A-36
6.11 Company Shareholder Representation Letters........................................... A-36
6.12 Stock Options; Employee Benefits..................................................... A-36
6.13 Subchapter S Distribution............................................................ A-39
6.14 Publicity............................................................................ A-39
6.15 Lock-up.............................................................................. A-39
6.16 Completion of Audit.................................................................. A-40
6.17 Letter Agreement..................................................................... A-40
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6.18 Parent's Shareholder Consent......................................................... A-40
6.19 Releases............................................................................. A-40
6.20 Indemnification...................................................................... A-40
ARTICLE VII...................................................................................... A-42
CONDITIONS PRECEDENT............................................................................. A-42
7.01 Conditions to Each Party's Obligation to Effect the Merger........................... A-42
7.02 Conditions to Obligations of Parent and Sub.......................................... A-43
7.03 Conditions to Obligations of the Company............................................. A-45
ARTICLE VIII..................................................................................... A-46
TERMINATION AND AMENDMENT........................................................................ A-46
8.01 Termination.......................................................................... A-46
8.02 Effect of Termination................................................................ A-46
8.03 Expenses............................................................................. A-47
8.04 Amendment............................................................................ A-47
8.05 Extension; Waiver.................................................................... A-47
ARTICLE IX....................................................................................... A-47
INDEMNIFICATION.................................................................................. A-47
9.01 Agreement to Indemnify............................................................... A-47
9.02 Survival of Indemnity................................................................ A-48
9.03 Additional Provisions................................................................ A-48
9.04 Third Party Claim Procedures......................................................... A-50
ARTICLE X........................................................................................ A-52
SHAREHOLDERS' REPRESENTATIVE..................................................................... A-52
10.01 Appointment of Shareholders' Representative.......................................... A-52
10.02 Authority............................................................................ A-52
10.03 Reliance............................................................................. A-53
10.04 Indemnification of Parent, Sub and their Affiliates.................................. A-53
10.05 Indemnification of Shareholders' Representative...................................... A-53
ARTICLE XI....................................................................................... A-54
GENERAL PROVISIONS............................................................................... A-54
11.01 Notices.............................................................................. A-54
10.02 Interpretation;...................................................................... A-55
11.03 Counterparts;........................................................................ A-56
11.04 Entire Agreement .................................................................... A-56
11.05 Governing Law............. .......................................................... A-56
11.06 Enforcement of Agreement............................................................. A-56
11.07 Severability......................................................................... A-56
11.08 Assignment;.......................................................................... A-56
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EXHIBIT A - PROMISSORY NOTES
EXHIBIT B - ESCROW AGREEMENT
EXHIBIT C-1 - NONCOMPETITION AGREEMENTS
EXHIBIT C-2 - EMPLOYMENT AGREEMENTS
EXHIBIT C-3 - EMPLOYMENT LETTERS
EXHIBIT D - LIST OF EMPLOYEES
EXHIBIT E - REGISTRATION RIGHTS AGREEMENT
EXHIBIT F - REPRESENTATION LETTERS
EXHIBIT G-1 - LETTER AGREEMENT
EXHIBIT G-2 - PARENT'S SHAREHOLDER CONSENT
EXHIBIT H - FIRPTA AFFIDAVIT
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of February 16,
2000, by and among Perficient, Inc., a Delaware corporation ("Parent"),
Perficient Compete, Inc., a Delaware corporation ("Sub"), Compete Inc., an
Illinois corporation (the "Company"), and the holders of shares of the Company
Common Stock (as defined herein), set forth on the signature page hereto (each,
a "Common Stock Holder" and collectively, the "Common Stock Holders") and the
holders of stock options exercisable into Company Common Stock that are subject
to accelerated vesting as set forth on the signature page hereto (each, an
"Accelerated Option Holder" and collectively, the "Accelerated Option Holders";
the Accelerated Option Holders and Common Stock Holders are sometimes referred
to collectively as the "Shareholders," and individually as a "Shareholder").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have determined that it is advisable and in the best interests of their
respective companies and their shareholders to consummate the business
combination transaction provided for herein in which the Company will, subject
to the terms and conditions set forth herein, merge with and into Sub (the
"Merger"); and
WHEREAS, Parent, Sub, the Company and the Shareholders desire to make
certain representations, warranties and covenants in connection with the Merger.
WHEREAS, the Board of Directors of Parent has determined to submit and
recommend the Merger and the issuance of Parent Common Stock (as defined herein)
(the "Share Issuance") to its shareholders for their approval to the extent such
approval is required by law or the rules of The Nasdaq SmallCap Market
("Nasdaq") or the Boston Stock Exchange (the "Boston Exchange");
WHEREAS, the parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
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NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law ("DGCL") and the Illinois
Business Corporation Act ("IBCA"), at the Effective Time (as hereinafter
defined), the Company shall merge with and into Sub. Sub shall become the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
in the Merger, and shall
continue its corporate existence under the laws of the State of Delaware. Parent
shall cause the Surviving Corporation to become a wholly-owned subsidiary of
Parent. The name of the Surviving Corporation shall be "Perficient Compete,
Inc.", a Delaware corporation. Upon consummation of the Merger, the separate
corporate existence of the Company shall terminate.
1.02 Plan of Merger. This Agreement shall constitute an agreement of
merger for purposes of the DGCL and the IBCA.
1.03 Effective Time. As promptly as practicable, but in no event later than
the third business day, after all of the conditions set forth in Article VII
shall have been satisfied or, if permissible, waived by the party entitled to
the benefit of the same, the Company and Sub shall duly execute and file
certificates/articles of merger (collectively, the "Certificates of Merger")
with the Secretary of State of the State of Delaware (the "Delaware Secretary")
in accordance with the DGCL and with the Secretary of State of the State of
Illinois (the "Illinois Secretary") in accordance with the IBCA. The Merger
shall become effective on the date (the "Effective Date" or the "Closing Date")
and at the later of such time (the "Effective Time") as the Certificates of
Merger are filed with the Delaware Secretary and the Illinois Secretary or at
such later date and time as is specified in such Certificates of Merger. Subject
to the terms and conditions of this Agreement, the closing of the Merger (the
"Closing") shall be held at the offices of ▇▇▇▇▇▇▇, Del Deo, Dolan, Griffinger &
▇▇▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
1.04 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided herein and as set forth in Section 259 of the DGCL and
Section 5/11.50 of the IBCA. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, (i) all the property, rights,
privileges, powers and franchises of the Company shall vest in the Surviving
Corporation, (ii) all debts, liabilities, obligations, restrictions,
disabilities and duties of Sub and the Company shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation and (iii) the Surviving Corporation shall become a wholly-owned
subsidiary of Parent.
1.05 Conversion of Company Common Stock.
(a) At the Effective Time, each issued and outstanding share of
common stock, no par value per share, of the Company (the "Company Common
Stock"), immediately prior to the Effective Time (other than shares of Company
Common Stock held in the Company's treasury) shall, by virtue of this Agreement
and without any action on the part of the holder thereof, be converted into the
right to receive and be exchangeable for (i) $3,500,000 (the "Cash Price")
divided by the sum of the number of shares of Company Common Stock outstanding
plus the number of shares of Company Common Stock issuable, immediately prior to
the Effective Time, upon exercise of the Company Accelerated Options (as defined
in Section 6.12(c) herein) (the "Cash Per Share Price"); (ii) non-interest
bearing Promissory Notes in the form attached
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hereto as Exhibit A (each, a "Note" and collectively, the "Notes") in the
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aggregate principal amount of $2,527,500 (the "Note Price") divided by the sum
of the number of shares of Company Common Stock outstanding plus the number of
shares of Company Common Stock issuable immediately prior to the Effective Time,
upon exercise of the Company Accelerated Options (the "Note Per Share Price");
and (iii) 2,200,000 shares (the "Stock Price") of common stock, par value $0.001
per share, of Parent (the "Parent Common Stock") divided by the sum of the
number of shares of Company Common Stock outstanding plus the number of shares
of Company Common Stock issuable immediately prior to the Effective Time, upon
exercise of the Company Accelerated Options (such consideration to be referred
to as the "Stock Per Share Price" and, together with the Cash Per Share Price
and the Note Per Share Price, the "Per Share Price"); a portion of which shall
be subject to forfeiture or adjustment as provided in Section 2.02 and Section
2.03 and Article IX hereof.
(b) [Intentionally Omitted.]
(c) Each share of Company Common Stock converted into the Parent
Common Stock pursuant to this Article I shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate (each a "Certificate," and collectively, the "Certificates")
previously representing any such shares of Company Common Stock shall thereafter
represent the right to receive (i) cash equal to the Cash Per Share Price
multiplied by the number of shares of Company Common Stock represented by such
certificate; (ii) a Note in the amount of the Note Per Share Price multiplied by
the number of shares of Company Common Stock represented by such certificate;
and (iii) shares of Parent Common Stock equal to the Stock Per Share Price
multiplied by the number of shares of Company Common Stock represented by such
Certificate (in the aggregate, the "Merger Consideration"), a portion of which
shall be subject to forfeiture or adjustment as provided in Section 2.02 and
Section 2.03 and subject to Article IX hereof.
(d) If, between the date of this Agreement and the Effective Time as
to the Per Share Price, the outstanding shares of Parent Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization or exchange of shares or if a stock split, combination, stock
dividend, stock rights or dividend thereon shall be declared with a record date
within said period, the Stock Per Share Price shall be correspondingly adjusted,
as applicable. No fractional shares of Parent Common Stock will be issued,
provided, however, that the Company shall provide cash in an amount equal to the
value of such fractional share of Parent Common Stock. As used in this
Agreement, the "value" of a share of Parent Common Stock shall equal, unless
otherwise indicated, the average closing price for the Parent's outstanding
common stock on the Nasdaq (or, if not traded on the Nasdaq, such exchange that
the stock is traded on) for the twenty (20) consecutive trading days ending on
the trading day immediately before the date of determination.
1.06 Escrowed Consideration. One half of the shares of Parent Common Stock
issued to the Common Stock Holders (the "Escrowed Consideration") shall be held
in escrow for a period of one (1) year from the Closing Date or such shorter
period as set
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forth in this Agreement, subject to Section 2.02 and Section 2.03 and subject to
Article IX, pursuant to the terms and subject to the conditions set forth in the
Escrow Agreement among the parties hereto and Continental Stock Transfer & Trust
Company, as Escrow Agent, in the form attached as Exhibit B hereto (the "Escrow
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Agreement") with such modifications as may be reasonably acceptable to the
Company and Parent, as requested by the Escrow Agent.
1.07 Certificate of Incorporation. Unless otherwise agreed to by the
parties prior to the Effective Time, at and after the Effective Time, the
Certificate of Incorporation of Sub shall be the Certificate of Incorporation of
the Surviving Corporation, until thereafter amended as provided by law and such
Certificate of Incorporation.
1.08 Bylaws. Unless otherwise agreed to by the parties prior to the
Effective Time, at and after the Effective Time, the Bylaws of Sub shall be the
Bylaws of the Surviving Corporation, until thereafter amended as provided by
law, the Certificate of Incorporation of the Surviving Corporation and such
Bylaws.
1.09 Directors and Officers of the Surviving Corporation; Directors of
Parent. As of the Effective Time, the board of directors of the Surviving
Corporation shall consist of four (4) members who shall be designated by Parent
in writing prior to the Effective Time and who shall initially include ▇▇▇
▇▇▇▇▇▇▇▇. Each of the directors so designated shall hold office in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation
until his or her respective successors are duly elected or appointed and
qualified. The board of directors of the Surviving Corporation shall elect the
officers of the Surviving Corporation. As of the Effective Time, the Board of
Directors of Parent shall consist of six (6) members, who shall be ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Dr. W. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and a designee of ▇▇▇ ▇▇▇▇▇▇▇▇, who shall initially be ▇▇▇ ▇▇▇▇▇▇▇▇.
The Company shall continue to recommend ▇▇▇ ▇▇▇▇▇▇▇▇ (or his designee) for
election to the Board of Directors of the Parent for as long as the Shareholders
and their affiliates own more than 10% of the Shares of Parent Common Stock
issued in connection with the Merger. In the event that such number of shares of
Parent Common Stock are not voted in favor of the election of ▇▇▇ ▇▇▇▇▇▇▇▇ (or
his designee) to the board of directors of Parent, ▇▇▇ ▇▇▇▇▇▇▇▇ or his designee
shall have the right to attend and observe all meetings of such Board of
Directors (which shall include the right to reasonably ask questions, comment
and participate at such meetings in accordance with the rules of order
reasonably established by the Board of Directors of the Parent.). Each of the
directors so designated shall hold office in accordance with the Certificate of
Incorporation and Bylaws of Parent until his or her respective successors are
duly elected or appointed and qualified. The Parent shall notify ▇▇▇ ▇▇▇▇▇▇▇▇
(or his designee) of each meeting of the Board of Directors of Parent at the
same time and in the same manner notice is given to other board members and the
Parent shall send to such individual all notices and other correspondence and
communications sent by the Parent to members of the Board and notices of all
action taken by the Board of Directors. ▇▇. ▇▇▇▇▇▇▇▇ (or his designee) shall
A-4
be reimbursed for all out-of-pocket expenses incurred in connection with his
attendance of meetings of the Board of Directors (whether as a director or an
observer).
1.10 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, title
to and possession of any property or right of the Company acquired or to be
acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry
out the purposes of this Agreement, the Company and its proper officers and
directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
the Surviving Corporation and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of the Surviving Corporation
are fully authorized in the name of the Company or otherwise to take any and all
such action.
1.11 Accounting and Tax Treatment. The parties to this Agreement intend that
the Merger shall be treated as a reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE II
PAYMENT OF MERGER CONSIDERATION
2.01 Exchange of Shares.
(a) At the Effective Time, upon surrender of all the Certificates
representing all issued and outstanding shares of Company Common Stock to Parent
(or affidavits and bonds relating thereto), Parent shall deliver to each Common
Stock Holder such Common Stock Holder's pro rata portion of the Cash Price, a
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Note and Common Stock Holder's pro rata portion of shares of Parent Common Stock
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that are not placed in escrow under Section 1.06 hereunder, each calculated in
the manner set forth in Section 1.05 hereof. Subject to the terms of the Escrow
Agreement, the Common Stock Holders shall also receive such person's portion of
the Escrowed Consideration, which shall be deposited in escrow in accordance and
subject to the conditions contained in Section 1.06, Section 2.02 and Section
2.03, Article IX hereof and the Escrow Agreement.
(b) After the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common Stock which
were issued and outstanding immediately prior to the Effective Time.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may direct as
indemnity against any claim that
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may be made against it with respect to such Certificate, Parent will deliver in
exchange for such lost, stolen or destroyed Certificate, a replacement stock
Certificate.
2.02 Forfeiture of Merger Consideration.
(a) Subject to Section 2.03(g) of this Agreement, in the event that
the employment of any Shareholder is terminated (i) by the Company for any
reason other than (A) a Without Cause Termination (as defined below) or (B) due
to the death or Disability of such Shareholder or (ii) by such Shareholder for
any reason other than his death or Disability prior to the first anniversary of
the Closing Date (as defined below), then the Shareholder shall forfeit to
Parent one-half of such Shareholder's shares of Parent Common Stock received
hereunder (the "Shareholder Termination Amount"), subject to Section 2.02(e)
hereof. For purposes of this Agreement, the following terms shall apply:
(i) "Without Cause Termination" means a termination of any
Shareholder's employment by the Company other than due to (a) a Termination for
Cause (as defined below), (b) Disability (as defined below), or (c) the
Shareholder's death.
