Exhibit 2.1
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STOCK PURCHASE AGREEMENT
by and between
IM ACQUISITION, INC.,
a Delaware corporation,
and
EDGEWATER TECHNOLOGY, INC.,
a Delaware corporation
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Dated as of November 16, 2000
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Section 1. Sale and Purchase of the Acquired Stock.................................................... 1
1.1 Sale and Purchase of the Acquired Stock...................................................... 1
1.2 Purchase Price............................................................................... 1
1.3 Payment of the Purchase Price................................................................ 1
1.4 Post-Closing Adjustment To The Purchase Price................................................ 2
Section 2. Closing.................................................................................... 3
2.1 General...................................................................................... 3
2.2 Closing Transactions......................................................................... 3
Section 3. Representations and Warranties of Seller................................................... 3
3.1 Organization and Corporate Power............................................................. 3
3.2 Authorization of Transactions................................................................ 4
3.3 Capitalization............................................................................... 4
3.4 Absence of Conflicts......................................................................... 5
3.5 Financial Statements and Related Matters..................................................... 5
3.6 Absence of Certain Developments.............................................................. 5
3.7 Taxes........................................................................................ 6
3.8 Proprietary Rights........................................................................... 8
3.9 Litigation; Proceedings...................................................................... 9
3.10 Brokers...................................................................................... 10
3.11 Governmental Licenses and Permits............................................................ 10
3.12 Employees.................................................................................... 10
3.13 Employee Benefit Matters..................................................................... 10
3.14 Insurance.................................................................................... 12
3.15 Officers and Directors; Bank Accounts........................................................ 13
3.16 Compliance with Laws......................................................................... 13
3.17 Environmental Matters........................................................................ 13
3.18 Contracts.................................................................................... 14
3.19 Assets....................................................................................... 15
3.20 No Undisclosed Liabilities................................................................... 15
3.21 Real Estate.................................................................................. 15
3.22 Customers and Suppliers...................................................................... 16
3.23 Indebtedness and Guarantees.................................................................. 16
3.24 Books and Records........................................................................... 16
3.25 Conduct During Prior Exclusivity Period..................................................... 16
3.26 Transactions with Affiliates................................................................ 16
3.27 Consents.................................................................................... 16
3.28 No Illegal Payments......................................................................... 16
Section 4. Representations and Warranties of Purchaser............................................... 17
4.1 Organization and Corporate Power............................................................ 17
4.2 Authorization of Transaction................................................................ 17
4.3 No Violation................................................................................ 17
4.4 Governmental Authorities and Consents....................................................... 17
4.5 Litigation.................................................................................. 17
4.6 Brokers..................................................................................... 18
4.7 Access; Accredited Investor Status.......................................................... 18
4.8 Funds....................................................................................... 18
4.9 Beneficial Ownership of Seller Common Stock; Acquisition of Acquired Stock.................. 18
Section 5. Pre-Closing Covenants of Seller........................................................... 18
5.1 Affirmative Covenants of Seller............................................................. 18
5.2 Negative Covenants of Seller................................................................ 20
5.3 Access...................................................................................... 21
5.4 Conditions.................................................................................. 21
5.5 HSR Filing.................................................................................. 21
5.6 Non-Solicitation............................................................................ 21
5.7 Transfer of Certain Frozen Benefit Plans.................................................... 21
Section 6. Pre-Closing Covenants of Purchaser........................................................ 21
6.1 Covenants of Purchaser...................................................................... 21
6.2 Conditions.................................................................................. 22
6.3 HSR Filing.................................................................................. 22
Section 7. Conditions to Obligation of Purchaser to Close............................................ 22
7.1 Accuracy of Representations and Warranties.................................................. 22
7.2 Performance................................................................................. 22
7.3 Stockholder Approval........................................................................ 22
7.4 Required Approvals.......................................................................... 22
7.5 No Injunction............................................................................... 22
7.6 Audited Financial Statements................................................................ 23
7.7 Closing Deliverables........................................................................ 23
Section 8. Conditions to Obligation of Seller to Close............................................... 24
8.1 Accuracy of Representations and Warranties.................................................. 24
8.2 Performance................................................................................. 25
8.3 Stockholder Approval........................................................................ 25
8.4 Required Approvals.......................................................................... 25
8.5 No Injunction............................................................................... 25
8.6 Closing Deliverables........................................................................ 25
Section 9. Additional Covenants...................................................................... 26
9.1 Covenant of Seller Not to Compete; Nonsolicitation.......................................... 26
9.2 Confidentiality............................................................................. 27
9.3 Divisibility; Remedy for Breach............................................................. 27
9.4 Transfer of 401(k) Plans.................................................................... 27
9.5 Frozen Benefit Plans........................................................................ 28
9.6 Incentive Bonus Payments.................................................................... 28
9.7 Certain Real Estate Matters................................................................. 28
9.8 Certain Insurance Matters................................................................... 28
Section 10. Termination of Agreement.................................................................. 29
10.1 Right to Terminate Agreement................................................................ 29
10.2 Effect of Termination....................................................................... 30
Section 11. Indemnification Related Matters; Taxes.................................................... 30
11.1 Expiration of Representations, Warranties and Covenants..................................... 30
11.2 Indemnification; Tax Covenants.............................................................. 31
Section 12. Miscellaneous Provisions.................................................................. 36
12.1 Time of Essence............................................................................. 36
12.2 Compliance with Laws........................................................................ 37
12.3 Further Assurances.......................................................................... 37
12.4 Publicity................................................................................... 37
12.5 Access of Seller to Books and Records....................................................... 37
12.6 Expenses.................................................................................... 37
12.7 Governing Law............................................................................... 37
12.8 Notices..................................................................................... 37
12.9 Table of Contents and Headings.............................................................. 38
12.10 Succession and Assignment................................................................... 38
12.11 Parties in Interest......................................................................... 39
12.12 Severability................................................................................ 39
12.13 Entire Agreement............................................................................ 39
12.14 Waiver...................................................................................... 39
12.15 Amendments.................................................................................. 39
12.16 Interpretation of Agreement................................................................. 39
12.17 Counterparts................................................................................ 40
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of November
16, 2000, by and between IM Acquisition, Inc., a Delaware corporation
("Purchaser"), and Edgewater Technology, Inc., a Delaware corporation
("Seller"). Certain capitalized terms used in this Agreement are defined on
Exhibit A.
Recitals
A. Seller, through its subsidiaries listed on the "Acquired Companies
Schedule" attached hereto, is engaged in the Business (as defined in Section
9.1(a) hereof).
B. Seller owns directly or indirectly 100% of the issued and outstanding
Capital Stock of each of the companies listed on the Acquired Companies Schedule
(collectively, the "Acquired Companies").
C. Purchaser wishes to purchase directly or indirectly all of the Capital
Stock of the companies on the Acquired Companies Schedule, all of which Capital
Stock is owned directly or indirectly by Seller as set forth on the
"Organization