(ii) "Termination for Cause" means, to the maximum extent
permitted by applicable law, a termination of any Shareholder's employment by
Parent attributed to (a) the repeated willful failure of the Shareholder
substantially to perform his duties hereunder (other than any such failure due
to physical or mental illness) that has not been cured reasonably promptly after
a written demand for substantial performance is delivered to the Shareholder by
Parent's Board of Directors, which demand identifies the manner in which
Parent's Board of Directors believes that the Shareholder has not substantially
performed his duties hereunder; (b) conviction of, or entering a plea of nolo
contendere to, a crime that constitutes a felony; (c) the Shareholder's engaging
in conduct that is intentional or grossly negligent that results in material
injury to Parent or any subsidiary; or (d) the material breach by the
Shareholder of any written covenant or agreement with Parent under this
Agreement or the Noncompetition Agreement between Parent and such Shareholder,
in the form attached hereto as Exhibit C-1 (each, a "Noncompetition Agreement"
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and collectively, the "Noncompetition Agreements"), or if applicable, the
Employment Agreement between Parent and such Shareholder.
(iii) "Disability" shall mean a physical or mental disability or
infirmity that prevents the material performance by a Shareholder of his duties
hereunder lasting for a continuous period of six months or longer and that is
confirmed by the reasoned and good faith judgment of Parent's Board of Directors
based on such competent medical evidence as shall be presented to it by the
Shareholder or by any physician or group of physicians or other competent
medical experts employed by the Shareholder or Parent to advise Parent's Board
of Directors.
(iv) Notwithstanding the foregoing, nothing contained in this
Agreement shall create a right in any Shareholder to continued employment with
Parent.
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Each Shareholder shall be an at-will employee of Parent (other than those
Shareholders entering into employment agreements hereunder).
(b) Immediately prior to the Closing, the Company shall provide the
Parent with a list (the "Employee List", and the number of persons on the
Employee List, the "Initial Employee Number") of the Company's billing
employees, independent contractors and consultants of the Company as of that
date. For purposes of illustration, Exhibit D sets forth what the Employee List
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would be had the Closing Date occurred on the date hereof.
(c) A " New Employee" shall be a person hired by any of the
Shareholders, Parent, the Surviving Corporation or their affiliates into
existing practices of the Company, International Business Machines Corp.
("IBM"), BEA WebExpress, Inc., Integral Systems, Inc. or new practices mutually
agreed to by Parent and the Company whose name does not appear on the Employee
List during the period from the Closing Date through the first anniversary of
the Closing Date who (i) remain in the employ of the Parent or the Surviving
Corporation on the first anniversary of the Closing Date and (ii) has been
employed for at least three (3) continuous months. Each person who would have
been a New Employee but for his or her failure to meet the requirement in clause
(ii) immediately above shall be a "Prospective New Employee". The number equal
to (i) the Initial Employee Number plus (ii) one-half of the number of New
----
Employees, minus (iii) the number of persons on the Employee List who leave the
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employ of Parent or the Surviving Corporation prior to the first anniversary of
the Closing for a reason other than due to a termination by Parent or the
Surviving Corporation with the primary intent of causing an adjustment to the
Purchase Price under subsection 2.02(d) shall be known as the "Employee
Calculation Number," and the sum of the Employee Calculation Number plus one-
half of the number of Prospective New Employees shall be known as the "Adjusted
Employee Calculation Number".
(d) In the event that on the first anniversary of the Closing Date
the Employee Calculation Number is equal to or greater than forty-six (46), no
adjustment to the Purchase Price shall be made pursuant to this subsection
2.02(d) or subsection 2.02(e). In the event that on the first anniversary of the
Closing Date the Employee Calculation Number is less than forty-six (46), the
Shareholders shall forfeit (in the aggregate and in the manner set forth in the
last section of this clause (d) and Section 6.12(c) but subject to 2.02(f)(i)
hereof), such number of shares of Parent Common Stock (the "Forfeiture Amount")
equal to the product of (i) twenty-two thousand (22,000) multiplied by (ii) the
number equal to fifty (50) minus the Adjusted Employee Calculation Number. All
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forfeitures under this Section 2.02(d) and 2.02(e) shall occur, on a pro rata
basis with respect to the Common Stock Holders, through transfer of the Parent
Common Stock held in escrow on behalf of the Common Stock Holders pursuant to
the terms of the Escrow Agreement, and with respect to Accelerated Option
Holders, through a forfeiture of such number of shares of Parent Common Stock
for which the Company Accelerated Option may be exercised pursuant to the terms
of Section 6.12(c) hereof. The number 22,000 used above shall be subject to
equitable adjustment in the
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event of stock splits, stock dividends or other such recapitalizations of the
Parent Common Stock.
(e) Should there be a forfeiture under Section 2.02(d), and should
there be Prospective New Employees at the time of such forfeiture, such number
of shares of Parent Common Stock (the "Prospective New Employee Shares") equal
to eleven thousand (11,000) multiplied by the Escrow Ratio (as defined herein)
shall remain subject to the Escrow for each Prospective New Employee and eleven
thousand (11,000) shares of Parent Common Stock for each Prospective New
Employee shall remain subject to forfeiture by the Shareholders. As used herein
the "Escrow Ratio" shall be a fraction, the numerator of which is the number of
shares of Parent Common Stock then subject to the escrow on the Closing Date,
and the denominator of which is the sum of the number of shares of Parent Common
Stock then subject to the escrow on the Closing Date plus the number of shares
of Parent Common Stock for which the Company Accelerated Options are then
exercisable into on the Closing Date. On the date that is three months after the
last date that a Prospective New Employee was hired, the Shareholders shall
forfeit (in the aggregate and in the manner set forth in the last section of
this clause (e) and Section 6.12(c) but subject to 2.02(f)(i) hereof), such
number of shares of Parent Common Stock (the "Prospective Employee Forfeiture
Amount") equal to the product of (i) eleven- thousand (11,000) multiplied by
(ii) the number of Prospective New Employees that failed to remain employed by
the Parent or the Surviving Corporation for three (3) continuous months
including the Closing Date. All forfeitures under this Section 2.02(e) shall
occur, on a pro rata basis with respect to the Common Stock Holders, through
transfer of the Parent Common Stock held in escrow on behalf of the Common Stock
Holders pursuant to the terms of the Escrow Agreement, and with respect to
Accelerated Option Holders, through a forfeiture of such number of shares of
Parent Common Stock for which the Company Accelerated Option may be exercised
pursuant to the terms of Section 6.12(c) hereof and the Forfeiture Amount shall
be increased by the Prospective Employee Forfeiture Amount. The number 11,000
used above shall be subject to equitable adjustment in the event of stock
splits, stock dividends or other such recapitalizations of the Parent Common
Stock.
(f)
(i) Notwithstanding subsections (a) through (e) hereof, in no
event shall the sum of (A) the Shareholder Termination Amount plus (B) the
Forfeiture Amount plus (C) the Shortfall Amount determined in accordance with
Section 2.03 hereunder exceed 1,100,000 shares of Parent Common Stock, and
provided further that in no event shall a Shareholder forfeit a number of shares
of Parent Common Stock in excess of the number of shares issuable to such
Shareholder hereunder (either directly or indirectly as options). Any
adjustments or forfeitures under this Agreement shall be made pro rata by the
--- ----
Shareholders, except for the Shareholder Termination Amount, which shall be
forfeited solely by the terminating employee.
(ii) Subject to Section 2.02(a), (d) and (e) and Section
2.03(b), on the first anniversary of the Closing Date, the Common Stock Holders
shall receive in
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the aggregate and pursuant to the terms of the Escrow Agreement, the Escrowed
Consideration that is being held in escrow and is not subject to a Dispute (as
such term is defined in the Escrow Agreement) less the total number of
----
Prospective New Employee Shares for all Prospective New Employees remaining at
such time. Three months after the last Prospective New Employee began his
employment, a number of shares of Parent Common Stock equal to the Prospective
New Employee Shares that has not been forfeited shall be released to the Common
Stock Holders.
(iii) Any adjustment pursuant to this Section 2.02 shall be
treated as an adjustment to the Merger Consideration, specifically to the Stock
Per Share Price.
(g) Notwithstanding any implication to the contrary contained herein,
there shall be no adjustment to the Purchase Price, no Parent Common Stock shall
be forfeited pursuant to this Section 2.02 and the Shareholders shall be
entitled to receive immediately all Parent Common Stock then held in the Escrow
upon the occurrence of any of the following events:
(i) In the event that the Parent or the Surviving Corporation
terminates the employment of ▇▇▇ ▇▇▇▇▇▇▇▇ by reason of a Without Cause
Termination; or
(ii) Upon the occurrence of an Event of Default by the Parent
(as defined in the Note) under any Note.
2.03 Adjustment of Merger Consideration.
(a) As soon as practicable but in no event later than forty five (45)
days following the Closing Date, the Shareholders shall cause the preparation of
a balance sheet of the Company, as at the close of business on the date
immediately prior to Closing Date (the "Closing Date Balance Sheet"), consistent
with the past practice of the Company and in accordance with the same principles
and methods followed in preparing the Financial Statements referred to in
Section 3.05 hereof, and in accordance with Schedule 2.03 hereof. Schedule 2.03
shall provide that no accrual shall be set forth on the Closing Date Balance
Sheet as a result of (i) income tax liability to the Company or the Surviving
Corporation as a result of the change by the Company from a cash basis taxpayer
to an accrual basis taxpayer calculated in the manner set forth on Schedule
1.05(e)(ii) hereto ; (ii) for any income taxes payable by the Shareholders for
the period between the date hereof and the Closing Date ("Taxes Between Signing
and Closing") and that there shall be no accrual for fees payable with respect
to the transactions contemplated by this Agreement borne by the Company on
behalf of the Shareholders pursuant to this Agreement as further described in
Schedule 2.03 ("Transaction Fees"). The Company shall also provide to Parent at
the time it presents the Closing Date Balance Sheet its calculation of Taxes
Between Signing and Closing and Transaction Fees. The cost of preparation of the
Closing Date Balance Sheet shall be borne by the Surviving Corporation. The
Company and Parent shall share with each other such detailed calculations and
supporting documents as the other shall reasonably require in
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connection with its review of any calculations made thereunder. Parent shall
have the right, in its sole discretion, to cause a review or audit of the
Closing Date Balance Sheet, at Parent's expense, by its accountants, provided
that such review or audit shall be completed within 30 days following the
availability of the Closing Date Balance Sheet. Parent may submit to the
Shareholders' Representative (as defined hereinafter) on behalf of the
Shareholders, not later than 30 days from the receipt of the Closing Date
Balance Sheet from the Shareholders' Representative on behalf of the
Shareholders, a list of any components of the Closing Date Balance Sheet, the
statement of Taxes Between Signing and Closing (the "Tax Statement") appearing
thereon with which Parent disagrees, if any (a "Dispute Notice") within thirty
(30) days of its receipt of the Closing Date Balance Sheet. If Parent does not
issue a Dispute Notice prior to such date, the Closing Date Balance Sheet, the
Tax Statement and/or Transaction Fees, as supplied to Parent, shall be deemed to
have been accepted and agreed to by Parent, and shall be final and binding on
the parties to this Agreement. The parties shall thereafter have 15 days to
discuss and reach resolution on any items of dispute. Any items of dispute
regarding the Closing Date Balance Sheet and/or the Tax Statement which are not
so resolved shall be submitted to the Chicago, Illinois office of KPMG (the
"Arbitrating Accountant") or if KPMG is unwilling to serve as Arbitrating
Accountant, to a nationally recognized so called "big-five" firm of public
accountants mutually acceptable to the Shareholders' Representative and Parent,
who shall have no conflict of interest with respect to either party and who
shall serve as an arbitrator hereunder, the expenses of which shall be shared
one-half by the Shareholders and one-half by Parent. If the Surviving
Corporation or Parent and the Shareholders' Representative are unable to agree
on an Arbitrating Accountant pursuant to the foregoing, each of the (i)
Surviving Corporation or Parent and (ii) the Shareholders' Representative shall,
within forty-five (45) days after delivery of the Dispute Notice select a
disinterested arbitrator with relevant experience of its choice, and the two
disinterested arbitrators so selected shall select, within ten (10) days of the
selection of such arbitrators, an Arbitrating Accountant. In connection with the
resolution of any dispute, the arbitrator or arbitrators shall have access to
all documents, records, work papers, facilities and personnel necessary to
perform its function as arbitrator. The arbitrator or arbitrators so selected
shall render a written decision as promptly as practicable, but in no event
later than twenty (20) days after submission of the matter to the Arbitrating
Accountant. The decision of the arbitrator shall be final and binding upon the
parties, and judgment may be entered on such decision in a court of competent
jurisdiction. To the extent not otherwise provided herein, the commercial
arbitration rules of the American Arbitration Association as in effect at the
time of any arbitration shall govern such arbitration in all respects. The
determination of such firm with respect to any and all disputes shall be
conclusive and binding upon all parties.
(b) If, at such time as the Closing Date Balance Sheet is deemed final and
binding, the Closing Date Balance Sheet reflects a Net Working Capital (as
defined below) less than $800,000, if the closing shall occur on or after June
1, 2000 and $750,000 if the closing shall occur prior to June 1, 2000, then the
Stock Price payable hereunder shall be reduced on a dollar-for-dollar basis by
the amount of such shortfall (the "Shortfall Amount"). For purposes of this
Agreement, "Net Working Capital" shall mean the sum of the Cash plus Accounts
Receivable less Current Liabilities as reflected on the Closing Date Balance
Sheet, calculated consistent with past practice, the Financial
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Statements referred to in Section 3.05 hereof and Schedule 2.03 hereof. At such
-------------
time that the parties have agreed upon the Closing Date Balance Sheet and if an
adjustment is required under this Section, then such number of the Escrowed
Shares shall be returned to the Parent as equal the Shortfall Amount divided by
the Average Closing Price subject to the terms of the Escrow Agreement.
Notwithstanding the prior sentence, the Shareholders may at its option through a
notice by the Shareholders' Representative to Parent within ten (10) days of the
final determination of the Shortfall Amount, satisfy any Shortfall Amount
through the payment of cash in lieu of Parent Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally, hereby represent
and warrant to Parent and Sub as follows except for the exceptions noted in the
schedule delivered by the Company and the Shareholders to Sub and Parent
concurrently herewith and identified by the parties as the "Disclosure
Schedule". When used herein, the term to the "knowledge of the Company and the
Shareholders" shall mean the awareness of facts or other information by the
Shareholders of the Company. Any disclosure set forth on any particular schedule
shall be deemed disclosed in reference to all applicable schedules where such
disclosure is reasonably apparent to the extent that the disclosure in the
Schedule discloses the exception to the representation or warranty to which the
disclosure may apply (whether or not it refers to the actual representation or
warranty).
3.01 Corporate Organization and Qualification.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Illinois. The Company has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
The Certificate or Articles of Incorporation and Bylaws of the Company, copies
of which have previously been delivered to Parent, are true, accurate and
complete copies of such documents as in effect as of the date of this Agreement.
(b) Except as set forth on Schedule 3.01, the Company has no direct
-------------
or indirect Subsidiaries. Except as set forth on Schedule 3.01, the Company does
-------------
not own, control or hold with the power to vote, directly or indirectly of
record, beneficially or otherwise, any capital stock or any equity or ownership
interest in any corporation, partnership, association, joint venture or other
entity, except for less than five percent (5%) of any equity security registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As
used in this Agreement, the word "Subsidiary" means any corporation,
partnership, limited liability company, or other organization, whether
incorporated or unincorporated, which is or was consolidated with such party or
with which such party is or was consolidated for financial reporting purposes.
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(c) The minute books of each of the Company and its Subsidiaries
contain true, accurate and complete records of all meetings and other corporate
actions held or taken by its shareholders and board of directors (including
committees thereof).
3.02 Capitalization.
(a) The authorized capital stock of the Company consists of 3,360,000
shares of Company Common Stock. As of the date of this Agreement, there are
2,634,678 shares of Company Common Stock issued and outstanding all of which are
owned by the Shareholders in the amounts as set forth in Schedule 3.02 annexed
-------------
hereto. Except as set forth on Schedule 3.02, all of the issued and outstanding
-------------
shares of Company Common Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. The authorized and issued and
outstanding capital stock of each Subsidiary of the Company is set forth on
Schedule 3.02. All of the issued and outstanding shares of capital stock of
-------------
each Subsidiary of the Company are owned by the Company, have been duly
authorized and validly issued and are fully paid, non-assessable and free of
preemptive rights with no personal liability attaching to the ownership thereof.
Except as set forth in Schedule 3.02 hereto, the Company does not have and is
-------------
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Company Common Stock or any other equity security of the
Company or any of its Subsidiaries or any securities representing the right to
purchase or otherwise receive any shares of Company Common Stock or any other
equity security of the Company or any of its Subsidiaries other than as provided
for in this Agreement. There are no bonds, debentures, notes, shares of
preferred stock or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for securities having the right to vote)
on any matters on which the Shareholders of the Company may vote.
(b) Except as disclosed on Schedule 3.02(b) hereto, there are no
----------------
agreements or understandings, with respect to the voting of any shares of
Company Common Stock or any Subsidiary of the Company or which restrict the
transfer of such shares, to which the Company or any of its Subsidiaries is a
party and there are no such agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of any such shares
or which restrict the transfer of such shares, other than applicable federal and
state securities laws.
(c) All dividends on Company Common Stock which have been declared
prior to the date of this Agreement have been paid in full.
3.03 Authority; No Violation.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation by the Company
of
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the transactions contemplated by this Agreement have been duly and validly
authorized by all requisite corporate action on the part of the Company, have
been approved by the vote or consent of the Shareholders of the Company required
by the Company's Certificate or Articles of Incorporation and Bylaws and, except
for the filing of the Certificates of Merger, no other corporate proceedings on
the part of the Company are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and each of the Shareholders
and (assuming the due authorization, execution and delivery by Parent and Sub)
constitutes a valid and binding obligation of the Company and each of the
Shareholders, enforceable against each of the Company and each Shareholder in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency (including, without limitation, all laws relating to
fraudulent transfers), moratorium or similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) Except as set forth in Schedule 3.03 hereto, neither the
-------------
execution and delivery of this Agreement by the Company, nor the consummation by
the Company of the transactions contemplated hereby, nor compliance by the
Company with any of the terms or provisions, hereof, will (i) violate, conflict
with or result in a breach of any provision of the Articles of Incorporation or
Bylaws of the Company, (ii) assuming that the consents and approvals referred to
in the Disclosure Schedule hereof are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree, license or
injunction applicable to the Company or any of its Subsidiaries, or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provisions of or the loss of any benefit under, constitute a
default (or any event, which, with notice or lapse of time, or both would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, material agreement or other
material instrument or obligation to which the Company or any of its
Subsidiaries is a party, or by which the Company or any of its Subsidiaries or
any of their respective properties or assets may be bound or affected.
3.04 Consents and Approvals. Except for (a) the filing of the Certificates
of Merger with the Delaware Secretary and the Illinois Secretary, respectively,
pursuant to the DGCL and the IBCA, respectively, to effect the Merger, (b) such
filings as may be necessary as a result of any facts or circumstances relating
solely to Parent or Sub, and (c) such filings, authorizations, consents or
approvals as may be set forth in the Disclosure Schedule hereto, no consents or
approvals of, or filings or registrations with, any court, administrative
agency, regulatory agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with the execution and delivery by the Company
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of this Agreement and the consummation by the Company of the Merger and the
other transactions contemplated hereby.
3.05 Financial Statements.
(a) Attached to Schedule 3.05(a) are copies of the unaudited balance
----------------
sheets of the Company as of December 31, 1998, and the related statements of
income for the fiscal year 1998, inclusive. Also attached to Schedule 3.05(a)
----------------
are copies of the unaudited consolidated balance sheets of the Company as of
December 31, 1999, and the related unaudited consolidated statements of income
for the fiscal year ended December 31, 1999. All such financial statements
delivered under this Section 3.05(a) to Parent shall be collectively referred to
herein as the "Financial Statements." The unaudited interim financial statements
of the Company and its Subsidiaries have been prepared as of their respective
dates in all material respects in accordance with applicable accounting
practices and fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the dates thereof and the
consolidated income and retained earnings and sources and applications of funds
for the periods then ended. The financial books and records of the Company are
true and accurate and are capable of being audited in accordance with generally
accepted accounting principles ("GAAP") for no less than the last two fiscal
years.
(b) Except (i) as set forth in the Disclosure Schedule hereto, (ii)
for liabilities incurred since December 31, 1999 in the ordinary course of
business consistent with past practice, or (iii) liabilities contemplated
herein, the Company does not have any liabilities or obligations of any nature
whatsoever (whether absolute, accrued, contingent or otherwise) which are not
adequately reserved or reflected on the balance sheet of the Company for the
quarter ended December 31, 1999 and which would not have a material adverse
effect on the Company, its business or financial condition taken as a whole (any
material adverse effect on the Company, its business or financial condition
taken as a whole being hereinafter defined as a "Material Adverse Effect").
(c) Schedule 3.05(c)(i) contains the Company's accounts receivable
-------------------
report as of January 23, 2000, which report is true and accurate in all material
respects and has been prepared in accordance with the Company's normal practice.
The accounts receivable reflected in the January 23, 2000 report contained in
Schedule 3.05(c)(i) and all the accounts receivable arising after such date are
-------------------
valid and genuine and arose from bona fide transactions in the ordinary course
of the Company's business and have been recorded in accordance with the
Company's historical revenue recognition policy. Except as set forth on Schedule
--------
3.05(c)(ii), no account receivable has been assigned or pledged to any other
-----------
person and no defense or set off to any such account receivable has to the
knowledge of the Company, been asserted by the account obligor. The allowance
for bad debt for the Company's accounts receivable set forth on the December 31,
1999 unaudited consolidated balance sheet is adequate and in accordance with the
historical accounting practices of the Company.
A-14
(d) Since December 31, 1999 neither the Company nor its Subsidiaries
has declared or paid any dividends, or made any other distribution on or in
respect of, or directly or indirectly purchased, retired, redeemed or otherwise
acquired any shares of the capital stock of the Company or issued or sold any
such shares of capital stock.
3.06 Absence of Certain Changes or Events. Except as set forth in the
Disclosure Schedule hereto, since December 31, 1999, there has not been any
Material Adverse Effect on the Company (including without limitation any loss of
employees or customers) and, to the Shareholders' and the Company's knowledge,
no fact or condition specific to the Company exists which is reasonably likely
to cause such a Material Adverse Effect on the Company in the future.
3.07 Legal Proceedings. Except as set forth in Schedule 3.07 hereto, the
-------------
Company is not a party to any, and there are no pending or, to the Shareholders'
and the Company's knowledge, threatened, legal, administrative, arbitrable or
other proceedings, claims, actions or governmental or regulatory investigations
of any nature against or affecting the Company or any of its Subsidiaries or any
property or asset of the Company or any of its Subsidiaries, before any court,
arbitrator, administrative agency or Governmental Entity, domestic or foreign.
Neither the Company nor any of its Subsidiaries nor any property or asset of the
Company is subject to any order, writ, judgment, injunction, decree,
determination or award which restricts its ability to conduct business in any
area in which it presently does business.
3.08 Taxes and Tax Returns.
(a) For purposes of this Agreement, the terms "Tax" and "Taxes" shall
mean any and all taxes, charges, fees, levies or other assessments, including,
without limitation, all net income, gross income, gross receipts, premium,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties (including penalties
for failure to file in accordance with applicable information reporting
requirements), and additions to tax by any authority, whether federal, state,
local, domestic or foreign. The term "Tax Return" shall mean any report, return,
form, declaration or other document or information required to be supplied to
any authority in connection with Taxes.
(b) The Company and its Subsidiaries (collectively, the "Taxpayer")
have filed all Tax Returns that were required to be filed. All such Tax Returns
were when filed, and continue to be, correct and complete in all material
respects. All Taxes owed by the Taxpayer (whether or not shown on any Tax
Return) have been timely paid. Except as set forth on Schedule 3.08(b) annexed
----------------
hereto, the Taxpayer currently is not the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where the Taxpayer does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no liens with respect to
Taxes on any of the assets or property of the Taxpayer.
A-15
(c) The Taxpayer has withheld or collected and paid all Taxes required
to have been withheld or collected and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder, any other
third party, or otherwise.
(d) There is no dispute or claim concerning any Tax Liability of the
Taxpayer either (A) claimed or raised by any authority in writing or (B) as to
which the Taxpayer or the directors and officers (and employees responsible for
Tax matters) of the Taxpayer has knowledge. There are no proceedings with
respect to Taxes pending, except as set forth on Schedule 3.08(d) annexed
----------------
hereto.
(e) Schedule 3.08(e) annexed hereto sets forth an accurate, correct
----------------
and complete list of all federal, state, local, and foreign Tax Returns filed
with respect to the Taxpayer for taxable periods ended on or after December 31,
1996, indicates those Tax Returns that have been audited and indicates those Tax
Returns that currently are the subject of audit. The Company has delivered to
Parent correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by or on behalf of the Taxpayer since December 31, 1996. No other audit or
investigation with respect to Taxes is pending or has been threatened.
(f) The Taxpayer has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(g) The Taxpayer has not agreed to make, nor is it required to make,
any adjustments under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(h) The Taxpayer is not a party to any contract, arrangement or plan
that has resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code, or the payment of any consideration which would not be deductible by
reason of Section 162(m) of the Code.
(i) The Taxpayer has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii).
(j) The Taxpayer is not a party to any agreement, whether written or
unwritten, providing for the payment of Tax liabilities, payment for Tax losses,
entitlements to refunds or similar Tax matters.
(k) No ruling with respect to Taxes relating to the Taxpayer has been
requested by or on behalf of the Taxpayer.
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(l) The Taxpayer (A) has never been a member of an affiliated group
(within the meaning of Section 1504 of the Code, or any similar group as defined
for state, local or foreign tax purposes) filing a consolidated federal (or
combined or unitary state, local or foreign) income Tax Return or (B) does not
have any liability for the taxes of any Person (other than the Taxpayers) under
Reg. (S) 1.1502-6 (or any similar provision of state, local or foreign Law), as
a transferee or successor, by contract, or otherwise.
(m) The unpaid Taxes of the Taxpayer (A) did not, as of the most
recent fiscal quarter end, exceed the reserves for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) on its books at such time and (B) do not exceed that
reserve as adjusted for the passage of time through the Effective Date in
accordance with the past custom and practice of the Taxpayer in filing its Tax
Returns.
(n) Schedule 3.08(n) sets forth the following information with respect
----------------
to the Company as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Effective Date giving effect to the
consummation of the transactions contemplated hereby): the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Company.
3.09 Employee Benefit Plans.
(a) Schedule 3.09 hereto sets forth a true and complete list of all
-------------
Plans maintained or contributed to by the Company or any of its Subsidiaries
during the five (5) years preceding this Agreement. The term "Plans" for
purposes of this Article III means all employee benefit plans, arrangements or
agreements that are maintained or contributed to, or that were maintained or
contributed to at any time during the five (5) years preceding the date of this
Agreement, by the Company or any of its Subsidiaries, or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company would be deemed a "single employer" within the meaning
of Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) The Company has heretofore delivered to Parent true and complete
copies of each of the Plans and all related documents, including but not limited
to (i) all required Forms 5500 and all related schedules for such Plans (if
applicable) for each of the last two (2) years, (ii) the actuarial report for
such Plan (if applicable) for each of the last two (2) years, and (iii) the most
recent determination letter from the IRS (if applicable) for such plan.
(c) (i) Except as set forth in Schedule 3.09 hereto, each of the Plans
-------------
has been operated and administered in all material respects in accordance with
applicable laws, including but not limited to ERISA and the Code, (ii) each of
the Plans intended to be "qualified" within meaning of Section 401(a) of the
Code has been maintained so as to
A-17
qualify from the effective date of such Plan to the Effective Time, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value of
"benefit liabilities" (within the meaning of Section 4001(a)(16) of ERISA) under
such Plan, based upon the actuarial assumptions currently used by the Plan for
IRS funding purposes did not, as of its latest valuation date, exceed the then
current value of the assets of such Plan allocable to such accrued benefits, and
there has been no "accumulated funding deficiency" (whether or not waived), (iv)
no Plan provides benefits, including without limitation death, medical or other
benefits (whether or not insured), with respect to current or former employees
of the Company, any of its Subsidiaries or any ERISA Affiliate beyond their
retirement or other termination of service, other than (A) coverage mandated by
applicable law, (B) life insurance death benefits payable in the event of the
death of a covered employee, (C) disability benefits payable to disabled former
employees, (D) death benefits or retirement benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA, (E) deferred
compensation benefits accrued as liabilities on the books of the Company, any of
its Subsidiaries or any ERISA Affiliate or (F) benefits the full cost of which
is borne by the current or former employee (or his beneficiary), (v) with
respect to each Plan subject to Title IV of ERISA no liability under Title IV of
ERISA has been incurred by the Company, any of its Subsidiaries or any ERISA
Affiliate that has not been satisfied in full, no condition exists that presents
a material risk to the Company, any of its Subsidiaries or any ERISA Affiliate
of incurring a material liability to or on account of such Plan, and there has
been no "reportable event" (within the meaning of Section 1013 of ERISA and the
regulations thereunder), (vi) none of the Company, any of its Subsidiaries or
any ERISA Affiliate has ever maintained or contributed to a "multiemployer
pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all
contributions or other amounts payable by the Company as of the Effective Time
with respect to each Plan in respect of current or prior plan years have been
paid or accrued in accordance with GAAP and Section 412 of the Code, (viii) none
of the Company, any of its Subsidiaries or any ERISA Affiliate has engaged in a
transaction in connection with which the Company, any of its Subsidiaries or any
ERISA Affiliate has any material liability for either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section
4975 or 4976 of the Code, (ix) consummation of the transactions contemplated
hereby will not cause any amounts payable under any of the Plans to fail to be
deductible for federal income tax purposes under Sections 280G or 162(m) of the
Code, and (x) there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the Plans or any
trusts related thereto.
(d) With respect to any Plan that is a welfare plan (within the
meaning of Section 3(l) of ERISA) (i) no such Plan is funded through a "welfare
benefit fund," as such term is defined in Section 419(a) of the Code, and (ii)
each such Plan complies in all material respects with the applicable
requirements of Section 4980B(f) of the Code, Part 6 of Subtitle B of Title I of
ERISA and any applicable state continuation coverage requirements ("COBRA").
(e) Except as prohibited by law (including Section 411(d)(6) of the
Code), each Plan may be amended, terminated, modified or otherwise revised by
the
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Company, any of its Subsidiaries or its ERISA Affiliates as of the Effective
Time to eliminate, without material effect, any and all future benefit accruals
under any Plan (except claims incurred under any welfare plan).
(f) Except as set forth on Schedule 3.09, neither the Company nor any
-------------
of its Subsidiaries has entered into, adopted or amended in any respect any
collective bargaining agreement or adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
insurance or other similar plan, agreement, trust, fund or arrangement for the
benefit of employees (whether or not legally binding).
(g) Other than as specifically set forth herein, the Company has
satisfied all requirements under the Compete Incorporated Employee's Stock
Option Plan and has not taken any action or failed to take any action that has
resulted in or will result in a breach or default under such Plan, or that would
result in the acceleration of vesting of any options under such Plan.
3.10 Compliance with Applicable Law; Certain Agreements; Licensing. Except
as set forth in Schedule 3.10(i) hereto, each of the Company and its
----------------
Subsidiaries holds all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of its business under and pursuant to all, and
has complied in all material respects with and, to the Shareholders' and the
Company's knowledge, is not in conflict with, or in default or violation of any
(a) statute, code, ordinance, law, rule, regulation, order, writ, judgment,
injunction or decree, published policies and guidelines of any Governmental
Entity, applicable to the Company or any Subsidiary or by which any property or
asset of the Company or Subsidiary is bound or affected or (b) any note, bond,
mortgage, indenture, deed of trust, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or any Subsidiary or any property or asset of the Company
or Subsidiary is bound or affected; and neither of the Company, any Subsidiary
or any Shareholder knows of, or has received notice of, any violations of any
the above. Schedule 3.10 (ii) hereto contains a list of all federal and state
------------------
licenses, franchises, permits and authorizations necessary for the lawful
conduct of the Company's or any of its Subsidiaries' respective businesses.
3.11 Certain Contracts.
(a) Except as set forth in Schedule 3.11(a) hereto, neither the
----------------
Company nor any of its Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or oral): (i) with
respect to the employment of any director, officer or employee, or with respect
to the employment of any consultant which cannot be terminated without payment,
(ii) which, upon the consummation of the transactions contemplated by this
Agreement, will result in any payment (whether of severance pay or otherwise)
becoming due from the Company or any of its Subsidiaries to any officer or
employee thereof which amounts are specifically quantified in Schedule 3.11(a),
(iii) which is a material contract (as defined in Item
A-19
601(b)(10) of Regulation S-K promulgated by the Securities and Exchange
Commission) ("SEC") to be performed after the date of this Agreement that has
not otherwise been disclosed in writing to Parent, (iv) which is a consulting or
other agreement (including agreements entered into in the ordinary course and
data processing, software programming and licensing contracts) not terminable on
ninety (90) days or less notice, (v) which restricts the conduct of any line of
business by the Company or any of its Subsidiaries, which restriction is
specifically referred to in such Schedule 3.11(a), (vi) with or to a labor union
or guild (including any collective bargaining agreement), or (vii) any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement, any of which are specifically quantified on Schedule
3.11(a)(vii). Other than as specifically set forth herein, no benefits under any
of such plans will be increased, or the vesting of the benefits of which, will
be accelerated by the occurrence of any of the transactions contemplated by this
Agreement. The Company has previously delivered to Parent true and complete
copies of all employment, consulting and deferred compensation agreements which
are in writing and to which the Company is a party. Each contract, arrangement,
commitment or understanding of the type described in this section is referred to
herein as a "Company Contract".
(b) Except as set forth in Schedule 3.11(b) hereto, (i) each Company
----------------
Contract is legal, valid and binding upon the Company or any of its
Subsidiaries, as the case may be, assuming due authorization of the other party
or parties thereto, and in full force and effect, subject to the effect of any
applicable bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers), moratorium or similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
(ii) the Company has performed all material obligations required to be performed
by it to date under each such Company Contract, and (iii) to the Shareholders'
and the Company's knowledge, no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a material default on
the part of the Company or Subsidiary, as the case may be, under any such
Company Contract.
(c) Neither the Company nor its Subsidiaries has made any express
warranty to any person or entity with respect to any services or products it
provides or delivers or has made or agreed to make any indemnification payment
with respect to any warranty claim, except for (i) the warranties and/or
agreement(s) to indemnify of which true and correct copies have been delivered
to Parent, and (ii) any warranties under other state or federal laws generally.
3.12 Agreements with Regulatory Agencies. Neither the Company nor any of
its Subsidiaries is subject to any cease-and-desist or other order issued in
writing by, or is a party to any written agreement, consent agreement or
memorandum of understanding,
A-20
commitment letter, suspension order, or similar undertaking (each, a "Regulatory
Agreement") with any regulatory agency or any other Governmental Entity that
restricts the conduct of its business in any material respect, nor has the
Company been notified in writing or, to the knowledge of the Company, otherwise
by any regulatory agency or any other Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
3.13 Environmental Matters.
(a) The Company and its Subsidiaries are, and have been, in material
compliance with all applicable environmental laws and with all rules,
regulations, standards and requirements of the United States Environmental
Protection Agency (the "EPA") and of state and local agencies with jurisdiction
over pollution or protection of the environment.
(b) There is no suit, claim, action or proceeding pending or, to the
Shareholders' and the Company's knowledge, threatened, before any Governmental
Entity or other forum in which the Company or any of its Subsidiaries has been
or, with respect to threatened proceedings, may be named as a defendant,
responsible party or potentially responsible party in any way relating to any
environmental law, rule, regulation, standard or requirement.
3.14 Properties.
(a) Schedule 3.14 hereto contains a true, complete and correct list of
-------------
all real properties owned by the Company or any of its Subsidiaries. Except as
set forth in Schedule 3.14 hereto, the Company or its Subsidiaries has good and
-------------
marketable title to all real property and other property owned by it and
included in the balance sheet of the Company at September 30, 1999, and owns
such property subject to no encumbrances, liens, security interests, pledges or
title imperfections.
(b) Neither the Company nor any of its Subsidiaries has received any
notice of a violation of any applicable zoning or environmental regulation,
ordinance or other law, order, regulation or requirement relating to its
operations or its properties and there is no such violation. Except as set
forth in Schedule 3.14 hereto, to the Shareholders' and the Company's knowledge,
-------------
all buildings and structures owned and used by the Company or any of its
Subsidiaries conform with all applicable ordinances, codes or regulations.
Except as set forth in Schedule 3.14 hereto, all buildings and structures leased
-------------
and used by the Company or any of its Subsidiaries conform in all material
respects with all applicable ordinances, codes or regulations, except where such
nonconformity would not have a Material Adverse Effect.
(c) The Disclosure Schedule contains a true, complete and correct list
of all leases pursuant to which the Company or any of its Subsidiaries leases
any real or personal property, either as lessee or as lessor which leases call
for an annual payment in excess of $10,000 and cannot be terminated without
penalty with 90 days or less notice
A-21
(the "Company Leases"). Assuming due authorization of the other party or parties
thereto, each of the Company Leases is valid and binding on the Company or
Subsidiary, and, to the best of the Company's knowledge, valid and binding on
and enforceable against all other respective parties to such leases, in
accordance with their respective terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency (including, without limitation, all laws
relating to fraudulent transfers), moratorium or similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). There are not
under such Company Leases any existing breaches, defaults or events of default
by the Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries received notice of, or made a claim with respect to, any breach or
default by any other party to such Company Leases. Each of the Company and its
Subsidiaries enjoys quiet and peaceful possession of all such leased properties
occupied by it as lessee.
3.15 Insurance. The Company has made available to Parent true and complete
copies of all material policies of insurance of the Company or any of its
Subsidiaries currently in effect a list of which is attached as Schedule 3.15.
-------------
All of the policies relating to insurance maintained by the Company with the
respect to its material properties and the conduct of its business in any
material respect (or any comparable policies entered into as a replacement
thereof) are in full force and effect and the Company has not received any
notice of cancellation with respect thereto. All life insurance policies on the
lives of any of the current and former officers of the Company which are
maintained by the Company or any of its Subsidiaries or which are otherwise
included as assets on the books of the Company are, or will at the Effective
Time be, owned by the Company or any of its Subsidiaries, free and clear of any
claims thereon by the officers or members of their families, except with respect
to the death benefits thereunder, as to which the Company agrees that there will
not be an amendment prior to the Effective Time without the consent of Parent.
The Company does not have any material liability for unpaid premium or premium
adjustments not properly reflected on the Company's December 31, 1999 balance
sheet. All claims under any policy or bond have been duly and timely filed.
3.16 Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining or other labor union or guild contract nor
has the Company or any of its Subsidiaries, to the Shareholders' and the
Company's knowledge, been approached by any collective bargaining or other labor
union or guild seeking to enter into a contract with the Company or any of its
Subsidiaries. There is no pending or, to the Shareholders' and the Company's
knowledge, threatened, labor dispute, strike or work stoppage against the
Company or any of its Subsidiaries which may interfere with the business
activities of the Company or any of its Subsidiaries. None of the Company or any
of its Subsidiaries or their respective representatives or employees has
committed any unfair labor practices in connection with the operation of the
business of the Company or any of its Subsidiaries, and there is no pending or,
to the Shareholders' and the Company's knowledge, threatened charge or complaint
against the Company or any of its Subsidiaries by the National Labor Relations
Board or any comparable state agency. Except as set forth on Schedule 3.16
-------------
hereto, to the Shareholders' and the
A-22
Company's knowledge, neither the Company nor its Subsidiaries has hired any
illegal aliens as employees. To the Company's and the Shareholders' knowledge,
neither the Company nor its Subsidiaries has discriminated on the basis of race,
age, sex or otherwise in its employment conditions or practices with respect to
its employees. There are no race, age, sex or other discrimination complaints
pending, or, to the Shareholders' and the Company's knowledge, threatened
against the Company or any of its Subsidiaries by any employee, former or
current, before any domestic (federal, state or local) or foreign board,
department, commission or agency nor, to the knowledge of the Company, does any
basis therefor exist. To the knowledge of the Company and the Shareholders, as
of the date hereof, none of the employees of the Company has a present intention
to terminate its employment with the Company.
3.17 Intellectual Property. The Company and its Subsidiaries own or
possess a license and other right to use without payment of any material amount
all material patents, copyrights, trade secrets, trade names, service marks,
trademarks, domain names, know-how, software and other intellectual property
material to the operation of its business as presently conducted (collectively,
the "Intellectual Property Rights"). Schedule 3.17 sets forth a list of all
-------------
patents, pending patent applications, registered copyrights, reported trademarks
and service marks and applications for the registration of trademarks and
service marks which are owned by the Company as well as all material
intellectual property license agreements. Neither the Company nor any of its
Subsidiaries has received any notice of conflict with the Intellectual Property
Rights from any third party. The Company and its Subsidiaries are not in
material default under any contract, agreement, arrangement or commitment
relating to any of the Intellectual Property Rights. To the Shareholders' and
the Company's knowledge, the Intellectual Property Rights do not infringe upon
the rights of any third parties and are valid and enforceable.
3.18 Broker's Fees. Neither the Company nor any of its officers or
directors, has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement, except as set forth in Schedule
--------
3.18.
----
3.19 Bank Accounts. The Company has provided or made available to Parent
complete and current summaries of information regarding all accounts, lock boxes
and safe deposits maintained by the Company at banks, trust companies,
securities firms or other brokers or other financial institutions.
3.20 Year 2000. Other than as indicated in Schedule 3.20, the Company has
received no claim for any liability, obligation or commitment to any third party
relating to Year 2000 compatibility for any services performed or goods sold,
and made no warranty or agreement to indemnify any third party for work
performed if such party incurs any damages as a result of the Company's
services.
3.21 Disclosure. No representation or warranty contained in this Agreement
or any schedule to this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances in which they are made, not
misleading.
A-23
3.22 Limitation on Warranties. Except as expressly set forth in this
Agreement, the Company and the Shareholders make no express or implied warranty
of any kind whatsoever with respect to the assets of the Company including any
representation as to physical condition or value of any of the assets of the
Company or the future profitability or future earnings performance of the
Company. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE ARE EXPRESSLY EXCLUDED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby, jointly and severally, represent and warrant to the
Company as follows:
4.01 Corporate Organization and Qualification. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Parent and Sub has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. The Certificate of
Incorporation and Bylaws of each of Parent and Sub, copies of which have
previously been delivered to the Company, are true and complete copies of such
documents as in effect as of the date of this Agreement. Parent has no direct or
indirect Subsidiaries other than Sub and Perficient LoreData, Inc., a Delaware
corporation. Neither Parent nor any of its Subsidiaries owns, controls or holds
the power to vote, directly or indirectly of record, beneficially or otherwise,
any capital stock or any equity or ownership interest in any corporation,
partnership, association, joint venture or other entity, except for less than
five percent (5%) of any equity security registered under the Exchange Act.
4.02 Capitalization.
(a) The authorized capital stock of Parent consists of 20,000,000
shares of Parent Common Stock and 5,000,000 shares of preferred stock, par value
$0.001 per share ("Parent Preferred Stock"). As of the date hereof, 4,065,047
shares of Parent Common Stock and no shares of Parent Preferred Stock are issued
and outstanding. All of the issued and outstanding shares of Parent Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights with no personal liability attaching
to the ownership thereof. Except as set forth in Schedule 4.02(a)(i) hereto,
-------------------
Parent does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Parent Common Stock or any other equity
security of Parent or any of its Subsidiaries or any securities representing
A-24
the right to purchase or otherwise receive any shares of Parent Common Stock or
any other equity security of Parent or any of its Subsidiaries other than as
provided for in this Agreement. There are no bonds, debentures, notes, shares of
preferred stock or other indebtedness of Parent having the right to vote (or
convertible into, or exchangeable for securities having the right to vote) on
any matters on which the Shareholders of Parent may vote. Except as disclosed on
Schedule 4.02(a)(ii) hereto, to Parent's knowledge there are no agreements or
--------------------
understandings, with respect to the voting of any shares of Parent Common Stock
or any Subsidiary of Parent or which restrict the transfer of such shares, to
which Parent or any of its Subsidiaries is a party and there are no such
agreements or understandings to which Parent or any of its Subsidiaries is a
party with respect to the voting of any such shares or which restrict the
transfer of such shares, other than applicable federal and state securities
laws. As used in this Agreement, Parent's "knowledge" shall mean the knowledge
of Parent's executive officers and directors, as disclosed in its Prospectus
dated July 29, 1999.
(b) The authorized capital stock of Sub consists of 10,000 shares of
common stock, par value $0.01 per share ("Sub Common Stock"). As of the date
hereof, 1,000 shares of Sub Common Stock are outstanding. All of the issued and
outstanding shares of capital stock of Sub are owned by Parent, have been duly
authorized and validly issued and are fully paid, non-assessable and free of
preemptive rights with no personal liability attaching to the ownership thereof.
4.03 Authority; No Violations.
(a) Each of Parent and Sub have full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Sub and the consummation by Parent and Sub of the transactions contemplated
hereby have been duly and validly authorized by all requisite corporate action
on the part of each of Parent. Except for the filing of the Certificates of
Merger and the approval of the shareholders of Parent, no other corporate
proceedings on the part of Parent or Sub are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Parent and Sub and (assuming the due
authorization, execution and delivery by the Company) constitutes a valid and
binding obligation of Parent and Sub, enforceable against Parent and Sub in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency (including, without limitation, all laws relating to
fraudulent transfers), moratorium or similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by each of
Parent and Sub, nor the consummation by either Parent or Sub, as the case may
be, of the transactions contemplated hereby, nor compliance by either Parent or
Sub with any of the terms or provisions hereof, will (i) violate, conflict with
or result in a breach of any provision of the Certificate of Incorporation or
Bylaws of Parent, or Sub, as the case may be, or (ii)(x) violate any statute,
code, ordinance, rule, regulations, judgment, order, writ,
A-25
decree or injunction applicable to Parent or Sub or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provisions of or the loss of any benefit under, constitute a default (or any
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance upon any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, material agreement or other instrument or obligation to
which Parent or Sub is a party, or by which they or any of their respective
properties or assets may be bound or affected.
4.04 Consents and Approvals. Except for (a) the filing of the Certificates
of Merger with the Delaware Secretary and the Illinois Secretary, respectively,
pursuant to the DGCL and the IBCA, respectively, to effect the Merger, (b) such
filings as may be necessary as a result of any facts or circumstances related
solely to the Company, (c) the consents and approvals listed on Schedule 4.04
-------------
hereto, and(d) the consent of the shareholders of Parent to the Merger and the
filing of a Proxy Statement in connection therewith, no consents or approvals
of or filings or registrations with any Governmental Entity or with any third
party are necessary in connection with the execution and delivery by Parent and
Sub of this Agreement and the consummation by Parent and Sub of the Merger and
the other transactions contemplated hereby.
4.05 Broker's Fees. Neither Parent nor Sub, nor any of their respective
officers or directors, has employed any broker or finder or incurred any
liability for any broker's fee, commission or finder's fee in connection with
any of the transactions contemplated by this Agreement, except as set forth in
Schedule 4.05 hereto.
-------------
4.06 SEC Reports. Parent has previously delivered to the Company an
accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement of Parent filed since May 1,
1999 with the SEC pursuant to the Exchange Act or the Securities Act
(collectively, the "Parent SEC Reports"). Parent has timely filed (either by
the required filing date or pursuant to Rule 12b-25 promulgated under the
Exchange Act) all Parent SEC Reports and other documents required to be filed by
it under the Securities Act and the Exchange Act and, as of their respective
dates and all Parent SEC Reports complied with all of the rules and regulations
of the SEC with respect thereto. As of their respective dates, the Parent SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Parent's consolidated financial statements (including any notes
to such financial statements) included within Parent SEC Reports (i) has been
prepared in all material respects in accordance with the published rules and
regulations of GAAP and the SEC applied on a consistent basis throughout the
periods involved, and (ii) fairly present in all material respects, the
consolidated financial position of Parent or as of the respective dates thereof
and the consolidated results of operations and cash flows for the periods
indicated.
A-26
4.07 Voting Requirements. The affirmative vote of the holders of a majority
of the shares of Parent Common Stock present and entitled to vote at the
Shareholders Meeting is the only vote of the holders of any class or series of
Parent's capital stock necessary to approve the Merger and the other
transactions contemplated hereby.
4.08 No Prior Activities. Sub has not incurred, directly or indirectly, any
liabilities or obligations, except those incurred in connection with its
incorporation or with the negotiation of this Agreement and consummation of the
transactions contemplated hereby. Sub has not engaged, directly or indirectly,
in any business or activity of any type or kind, or entered into any agreement
or arrangement with any person or entity, or become subject to or bound by any
obligation or undertaking, that is not contemplated by or in connection with
this Agreement and the transactions contemplated hereby.
4.09 Labor Matters. Neither Parent nor any of its Subsidiaries is a party
to any collective bargaining or other labor union or guild contract nor, to
Parent's knowledge, has Parent or any of its Subsidiaries been approached by any
collective bargaining or other labor union or guild seeking to enter into a
contract with Parent or any of its Subsidiaries. There is no pending, or to
Parent's knowledge, threatened labor dispute, strike or work stoppage against
Parent or any of its Subsidiaries which may interfere with the business
activities of Parent or any of its Subsidiaries. None of Parent or any of its
Subsidiaries or their respective representatives or employees has committed any
unfair labor practices in connection with the operation of the business of
Parent or any of its Subsidiaries, and there is no pending or, to Parent's
knowledge, threatened charge or complaint against Parent or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency.
4.10 No Material Adverse Change. Since September 30, 1999, and through the
date of this Agreement, there has been no fact or condition specific to the
Parent, other than as disclosed in the Parent SEC Reports, that has had a
material adverse effect on the Parent, its business or financial condition,
taken as a whole.
4.11 Limitation on Warranties. Except as expressly set forth in this
Article IV, Parent and Sub make no express or implied warranty of any kind
whatsoever with respect to the assets or securities of Parent, Sub or Surviving
Corporation, including any representation as to physical condition or value of
any of the assets or the securities of the Parent, Sub or the Surviving
Corporation or the future profitability or future earnings performance of the
Parent, Sub or the Surviving Corporation. ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
A-27
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
Parent, the Company shall (and shall cause its Subsidiaries to) carry on its
business in the ordinary course consistent with past practice. The Company shall
(and shall cause its Subsidiaries to) use all reasonable efforts to (x) preserve
its business organization, (y) keep available the present services of its
employees and (z) preserve for itself and Parent the goodwill of the customers
of the Company and its Subsidiaries and others with whom business relationships
exist, including, but not limited to all material contracts. Without limiting
the generality of the foregoing, and except as otherwise contemplated by this
Agreement or consented to in writing by Parent, the Company shall not (and shall
cause its Subsidiaries not to):
(a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock, except for a distribution to the Common
Stock Holders of the Company to cover the Common Stock Holders' income tax
liability attributable to the ownership of the Company Common Stock in an amount
not to exceed $100,000 for the fiscal year ended December 31, 1999 and such
additional amounts as are necessary for the period from January 1, 2000 to the
Closing Date subject to the delivery to the Parent prior to the Closing of a Tax
Calculation as defined in Section 7.02(n), less amounts previously distributed
on account thereof);
(b) (i) split, combine or reclassify any shares of its capital stock;
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock except upon
the exercise or fulfillment of rights or options issued or existing pursuant to
employee benefit plans, programs or arrangements, all to the extent outstanding
and in existence on the date of this Agreement, or (ii) repurchase, redeem or
otherwise acquire, any shares of the capital stock of the Company, or any
securities convertible into or exercisable for any shares of the capital stock
of the Company;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing;
(d) amend its Articles of Incorporation or Bylaws;
(e) make any capital expenditures in excess of $25,000;
(f) enter into any new line of business;
A-28
(g) (i) acquire or agree to acquire, by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
(ii) otherwise acquire any assets, other than in the ordinary course of
business, which would be material to the Company and its Subsidiaries, taken as
a whole ;
(h) take any action that is intended or would result in any of its
representations and warranties set forth in this Agreement being or becoming
materially untrue, or in any of the conditions to the Merger set forth in
Article VII not being satisfied, or in breach of any provision of this Agreement
except, in every case, as may be required by applicable law;
(i) change its methods of accounting in effect at December 31, 1998,
except as required by changes in GAAP or regulatory accounting principles as
concurred to by the Company's independent auditors;
(j) (i) enter into, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between the Company or any of its
Subsidiaries and one or more of its current or former directors, officers or
employees or (ii) increase in any manner compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan or
agreement as in effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares); or (iii) enter into,
modify or renew any employment, severance or other agreement with any director,
officer or employee of the Company or any of its Subsidiaries or establish,
adopt, enter into, or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement providing for any benefit to any
director, officer or employee (whether or not legally binding) other than in
connection with the employment of any employees in the Company's ordinary course
of business;
(k) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity except in the ordinary
course of business consistent with past practice of the Company;
(l) sell, lease, encumber, assign or otherwise dispose of, or agree to
sell, lease, encumber, assign or otherwise dispose of, any of its material
assets, properties or other rights or agreements;
(m) make any Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
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(n) pay, discharge or satisfy any claim, liability or obligation,
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice or as incurred in connection with the
Merger and the transactions expressly contemplated hereby, of liabilities
reflected or reserved against in the balance sheet at December 31, 1999, or
subsequently incurred in the ordinary course of business and consistent with
past practice;
(o) enter into or renew, amend or terminate, or give notice of a
proposed renewal, amendment or termination, or make any commitment with respect
to, regardless of whether consistent with past practices, any lease, contract,
agreement or commitment having a term of one year or more from the time of
execution or outside of the ordinary course of business consistent with past
practices other than computer leases in the amount not to exceed $20,000
individually or $100,000 in the aggregate;
(p) waive any material right, whether in equity or at law; or
(q) agree to do any of the foregoing.
5.02 No Solicitation; Non-Disclosure.
(a) None of the Company, any of its Subsidiaries, the Shareholders or
any of their respective directors, officers, employees, representatives, agents
and advisors or other persons controlled by the Company shall solicit or hold
discussions or negotiations with, or assist or provide any information to, any
person, entity or group (other than Parent, Sub and their affiliates and
representatives) concerning (i) any merger, consolidation, business combination,
share exchange, or other similar transaction involving the Company; (ii) any
sale, lease, exchange, mortgage, pledge, license transfer or other disposition
of any shares of Company Common Stock or significant assets of the Company; or
(iii) except as permitted in Section 5.01, the issuance of any new shares of
capital stock of the Company or any options, warrants or other rights to acquire
shares of capital stock of the Company. The Company will promptly communicate to
Parent, Sub and their affiliates and representatives the terms of any proposal,
discussion, negotiation or inquiry relating to a merger or disposition of a
significant portion of its capital stock or assets or similar transaction
involving the Company and the identity of the party making such proposal or
inquiry, which it may receive with respect to any such transaction.
(b) No party (or its representatives, agents, counsel, accountants or
investment bankers) hereto shall disclose to any third party, other than either
party's representatives, agents, counsel, accountants or investment bankers any
confidential or proprietary information about the business, assets or operations
of the other parties to this Agreement or the transactions contemplated hereby,
except as may be required by applicable law. The parties hereto agree that the
remedy at law for any breach of the requirements of this subsection will be
inadequate and that any breach would cause such immediate and permanent damage
as would be impossible to ascertain, and, therefore, the parties hereto agree
and consent that in the event of any breach of this subsection, in
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addition to any and all other legal and equitable remedies available for such
breach, including a recovery of damages, the non-breaching parties shall be
entitled to obtain preliminary or permanent injunctive relief without the
necessity of proving actual damage by reason of such breach and, to the extent
permissible under applicable law, a temporary restraining order may be granted
immediately on commencement of such action.
5.03 Employee Retention. The Company and the Shareholders agree to
immediately notify Parent if they have any knowledge of the intention of an
employee of the Company to terminate his employment with the Company. In
addition, the Company and the Shareholders agree that from the date of this
Agreement and continuing to the Effective Time, they shall not take any action
or fail to take any action that will result in the termination of an employee of
the Company without first consulting with Parent and providing Parent with an
opportunity to provide advice with respect to any such action or inaction.
5.04 Covenants of Parent and Sub. During the period from the date of this
Agreement and continuing until the Effective Time, Parent shall notify the
Shareholders' Representative prior to its taking of any of the following
actions:
(a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock;
(b) (i) split, combine or reclassify any shares of its capital stock;
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of, or in substitution for shares of its capital stock except upon
the exercise or fulfillment of rights or options issued or existing pursuant to
employee benefit plans, programs or arrangements, all to the extent outstanding
and in existence on the date of this Agreement, or (ii) repurchase, redeem or
otherwise acquire, any shares of the capital stock of Parent or its
Subsidiaries, or any securities convertible into or exercisable for any shares
of the capital stock of Parent or its Subsidiaries;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing except permitted pursuant to its employee benefit plans;
(d) amend its Certificate or Articles of Incorporation or Bylaws;
(e) enter into any new line of business;
(f) (i) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
(ii) otherwise acquire any assets, other than in the ordinary course of
business, which would, in either case, be material to Parent and its
Subsidiaries, taken as a whole;
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(g) without limiting the Company's and the Shareholders' rights under
Article VIII hereof, take any action that is intended or would result in any of
its representations and warranties set forth in this Agreement being or becoming
untrue, or in any of the conditions to the Merger set forth in Article VII not
being satisfied, or in breach of any provision of this Agreement except, in
every case, as may be required by applicable law;
(h) change its methods of accounting in effect at December 31, 1998,
except as required by changes in GAAP or regulatory accounting principles as
concurred to by Parent and its Subsidiaries's independent auditors;
(i) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity except in the ordinary
course of business consistent with past practice of Parent and its Subsidiaries
and except for indebtedness in an amount less than $100,000;
(j) sell, lease, encumber, assign or otherwise dispose of, or agree
to sell, lease, encumber, assign or otherwise dispose of, any of its material
assets or properties;
(k) make any Tax election or settle or compromise any material
federal, state, local or foreign Tax liability; or
(l) pay, discharge or satisfy any claim, liability or obligation,
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice or as incurred in connection with the
Merger and the transactions expressly contemplated hereby, of liabilities
reflected or reserved against in the balance sheet at September 30, 1999, or
subsequently incurred in the ordinary course of business and consistent with
past practice and other than the obligations in connection with the acquisition
of LoreData, Inc.
5.05 All Necessary Action. Each of the parties hereto shall use its best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate the transaction
contemplated hereby as soon as practicable. No party shall intentionally
perform any act which, if performed, or omit to perform any act which, if
omitted to be performed, would prevent or excuse the performance of this
Agreement by any party hereto or which would result in any representation or
warranty herein contained of such party being untrue in any material respect as
if originally made on and as of the Closing Date.
5.06 Notification. Each party shall promptly give the other party written
notice of the existence or occurrence of any condition which would make any
representation or warranty herein contained of either party untrue or which
might reasonable to expected to prevent the consummation of the transactions
contemplated hereby.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Regulatory Matters. The parties hereto shall cooperate with each
other and use all reasonable efforts promptly to prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). The Company and Parent
shall have the right to review in advance, and to the extent practicable each
will consult with the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to the Company,
Parent or Sub, as the case may be, which appear in any filing made with or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. Parent (or Sub as the case
may be) and the Company shall promptly furnish each other with copies of written
communications received by Parent, Sub or the Company, as the case may be, from
or delivered by any of the foregoing to, any Governmental Entity in respect of
the transactions contemplated hereby.
6.02 Securities Laws Matters.
(a) During the two-year period following the Closing Date, Parent
shall use its reasonable best efforts to make current public information
available in accordance with Rule 144(c) under the Securities Act.
(b) On the Closing Date, Parent shall execute and deliver to the
Shareholders of the Company a Registration Rights Agreement in the form attached
hereto as Exhibit E (the "Registration Rights Agreement").
---------
6.03 Shareholder Approval.
(a) Parent will (i) call a meeting of its shareholders (the
"Meeting") for the purpose of voting upon adoption and authorization of the
Merger and approve the issuance of the Parent Common Stock and, if necessary, to
approve an amendment to the Parent Stock Option Plan to increase the number of
shares of Parent Common Stock reserved for issuance upon exercise of stock
options granted thereunder to the Shareholders of the Company (collectively, the
"Matters"), (ii) hold the Meeting as soon as practicable following the date of
this Agreement, (iii) recommend to its shareholders the approval of each of the
Matters through its Board of Directors, and (iv) use its best
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efforts to obtain the necessary adoption and authorization of this Agreement by
the shareholders of Parent.
(b) Parent will (i) as soon as practicable following the date of this
Agreement, prepare in correct and appropriate form and file with the SEC a
preliminary Proxy Statement and (ii) use its reasonable best efforts to respond
to any comments of the SEC or its staff and to cause the Proxy Statement to be
cleared by the SEC. The Company and the Shareholders shall supply to Parent on
a timely basis in connection with the preparation of the Proxy Statement all
financial and other information necessary to be included therein with respect to
the Company and the Shareholders. Parent will notify the Company of the receipt
of any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for additional
information and will supply the Company with copies of all correspondence
between Parent or any of its representatives, on the one hand, and the SEC or
its staff, on the other hand, with respect to the Proxy Statement. Parent shall
give the Company and its counsel the opportunity to review the Proxy Statement
prior to being filed with the SEC and shall give the Company and its counsel the
opportunity to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of Parent and the
Company agrees to use its reasonable best efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC. As promptly as practicable after the Proxy Statement has been
cleared by the SEC, Parent shall mail the Proxy Statement to the stockholders of
Parent.
(c) Each party agrees to notify the other of, and to correct, any
information contained in the Proxy Statement furnished by such party to the
other for inclusion therein, which information shall be, at the time of
furnishing, or become, prior to the Meeting, false or misleading in any material
respect. If at any time prior to the Meeting or any adjournment thereof there
shall occur any event that should be set forth in an amendment to Proxy
Statement, Parent will prepare and mail to its stockholders such an amendment or
supplement.
(d) During the period from the date of this Agreement to the date of
Closing, Parent will file all reports, schedules and definitive proxy statements
(including the Proxy Statement) (the "Parent Filings") required to be filed by
Parent with the SEC and will provide copies thereof to the Company promptly upon
the filing thereof.
(e) Each Shareholder acknowledges and agrees that by signing this
Agreement, he has voted all of his shares of Company Common Stock in favor of
the approval of this Agreement, the Merger and all aspects of the transactions
contemplated hereby, that such approval is irrevocable and cannot be rescinded
and that each such Shareholder irrevocably agrees that he shall vote or cause to
be voted (in person or by proxy) all of his shares of Company Common Stock at
each meeting in which such matters are considered and subject to a vote in favor
of any such other matters that come before the Meeting concerning the Agreement,
the Merger and the transactions contemplated thereby.
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6.04 Access to Information. The Company shall afford to Parent, and shall
cause its independent accountants to afford to Parent and Parent's accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Closing to all of the Company's assets,
properties, books, Company Contracts and records. The Company shall permit
Parent and its representatives to make abstracts from and copies of such books
and records. During such period, the Company shall use its reasonable best
efforts to furnish promptly to Parent all other information concerning the
business, properties and personnel of the Company as Parent may reasonably
request. Following the Closing, Parent and the Surviving Corporation shall
provide access to the Surviving Corporation books and records for reasonable
business purposes including, without limitation, the preparation of the
Company's final Tax returns and the Shareholders' Tax returns.
6.05 Legal Conditions to Merger. Each of Parent, Sub and the Company
shall use all reasonable efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party with respect to the Merger and, subject to
the conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by Parent, Sub or the Company in connection with the
Merger and the other transactions contemplated by this Agreement.
6.06 Additional Agreements. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purpose of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement shall take all such necessary action as may be reasonably requested by
the Company or Parent (without additional cost to them).
6.07 Disclosure Supplements. Prior to the Effective Time, each party will
supplement or amend the Schedules hereto delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set forth
or described in such Schedules or which is necessary to correct any information
in such Schedules which has been rendered inaccurate thereby. No supplement or
amendment to such Schedules shall have any effect for the purposes of
determining satisfaction of the conditions set forth in Sections 7.02(a) hereof
or the compliance by the Company with the covenants set forth in Section 5.01
hereof (unless Parent consents in writing to such satisfaction of conditions or
compliance or elects to waive such matter by closing the transactions
contemplated hereby) or for the purposes of determining satisfaction of the
conditions set forth in Sections 7.03(a) hereof (unless the Company consents to
such satisfaction of conditions or elects to waive such matter by closing the
transactions contemplated hereby).
6.08 No Inconsistent Actions. Prior to the Effective Time, except as
otherwise permitted by this Agreement, no party will enter into any transaction
or make any
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agreement or commitment and will use reasonable efforts not to permit any event
to occur, which could reasonably be anticipated to result in (x) a denial of the
regulatory approvals referred to in Section 7.01(a) or (y) the imposition of any
condition or requirement that would materially adversely affect the economic or
business benefits to the Surviving Corporation of the transactions contemplated
by this Agreement.
6.09 Tax Matters. The parties shall not, before or after the Effective
Time, purposefully take any action or fail to take any action that would
prevent, or would be reasonably likely to prevent, the Merger from qualifying as
a reorganization and having each of the parties hereto from being parties to
such reorganization within the meaning of Section 368 of the Code.
6.10 Noncompetition Agreements; Employment Agreements. On the Closing
Date, Parent shall enter into a Noncompetition Agreement with each Shareholder
in the form attached as Exhibit C-1 and Parent shall enter into an Employment
-----------
Agreement with each of ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ in the form attached as
Exhibit C-2 hereto.
-----------
6.11 Company Shareholder Representation Letters. On the Closing Date,
each Shareholder shall execute and deliver to Parent the Representation Letters
in the form attached hereto as Exhibit F (the "Representation Letters").
---------
6.12 Stock Options; Employee Benefits. (a) At the Effective Time, the
Parent shall assume the Compete, Inc. Employees' Stock Option Plan (the "Company
Stock Option Plan") and, subject to the adjustments provided below with respect
to the Company Accelerated Options, the Parent shall assume all outstanding
options granted pursuant to the Company Stock Option Plan and each such assumed
option shall become and represent an option (an "Adjusted Option") (i) to
purchase the number of shares of Parent Common Stock determined by multiplying
(A) the number of shares of Parent Common Stock to be issued upon conversion of
one share of Company Common Stock pursuant to Section 1.05(a) of this Agreement
(assuming the use of the Cash Per Share Price and the Note Per Share Price to
purchase Parent Common Stock (valued at the Effective Time calculated in the
manner described in Section 1.05(d)) by (B) the number of shares of Company
Common Stock subject to such assumed option immediately prior to the Effective
Time and (ii) at an exercise price per share of Parent Company Stock determined
by dividing (X) the aggregate exercise price for the shares of Company Common
Stock subject to such assumed option immediately prior to the Effective Time by
(Y) the number of shares of Parent Common Stock subject to such Adjusted Option
at the Effective Time and rounding the resulting quotient down to the nearest
whole cent; provided, however, that the adjustments with respect to any such
assumed option that is an "incentive stock option" (as defined in Section 422 of
the Code) shall be effected in a manner consistent with the requirements of
Section 424(a) of the Code. Each Adjusted Option shall continue to be governed
by the Company Stock Option Plan and shall continue to be evidenced by the stock
option agreement evidencing the grant of the predecessor assumed option and the
Company Stock Option Plan and each such
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agreement shall be deemed amended to reflect the assumption of that plan by the
Parent, the substitution of Parent Common Stock for Company Common Stock, and
the revised exercise price determined pursuant to this Section 6.12.
Notwithstanding anything herein to the contrary, the Parent shall not be
obligated hereunder to assume the Company Stock Option Plan to the extent that
there are options outstanding to purchase more than 448,349 shares of Company
Common Stock immediately prior to the Closing Date subject to increase by
agreement between Parent and the Company in addition to the Company Accelerated
Options.
(b) At the Effective Time, the Parent shall, subject to the
adjustments provided below with respect to the Company Accelerated Options,
assume the non-qualified stock option granted to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of Company
Common Stock pursuant to that certain Agreement dated March 9, 1998, by and
between the Company and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇ Option") and subject to
Section 6.12(c) the ▇▇▇▇▇▇▇ Option shall become and represent an option to
purchase a number of shares of Parent Common Stock at a per share exercise price
determined in the same manner as determined with respect to an Adjusted Option
pursuant to Section 6.12(a).
(c) Each of the incentive stock options granted on December 15, 1999,
pursuant to the Company Stock Option Plan, to ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, and to
▇▇▇▇▇▇▇ ▇▇▇▇▇ of Company Common Stock and the ▇▇▇▇▇▇▇ Option each of which is
further described in Schedule 3.2 of the Disclosure Schedule (each a "Company
Accelerated Option") shall be assumed by Parent and adjusted pursuant to
Sections 6.12(a) and (b) but only with respect to a number of shares of Company
Common Stock determined by multiplying (i) the number of shares of Company
Common Stock subject to that option immediately prior to the Effective Time (the
"Pre-Adjusted Acceleration Option Number") by (ii) a fraction, the numerator of
which is equal to the Stock Per Share Price (converted to a dollar amount based
on the value of a share of Parent Common Stock at the Effective Time) and the
denominator of which is equal to the sum of the Cash Per Share Price, the Note
Per Share Price, and the Stock Per Share Price (converted to a dollar amount
based on the value of a share of Parent Common Stock at the Effective Time) and
rounding the resulting product up the nearest whole share. Each Company
Accelerated Option shall, to the extent assumed by Parent, be fully exercisable
on and after the Effective Time; provided, however, that, if at the time of such
exercise the escrow described in Section 1.06 hereof is still in place, such
portion of the Parent Common Stock issued upon such exercise shall be deposited
into escrow and be subject to the escrow terms as if that Company Accelerated
Option had been exercised to the same extent prior to the Effective Time and,
provided further, that should any of the events set forth in Section 2.02 (a),
(d) or (e) or 2.03 or Article IX hereof occur, the holder of the Company
Accelerated Option agrees to an immediate and automatic reduction in the number
of shares that may be purchased upon exercise of the option equal to the amount
that they would have had if all holders of the Company Accelerated Options
exercised such Options and become a Common Stock Holder immediately prior to
such event. For purposes of the conversion adjustments under Sections 6.12(a)
and (b), the number of shares of Company Common Stock subject to each Company
Accelerated Option immediately prior to the Effective Time shall be deemed to be
the
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number of shares of Company Common Stock for which that option is assumed by
Parent, as determined by this Section 6.12(c). Notwithstanding anything herein
to the contrary, the number of shares of Parent Common Stock issuable to the
Shareholders and issuable upon exercise of the Company Accelerated Options shall
not exceed an aggregate of 2,200,000 which number shall be subject to equitable
adjustment in the event of stock splits, stock dividends or other
recapitalization to the Parent Common Stock.
(d) The portion of each Company Accelerated Option that is not
assumed by the Parent pursuant to Section 6.12(c) shall lapse and cease to be
outstanding as of the Effective Time.
(e) Each holder of a Company Accelerated Option shall be paid by the
Parent such Holder's pro rata share of the Cash Price at the same time and in
the same manner as a Shareholder (i) an amount in cash determined by multiplying
the (A) Cash Per Share Price by (B) the Pre-Adjusted Accelerated Option Number
and then reducing the resulting product by the aggregate exercise price for the
shares of Company Common Stock attributable to a portion of the Company
Accelerated Option that is not assumed by the Parent pursuant to Section
6.12(c); and (ii) such Holders' pro rata share of the Note Price, by issuing a
Note in the principal amount determined by multiplying the (X) Note Per Share
Price by (Y) the Pre-Adjusted Accelerated Option Number.
(f) Subject to the approval of the shareholders of Parent if such
approval is required, Parent shall (i) reserve for issuance the number of shares
of Parent Common Stock that will become subject to the Company Stock Option Plan
(as assumed) and (ii) issue or cause to be issued the appropriate number of
shares of Parent Common Stock pursuant to the Company Stock Option Plan (as
assumed) or maturation of rights existing thereunder on the Effective Time or
thereafter granted or awarded. As soon as practicable after the Effective Time,
Parent shall prepare and file with the Commission a registration statement on
Form S-8 (or other appropriate form) registering a number of shares of Parent
Common Stock necessary to fulfill Parent's obligations with respect to issuance
of such shares under this Section 6.12. Such registration statement shall be
kept effective and the current status of the prospectus required thereby shall
be maintained for at least as long as any Adjusted Option or the ▇▇▇▇▇▇▇ Option
remain outstanding.
(g) Between the time of the execution of this Agreement and the
Closing Date, the Parent may, at its option, solicit all holders of options to
agree to the conversion and merger of the Company Stock Option Plan into its
Stock Option Plan. As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Adjusted Options and the ▇▇▇▇▇▇▇ Option
appropriate notices setting forth such holders' rights pursuant to the Company
Stock Option Plan (as assumed).
(h) Until the first anniversary of the Closing Date, Parent shall
take no action with respect to the Parent Stock Option Plan that would (i)
accelerate or otherwise effect the exercisability or vesting of the Adjusted
Options without the written consent of the Shareholders' Representative, which
may be withheld for any reason or no reason and
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only to the extent permitted under the Company Stock Option Plan (as assumed),
or (ii) adversely affect the rights of the Holders of the Adjusted Options.
(i) Schedule 6.12(i) sets forth a complete list of the retirement,
----------------
health, welfare and other employee benefits that are currently provided to
Parent's employees. Until the first anniversary of the Closing Date, Parent
shall use its best efforts to provide the Company's employees with retirement,
health, welfare and other employee benefits that are substantially equivalent
to those described in Schedule 6.12(i), or, at the option of Parent, continue
----------------
the Company's current benefit plans; provided, however, that except as otherwise
-------- -------
provided in this Agreement, nothing in this Section 6.12 shall confer upon
Parent any obligation to continue the employment of any of the Company's
employees.
6.13 Subchapter S Distribution. Prior to the Closing, the Company shall
make a distribution to the Common Stock Holders in the aggregate amount not to
exceed $100,000 to cover the income tax liability to the Common Stock Holders
attributable to the operations of the business of the Company (but not relating
to any salary of the Common Stock Holder) for the fiscal year ended December 31,
1999 and the period from January 1, 2000 to the Closing Date (subject to the
delivery to the Parent prior to the Closing of a Tax Calculation as defined in
Section 7.02(n)) less amounts previously distributed on account thereof).
6.14 Publicity. The parties acknowledge that Parent, as a publicly held
company, is subject to certain disclosure requirements under federal securities
laws. Accordingly, the Company and the Shareholders agree that, except as
otherwise required by law, they (a) will make no public comment concerning or
announcement regarding the Merger; and (b) will notify Parent of any external
rumor of the Merger received by the Company. Notwithstanding the foregoing,
Parent reserves the right to disclosure the Merger, including financial
information regarding the Company and the status of negotiations, at any time it
decides that such disclosure is appropriate under the securities laws or the
rules of any stock exchange, provided, however, that Parent shall provide the
-------- -------
Company and its counsel a reasonable time to review and comment upon such
disclosure.
Except as otherwise required by law or the rules of The Nasdaq SmallCap
Market System or the Boston Stock Exchange, Inc. and notwithstanding anything in
this Agreement to the contrary, so long as this Agreement is in effect, none of
Parent, Sub, the Shareholders or the Company shall, or shall permit any of their
Subsidiaries, if applicable, to issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by this Agreement
without the consent of the other party.
6.15 Lock-Up. Each Shareholder covenants and agrees that in the event of
a private or public offering of Parent Common Stock following the Closing, such
Shareholder shall be subject to the same restrictions on transferability or
lock-up of shares of Parent Common Stock as the underwriter of any such offering
or any executive officer of Parent shall require of the executive officers of
Parent. In addition, each Shareholder agrees that for a period beginning on the
Closing Date and ending one (1) year therefrom, he will not, directly or
indirectly, (a) sell, offer to sell, contract to sell,
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grant any option to sell, any shares of Parent Common Stock received hereunder
or securities convertible into or exchangeable for shares of Parent Common
Stock; (b) propose, or publicly disclose an intent to propose, any of the
foregoing; or (c) assist or advise any other persons or entities in connection
with the foregoing. Notwithstanding the above, this prohibition shall not apply
to (i) sales by the estate of any Shareholder upon the death of a Shareholder
but only to the extent of estate tax liability related to the transfer of the
shares upon the death of the Shareholder, and (ii) sales upon the exercise of
piggy-back registration rights, if and only if, current shareholders of Parent
other than ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, who are officers of directors of Parent, participate
in any such public offering, subject to the restrictions included in the
Registration Rights Agreement.
6.16 Completion of Audit. The Shareholders covenant and agree to use
reasonable efforts to cause the independent auditors of the Company to complete
their audit of the business, financial condition and results of operations of
the Company for fiscal years ending December 31, 1998 and December 31, 1999 as
soon as possible, but in no event later than March 31, 2000.
6.17 Letter Agreement. Each Shareholder covenants and agrees to execute
the Letter Agreement in the form attached as Exhibit G-1 hereto (the "Letter
-----------
Agreement").
6.18 Parent's Shareholder Consent. Parent acknowledges that it has
delivered to the Company an executed copy of the irrevocable agreement of
certain of Parent's shareholders to (i) approve the Merger, the issuance of
Parent Common Stock and the other transactions set forth in this agreement as
set forth on Exhibit G-2 hereto ("Parent's Shareholder Consent"). Parent
-----------
represents and warrants that each person signing Parent's Shareholder Consent
has full power and authority, if an entity, and full power and capacity, if an
individual, to execute and deliver Parent's Shareholder Consent and that such
Parent's Shareholder Consent has been duly and validly executed and delivered
constitutes a valid and binding obligation of the parties executing Parent's
Shareholder Consent.
6.19 Releases. Prior to the Closing, the Shareholders shall have received
releases from (i) those lessors and lenders set forth on Schedule 6.19 hereto
-------------
and (ii) from the Company.
6.20 Indemnification.
(a) From and after the Effective Time, the Surviving Corporation
shall provide exculpation and indemnification for each person who is now or who
becomes prior to the Effective Time, an officer, employee or director of the
Company (the "Company Indemnified Parties") which is the same as the exculpation
and indemnification provided to the Company Indemnified Parties by the Company
immediately prior to the Effective Time in their respective articles of
incorporation and bylaws or other organizational documents, as in effect on the
date hereof; provided, that such exculpation and indemnification covers actions
not to exceed six (6) years prior to
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the Effective Time, including all transactions contemplated by this Agreement
and such obligation shall only continue for a period of six (6) years from the
Effective Time.
(b) In addition, for a period of six (6) years from the Effective
Time, to the rights provided in Section 6.20(a) above, in the event of any
threatened or actual claim, action, suit, proceeding or investigation, whether
civil, criminal or administrative, including without limitation, any action by
or on behalf of any or all Shareholders of Parent, or any Subsidiary of Parent,
or by or in the right of the Company, Parent or the Surviving Corporation, or
any Subsidiary of any of them, or any claim, action, suit, proceeding or
investigation (collectively, "Section 6.20 Claims") in which any Company
Indemnified Party is, or is threatened to be, made a party based in whole or in
part on, or arising in whole or in part out of, or pertaining to (i) the fact
that he is or was an officer, employee or director of the Company or any action
or omission or alleged action or omission by such Person in his capacity as an
officer, employee or director, or (ii) this Agreement or the transactions
contemplated by this Agreement, whether in any case asserted or arising before
or after the Effective Time, Parent and the Surviving Corporation (the "Company
Indemnifying Parties") shall from and after the Effective Time jointly and
severally indemnify and hold harmless the Company Indemnified Parties from and
against any losses, claims, liabilities, expenses (including reasonable
attorneys' fees and expenses), judgments, fines or amounts paid in settlement
arising out of or relating to any such Section 6.20 Claims. Parent, the
Surviving Corporation and the Company Indemnified Parties hereby agree to use
their reasonable best efforts to cooperate in the defense of such Section 6.20
Claims. In connection with any such Section 6.20 Claim, the Company Indemnified
Parties shall have the right to select and retain one counsel, at the cost of
the Company Indemnifying Parties, subject to the consent of the Company
Indemnifying Parties (which consent shall not be unreasonably withheld or
delayed). In addition, after the Effective Time, in the event of any such
threatened or actual Section 6.20 Claim, the Company Indemnifying Parties shall
promptly pay and advance reasonable expenses and costs incurred by each
Indemnified Person as they become due and payable in advance of the final
disposition of the Section 6.20 Claim to the fullest extent and in the manner
permitted by law. Notwithstanding the foregoing, the Company Indemnifying
Parties shall not be obligated to advance any expenses or costs prior to receipt
of an undertaking by or on behalf of the Company Indemnified Party, such
undertaking to be accepted without regard to the creditworthiness of the Company
Indemnified Party, to repay any expenses advanced if it shall ultimately be
determined that the Company Indemnified Party is not entitled to be indemnified
against such expense. Notwithstanding anything to the contrary set forth in this
Agreement, the Company Indemnifying Parties (i) shall not be liable for any
settlement effected without their prior written consent (which consent shall not
be unreasonably withheld or delayed), and (ii) shall not have any obligation
hereunder to any Company Indemnified Party to the extent that a court of
competent jurisdiction shall determine in a final and non-appealable order that
such indemnification is prohibited by applicable law. In the event of a final
and non-appealable determination by a court that any payment of expenses is
prohibited by applicable law, the Company Indemnified Party shall promptly
refund to the Company Indemnifying Parties the amount of all such expenses
theretofore advanced pursuant hereto. Any Company Indemnified Party wishing to
claim indemnification under this Section 6.20, upon learning of any such
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Section 6.20 Claim, shall promptly notify the Company Indemnifying Parties of
such Section 6.20 Claim and the relevant facts and circumstances with respect
thereto; provided however, that the failure to provide such notice shall not
affect the obligations of the Company Indemnifying Parties except to the extent
such failure to notify materially prejudices the Company Indemnifying Parties'
ability to defend such Section 6.20 Claim; and provided, further, however, that
no Company Indemnified Party shall be obligated to provide any notification
pursuant to this Section 6.20 prior to the Effective Time .
(c) At or prior to the Effective Time, Buyer shall provide evidence
of directors' and officers' liability insurance policy coverage naming the
Company, the Surviving Corporations and the Company's Subsidiary's directors and
officers as parties with at least $3,000,000 of coverage for a period of six (6)
years which will provide the directors and officers with coverage on
substantially similar terms as currently provided by Parent to its directors and
officers. At or prior to the Effective Time, Seller shall have the right to
reasonably review and approve any such policy, which approval shall not be
unreasonably withheld.
(d) This Section 6.20 is intended for the irrevocable benefit of, and
to grant third-party rights to, the Company Indemnified Parties and their
successors, assigns and heirs and shall be binding on all successors and assigns
of Parent and Buyer, including the Surviving Corporation. Each of the Company
Indemnified Parties shall be entitled to enforce the covenants contained in this
Section 6.20 and Parent and the Surviving Corporation acknowledge and agree that
each Company Indemnified Party would suffer irreparable harm and that no
adequate remedy at law exists for a breach of such covenants and such Company
Indemnified Party shall be entitled to injunctive relief and specific
performance in the event of any breach of any provision in this Section 6.20.
(e) In the event that the Surviving Corporation or any of its
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, the successors
and assigns of such entity shall assume the obligations set forth in this
Section 6.20, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director and officer covered
hereby.
ARTICLE VII
CONDITIONS PRECEDENT
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
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(a) Regulatory Approvals. All necessary approvals, authorizations
and consents of all Governmental Entities required to consummate the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof shall
have expired or been terminated (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(b) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger or any of the other transactions contemplated by this Agreement shall be
in effect and no proceeding initiated by any Governmental Entity seeking an
injunction shall be pending. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation of
the Merger, or any of the other transactions contemplated by this Agreement.
7.02 Conditions to Obligations of Parent and Sub. The obligation of Parent
and Sub to effect the Merger is also subject to the satisfaction or waiver by
Parent or Sub, at or prior to the Effective Time, of the following conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the shareholders of
Parent.
(b) Representations and Warranties. The representations and
warranties of the Company and the Shareholders set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date. Parent shall receive at Closing a certificate signed on behalf of the
Company by an authorized officer to the foregoing effect.
(c) Performance of Obligations of the Company and the Shareholders.
The Company and the Shareholders shall have performed all obligations required
to be performed by it under this Agreement at or prior to the Closing Date, and
Parent shall receive at Closing a certificate signed on behalf of the Company by
an authorized officer to such effect.
(d) Consents Under Agreements. The consent, approval, waiver or
amendment of each person (other than the Governmental Entities referred to in
Section 7.01(a)) set forth on Schedule 3.03 and Schedule 3.04 hereto shall have
------------- -------------
been obtained and shall be reasonably satisfactory to Parent.
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(e) List of Employees. The Company shall have delivered to Parent a
list of employees who will become employees of Parent or the surviving
corporation immediately following the Closing.
(f) Stock Option List. The Company shall have delivered to Parent a
list containing the holders of Company Non-Accelerated Options together with the
number of such options.
(g) FIRPTA. The Company shall have delivered to Parent and Sub an
affidavit, dated as of the Effective Date, pursuant to Sections 897 and 1445 of
the Code in substantially the form set forth in Exhibit H hereto.
---------
(h) Dissenters' Rights. The Common Stock Holders of the Company
shall not have any right to exercise dissenters', appraisal or similar rights
under the IBCA by virtue of the Merger.
(i) Opinion of Counsel for Company and the Shareholders. The Parent
and Sub shall have received an Opinion of Counsel of the Company and the
Shareholders in form and substance reasonably acceptable to the parties.
(j) Authorization to Conduct Business. The Company shall have been
licensed, qualified or authorized to conduct business in all jurisdictions in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary and shall have satisfied and paid all expenses, taxes,
assessments, fines, penalties and other payments to such jurisdictions in
connection therewith.
(k) Termination of Stockholders' Agreement. The Company and the
Common Stock Holders shall have entered into a Termination Agreement pursuant to
which they shall affirmatively terminate the Shareholders' Agreement dated July
5, 1995 and all amendments thereto.
(l) Termination or Amendment of ▇▇▇▇▇▇ Agreement. The Company and
▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") shall have terminated or amended the Employment Letter
Agreement dated as of September 10, 1999 to provide that ▇▇▇▇▇▇ shall receive
70% of any revenue in excess of $225,000 that is earned by the Company and
attributable to ▇▇▇▇▇▇'▇ efforts during the fiscal year ending December 31,
2000.
(m) Escrow Agreement. The Company, Parent, Sub, Shareholders and the
Escrow Agent shall each have executed and delivered the Escrow Agreement in the
form substantially as attached as Exhibit B subject to such revisions as may be
---------
requested by the Escrow Agent and that are reasonably acceptable to the parties.
(n) Tax Calculation. The Company shall have submitted to Parent a
calculation of income tax payable by the Common Stock Holders attributable to
their
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ownership of Company Common Stock in form and substance reasonably satisfactory
to Parent ("Tax Calculation").
7.03 Conditions to Obligations of the Company. The obligations of the
Company to effect the Merger is also subject to the satisfaction, or waiver by
the Company, at or prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except
with respect to the representation in Section 4.10 which shall be true as of the
date of the Agreement and except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date. The Company shall receive at Closing a certificate
signed on behalf of Parent and Sub by an authorized officer of each company to
the foregoing effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have each performed all obligations required to be performed by them under
this Agreement at or prior to the Closing Date, and the Company shall receive at
Closing a certificate signed on behalf of Parent and Sub by an authorized
officer of each company to such effect.
(c) Promissory Notes. Parent shall have executed and delivered to
each Shareholder a Note.
(d) Opinion of Counsel for the Parent and Sub. The Company shall
have received an opinion of counsel of Parent and Sub in form and substance
reasonably acceptable to the parties.
(e) Payment of Non-Escrowed Portion of Merger Consideration. Parent
shall have paid each Shareholder such Shareholder's pro rata portion of the non-
--------
escrowed Merger Consideration.
(f) Menell Resignation. Parent shall have caused ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to
resign from his position as a member of the Board of Directors of Parent.
(g) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the shareholders of
the Company.
(h) Board of Directors of Sub and Parent. Either ▇▇▇ ▇▇▇▇▇▇▇▇ or a
nominee of the Shareholders shall be elected to the board of directors of Sub
and Parent.
(i) Employment Agreements. Parent shall have entered into Employment
Agreements with each of ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ in the form
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attached as Exhibit C-2 hereto and shall have issued employment letters with the
-----------
persons and providing the salaries and titles set forth on Exhibit C-3 hereto.
-----------
(j) Tax Free Reorganization. The Company shall be reasonably
satisfied that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code and each of the parties to this Agreement shall be a
party to such reorganization and therefore, for federal income tax purposes, the
Shareholders shall recognize no income, gain or loss upon the Merger except to
the extent of any cash consideration actually received or deemed received.
(k) Escrow Agreement. The Company, Parent, Sub, Shareholders and the
Escrow Agent shall each have executed and delivered the Escrow Agreement in the
form substantially as attached as Exhibit B subject to such revisions as may be
requested by the Escrow Agent and that are reasonably acceptable to the parties.
(l) Tax Calculation. The Company shall have submitted to Parent the
Tax Calculation in form and substance reasonably satisfactory to Parent.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.01 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual consent of Parent and the Company in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Parent or the Company (provided, however, that the
right to terminate this Agreement under this clause shall not be available to
any party whose failure to fulfill any of its obligations under this Agreement
has been the cause of or resulted in the failure of the Closing to occur) if
there shall have been a material breach of any of the representations,
warranties, covenants or agreements set forth in this Agreement on the part of
the other party; or
(c) by either Parent or the Company if the Closing shall not have
occurred by July 1, 2000, which date may be increased by an additional 30 days
at the request of Parent, if the Closing is delayed solely because any Requisite
Regulatory Approval or approval by the shareholders of Parent has not been
obtained due to issues relating to information in the Proxy Statement supplied
by or regarding the Company (including its financial statements) and Parent is
diligently undertaking such efforts required to obtain the same.
8.02 Effect of Termination. In the event of termination of this Agreement
by either Parent or the Company as provided in Section 8.01, each of this
Agreement and
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that letter agreement between Parent and the Company dated January 12, 2000
shall forthwith become void and have no effect except Section 5.02 shall survive
any termination of this Agreement, and there shall be no further obligation on
the part of Parent, Sub, the Company, or their respective officers or directors
or the Shareholders except for the obligations under such provisions.
Notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of its
intentional breach of any provision of this Agreement. Notwithstanding the
foregoing sentence, should this Agreement be terminated by the Company pursuant
to Section 8.01(c) hereof solely because a meeting of shareholders was held and
the matters were not approved at the Meeting (and not by virtue of any other
default under this Agreement or failure by the Company to satisfy any other
representation, warranty, condition or covenant hereunder), the Parent shall pay
the Company, within two (2) business days of such termination, the amount equal
to the Company's Transaction Costs (subject to reasonable documentation).
8.03 Expenses. If the transactions contemplated by this Agreement do not
close, each party shall bear its own costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, regardless of
whether or not the Merger is consummated.
8.04 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors. Notwithstanding the foregoing, non-material
amendments to this Agreement may be made without the authorization of the
respective Boards of Directors of the parties hereto. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.05 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver shall nor operate as a waiver of, or estoppel with respect
to, any subsequent or other failure.
ARTICLE IX
INDEMNIFICATION
9.01 Agreement to Indemnify. Following the Closing and subject to the
limitations set forth herein,
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(a) the Company and each Shareholder, jointly and severally, shall
indemnify and agree to defend and hold harmless Parent and the Surviving
Corporation (and their respective affiliates, officers, directors, employees,
representatives and agents) ("Purchaser Indemnities" and, singularly, a
"Purchaser Indemnitee") against and in respect of any and all Damages, by reason
of or otherwise arising out of a breach by the Company of a representation,
warranty or covenant contained in this Agreement. "Damages" shall include,
reasonable attorneys' fees and disbursements, reasonable accountants' fees and
disbursements, costs of litigation and other expenses incurred by them (or their
respective affiliates, officers, directors or employees) in the defense of any
claim asserted against them (or their respective affiliates, officers, directors
or employees) and any amounts paid in settlement or compromise of any claim
asserted against them to the extent that the claim asserted is or would have
been subject to the indemnification provisions hereof, subject to the
limitations on indemnification set forth in Sections 9.02 and 9.03. "Damages"
shall not include any amount for which reimbursement is received by Parent, the
Surviving Corporation or the Company, as the case may be, pursuant to insurance
policies or third-party payments by virtue of indemnification or subrogation
received by such party which the Parent, the Company and the Surviving
Corporation shall use their best efforts to pursue.
(b) Parent shall indemnify and agrees to defend and hold harmless the
Shareholders (and their respective affiliates, representatives and agents)
against and in respect of any and all Damages by reason of or otherwise arising
out of a breach by Parent or Sub of a representation, warranty or covenant
contained in this Agreement.
9.02 Survival of Indemnity. The indemnification obligations of each
indemnifying party pursuant to Section 9.01 shall survive the Closing for a
period of twelve (12) months, except for Damages arising out of a breach of any
of the representations or warranties in either Section 3.08 or Section 3.13,
which shall survive for three (3) years. Upon expiration of such periods, no
indemnifying party shall have any liability for Damages under such
indemnification obligations unless it has received written notice from an
indemnified party claiming indemnification prior to the expiration of the
applicable period as required.
9.03 Additional Provisions.
(a) Limitations on Indemnified Amounts of the Company and the
Shareholders. Except as otherwise provided herein, the Company and the
Shareholders shall not have any obligation to indemnify any parties under this
Article IX until the Company's and the Shareholders' aggregate indemnity
obligations shall exceed $250,000.00, whereupon such parties shall be entitled
to receive Damages from the first dollar; provided, however, that in no event
-------- -------
shall the Company's and the Shareholders' aggregate indemnity obligations exceed
the value of the Merger Consideration less the difference, if any, between the
value of the Parent Common Stock at Closing and the value of the Parent Common
Stock at the time a Claim is made. The liability of the Company and the
Shareholders collectively for indemnification under this Article IX by
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reason of or arising out of any breach by the Company or any Shareholder of any
covenant or of any representation or warranty shall not be modified, waived or
diminished by any examination or investigation conducted by Parent of the books,
records or operations of the Company.
(b) Limitations on Indemnified Amounts of Parent. Parent shall have
no obligation to indemnify the Company under this Article IX until the
indemnified parties' aggregate indemnity obligations shall exceed $250,000.00,
whereupon such parties shall be entitled to receive Damages from the first
dollar; provided, however, that in no event shall Parent's aggregate indemnity
-------- -------
obligations exceed the value of the Merger Consideration less the difference, if
any, between the value of the Parent Common Stock issued hereunder at Closing
and the value of the Parent Common Stock at the time a Claim is made. The
liability of Parent for indemnification under this Article IX by reason of or
arising out of any breach by Parent or Sub of any covenant or of any
representation or warranty shall not be modified, waived or diminished by any
examination or investigation conducted by the Company of the books, records or
operations of Parent and Sub. The Company and the Shareholders shall have no
obligations to indemnify the Purchaser Indemnities with respect to punitive
damages or to the extent that the matter in question was taken into account in
full in the computation of the Merger Consideration pursuant to Section 2.02 or
2.03.
(c) No Limitation in Event of Fraud. Notwithstanding any other
provision hereof, nothing in this Article IX (including the provisions of
paragraphs (a) and (b) of this Section 9.03) or otherwise shall limit, in any
manner, any remedy at law or equity, to which any party may be entitled as a
result of fraud by any indemnifying party or its employees, officers or
directors or a violation of the federal securities laws.
(d) Exclusivity of Remedy; Survival of Covenants. Following the
Closing, except in respect of claims based upon fraud or violation of the
federal securities laws, the indemnification accorded by this Section shall be
the sole and exclusive remedy of the parties indemnified under this Article IX
in respect of any misrepresentation or inaccuracy in, or breach of, any
representation or warranty or any breach or failure in performance of any
covenant or agreement made in this Agreement or in any document or certificate
delivered pursuant hereto. Notwithstanding the foregoing, in the event of any
breach or failure in performance after the Closing of any covenant or agreement,
a non-breaching party shall also be entitled to seek specific performance,
injunctive or other equitable relief. The covenants of any party shall
terminate according to the terms of such covenant and the expiration of the
applicable statutes of limitations.
(e) Subrogation. Upon making any payment to an indemnified party for
any indemnification claim pursuant to this Article IX, an indemnifying party
shall be subrogated, to the extent of such payment, to any rights that the
indemnified party may have against any other persons with respect to the subject
matter underlying such indemnification claim and the indemnified party shall
take such actions as the indemnifying party may reasonably require to perfect
such subrogation or to pursue such rights against such other persons as the
indemnified party may have.
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(f) Parent's Right of Set-Off. Upon written notice to the Company or
the Shareholders specifying in detail its good faith justification therefor, for
a period of one (1) year from the Closing Date, Parent may set off the amount of
any Damages for which the Company or the Shareholders are liable under Section
9.01 against the Escrowed Consideration. Neither the exercise of nor the
failure to exercise such right of set-off shall constitute an election of
remedies nor limit Parent or Sub in any manner in the enforcement of any other
remedies that may be available to it. Notwithstanding the prior sentence, the
Shareholders may at its option through a notice by the Shareholders'
Representative to Parent within ten (10) days of the final determination of any
Damages, satisfy the payment of any Damages through the payment of cash in lieu
of Parent Common Stock.
9.04 Third Party Claim Procedures.
(a) Definitions. The term "Indemnified Party" shall mean a party (or
its successor) who is entitled to indemnification from a party hereto pursuant
to this Article IX; The term "Indemnifying Party" shall mean a party (or its
successor) hereto who is required to provide indemnification under this Article
IX to another party; and the term "Third Party Claim" shall mean any claim,
action, suit, proceeding, investigation or like matter which is asserted or
threatened by a party other than the parties hereto, their successors and
permitted assigns, against any Indemnified Party or to which any Indemnified
Party is subject.
(b) Procedure. Within thirty (30) days following the receipt of
notice of a Third Party Claim, and in any event within the period necessary to
respond to such pleading, if applicable, the party receiving the notice of the
Third Party Claim shall (i) notify the other party of its existence setting
forth with reasonable specificity the facts and circumstances of which such
party has received notice, and (ii) if the party giving such notice is an
Indemnified Party, specifying the basis hereunder upon which the Indemnified
Party's claim for indemnification is asserted. The failure to deliver the
notice described in the preceding sentence within the time frame required shall
not relieve any party hereto of any liability under this Agreement unless such
party is materially damaged by the failure to deliver such notice to such party
within such time period. The Indemnified Party may, upon reasonable notice,
tender the exclusive defense of a Third Party Claim (subject to the provisions
of this Section 9.04(b) to the Indemnifying Party. If (i) the defense of a
Third Party Claim is so tendered and within thirty (30) days thereafter such
tender is accepted without qualification (or reservation of rights) by the
Indemnifying Party; or (ii) within thirty (30) days after the date on which
written notice of a Third Party Claim has been given pursuant to this Section
9.04(b), the Indemnifying Party shall acknowledge in writing to the Indemnified
Party and without qualification (or reservation of rights) its indemnification
obligations as provided in this Article IX; then, except as hereinafter
provided, the Indemnified Party shall not, and the Indemnifying Party shall,
have the right to contest, defend, litigate or settle such Third Party Claim.
The Indemnified Party shall have the right to be represented by counsel at its
own expense in any such contest, defense, litigation or settlement conducted by
the
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Indemnifying Party provided that the Indemnified Party shall be entitled to
reimbursement therefor if the Indemnifying Party shall lose its right to
contest, defend, litigate and settle the Third Party Claim as herein provided.
The Indemnifying Party shall lose its right to defend and settle the Third Party
Claim if it shall fail to diligently contest the Third Party Claim. So long as
the Indemnifying Party has not lost its right and/or obligation to contest,
defend, litigate and settle as herein provided, the Indemnifying Party shall
have the exclusive right to contest, defend and litigate the Third Party Claim
and shall have the right, upon receiving the prior written approval of the
Indemnified Party (which shall not be unreasonably withheld unless such
settlement does not fulfill the conditions set forth in the following sentence
and which shall be deemed automatically given if a response has not been
received within the ten (10) day period following a request for such consent),
to settle any such matter, either before or after the initiation of litigation,
at such time and upon such terms as it deems fair and reasonable.
Notwithstanding anything to the contrary herein contained, in connection with
any settlement negotiated by an Indemnifying Party, no Indemnified Party or
Indemnifying Party (as the case may be) that is not controlling the defense and
or settlement of the Third Party Claim (the "Non-Control Party") shall be
required by an Indemnifying Party or Indemnified Party controlling the
litigation to (and no such party shall) (x) enter into any settlement that does
not include as an unconditional term thereof the delivery by the claimant or
plaintiff to the Non-Control Party of a release from all liability in respect of
such claim or litigation, (y) enter into any settlement that attributes by its
terms liability to the Non-Control Party or which may otherwise have an adverse
effect on the Indemnified Party's business, or (z) consent to the entry of any
judgment that does not include as a term thereof a full dismissal of the
litigation or proceeding with prejudice. All expenses (including attorneys'
fees) incurred by the Indemnifying Party in connection with the foregoing shall
be paid by the Indemnifying Party. No failure by an Indemnifying Party to
acknowledge in writing its indemnification obligations under this Article IX
shall relieve it of such obligations to the extent they exist. If an Indemnified
Party is entitled to indemnification against a Third Party Claim, and the
Indemnifying Party fails to accept a tender of, or assume, the defense of a
Third Party Claim pursuant to this Section IX, or if, in accordance with the
foregoing, the Indemnifying Party does not have the right or shall lose its
right to contest, defend, litigate and settle such a Third Party Claim, the
Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may, upon receiving prior written approval of the Indemnifying Party (which
shall not be unreasonably withheld unless such settlement may have an adverse
effect on the Business and which shall be deemed automatically given if a
response has not been received within the ten (10) day period following a
request for such consent), settle such Third Party Claim, either before or after
the initiation of litigation, at such time and upon such terms as the
Indemnified Party deems fair and reasonable, provided that at least ten (10)
days prior to any such settlement, written notice of its intention to settle is
given to the Indemnifying Party. If, pursuant to this Section 9.04(b), the
Indemnified Party so contests, defends, litigates or settles a Third Party
Claim, for which it is entitled to indemnification hereunder as provided herein,
the Indemnified Party shall be reimbursed by the Indemnifying Party for the
reasonable attorneys' fees and other expenses of defending,
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contesting, litigating and/or settling the Third Party Claim which are incurred
from time to time, forthwith following the presentation to the Indemnifying
Party of itemized bills for said attorneys' fees and other expenses. The
Indemnified Party or the Indemnifying Party, as the case may be, shall furnish
such information in reasonable detail as it may have with respect to a Third
Party Claim (including copies of any summons, complaint or other pleading which
may have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) to the other party
if such other party is assuming defense of such claim, and make available all
records and other similar materials which are reasonably required in the defense
of such Third Party Claim and shall otherwise cooperate with and assist the
defending party in the defense of such Third Party Claim.
ARTICLE X
SHAREHOLDERS' REPRESENTATIVE
10.01 Appointment of Shareholders' Representative.. The initial
Shareholders' Representative shall be ▇▇▇ ▇▇▇▇▇▇▇▇ (the "Shareholders'
-------------
Representative"). The Shareholders' Representative shall be the attorney-in-
--------------
fact and agent of Shareholders. The foregoing power is irrevocable and coupled
with an interest, and shall not be affected by the death, incapacity, illness,
dissolution or other inability to act of any of the Shareholders.
10.02 Authority. Each Shareholder hereby grants the Shareholders'
Representative full power and authority:
(a) to execute and deliver, on behalf of such Shareholder, and to
accept delivery of, on behalf of such Shareholder, such documents as may be
deemed by the Shareholders' Representative, in his sole discretion, to be
appropriate to consummate this Agreement;
(b) to certify, on behalf of such Shareholder, as to the accuracy
of the representations and warranties of such Shareholder under, or pursuant to
the terms of, this Agreement;
(c) to, (i) dispute or refrain from disputing, on behalf of such
Shareholder, any claim made by Parent or the Surviving Corporation under this
Agreement; (ii) negotiate and compromise, on behalf of such Shareholder or
holder of Accelerated Company Options, any dispute that may arise under, and to
exercise or refrain from exercising any remedies available under this Agreement,
and (iii) execute, on behalf of such Shareholder or holder of Accelerated
Company Options, any settlement agreement, release or other document with
respect to such dispute or remedy;
(d) to give or agree to, on behalf of such Shareholder or holder of
Accelerated Company Options, any and all consents, waivers, amendments or
modifications, deemed by the Shareholders' Representative, in his sole
discretion, to be
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necessary or appropriate, under this Agreement, and, in each case, to execute
and deliver any documents that may be necessary or appropriate in connection
therewith;
(e) to enforce, on behalf of such Shareholder, any claim against
Parent, Sub or the Surviving Corporation arising under this Agreement;
(f) to engage attorneys, accountants and agents at the expense
of Shareholders and holders of Accelerated Company Options; and
(g) to give such instructions and to take such action or refrain
from taking such action, on behalf of such Shareholders and holders of
Accelerated Company Options, as the Shareholders' Representative deems, in their
sole discretion, necessary or appropriate to carry out the provisions of this
Agreement.
10.03 Reliance. Each Shareholder hereby agrees that: (a) in all matters
in which action by the Shareholders' Representative are required or permitted,
the Shareholders' Representative is authorized to act on behalf of such
Shareholder, notwithstanding any dispute or disagreement among Shareholders or
between any Shareholder and the Shareholders' Representative, and Parent, Sub
and the Surviving Corporation shall be entitled to rely on any and all action
taken by the Shareholders' Representative, under this Agreement without any
liability to, or obligation to inquire of, any of the Shareholders
notwithstanding any knowledge on the part of the Purchaser of any such dispute
or disagreement; (b) the power and authority of the Shareholders'
Representative, as described in this Agreement, shall be effective until all
rights and obligations of Shareholders under this Agreement have terminated,
expired or been fully performed; and (c) if the Shareholders' Representative
resigns or otherwise ceases to function in his or her capacity as such for any
reason whatsoever, a majority of the Shareholders shall have the right,
exercisable upon written notice delivered to Purchaser to appoint another
individual to serve as a new Shareholders' Representative to fill the vacancy
caused by the circumstance described above.
10.04 Indemnification of Parent, Sub and Their Affiliates. Shareholders
jointly and severally, shall indemnify the Purchaser Indemnities against, and
agree to hold the Purchaser Indemnities harmless from, any and all Damages
incurred or suffered by any Purchaser Indemnitee arising out of, with respect to
or incident to the operation of, or any breach of any covenant or agreement
pursuant to, this Article X by a Shareholder or a Shareholders' Representative,
or the designation, appointment and actions of the Shareholders' Representative
pursuant to the provisions hereof, including with respect to (i) actions taken
by the Shareholders' Representative, and (ii) reliance in good faith by any
Purchaser Indemnitee on, and actions in good faith taken by any Purchaser
Indemnitee in response to or in reliance on, the instructions of, notice given
by or any other action taken by the Shareholders' Representative.
10.05 Indemnification of Shareholders' Representative. Each Shareholder
shall severally indemnify and hold the Shareholders' Representative harmless
from and against any Damages (except as result from such Person's gross
negligence or willful
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misconduct) that such Person may suffer or incur in connection with any action
taken by such Person as the Shareholders' Representative. Each Shareholder shall
bear its pro-rata portion of such Damages. No Shareholders' Representative shall
be liable to any Shareholder with respect to any action or omission taken or
omitted to be taken by the Shareholders' Representative pursuant to this Article
X, except for such person's gross negligence or willful misconduct. No
Shareholders' Representative shall be responsible in any manner whatsoever for
any failure or inability of Parent or Sub, or of anyone else, to honor any of
the provisions of this Agreement. The Shareholders' Representative shall be
fully protected by Shareholders in acting on and relying upon any written
notice, direction, request, waiver, notice, consent, receipt or other paper or
document which they in good faith believe to be genuine and to have been signed
or presented by the proper party or parties. The Shareholders' Representative
shall not be liable to the Shareholders for any error of judgment, or any act
done or step taken or omitted by any of them in good faith or for any mistake in
fact or law, or for anything which any of them may do or refrain from doing in
connection herewith, except for their own bad faith, willful misconduct or gross
negligence. The Shareholders' Representative may seek the advice of legal
counsel, engage experts or otherwise incur reasonable expenses in the event of
any dispute or question as to the construction of any of the provisions of this
Agreement or their duties hereunder, and they shall incur no liability to
Shareholders with respect to any action taken, omitted or suffered by them in
good faith in accordance with the opinion of such counsel. The Shareholders
shall severally hold the Shareholders' Representative harmless from and against
any and all such expenses, and, in addition to any and all other remedies
available, the Shareholders' Representative shall have the right to set-off
against any amounts due to the Shareholders.
ARTICLE XI
GENERAL PROVISIONS
11.01 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or telecopied (with
confirmation from recipient) provided that a copy of all telecopies is sent by
one of the other delivery methods set forth in this Section 11.01 within one (1)
day of being telecopied, three (3) days after mailed by registered or certified
mail (return receipt requested) or on the day delivered by an express courier
(with confirmation from recipient) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
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(a) if to Parent or Sub, to:
Perficient, Inc.
▇▇▇▇-▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Del Deo, Dolan, Griffinger & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Compete Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Altheimer & ▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
10.02 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
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11.03 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
11.04 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
11.05 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law principles thereof.
11.06 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in Sections 5.02
or 6.04 of this Agreement were not performed in accordance with its specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of
Sections 5.02 or 6.04 of this Agreement and to enforce specifically the terms
and provisions thereof in any court of the United States or any court located in
the State of New York, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.07 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is deemed to be so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.
11.08 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
PERFICIENT, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
PERFICIENT COMPETE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
COMPETE INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
SHAREHOLDERS
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, individually
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, individually
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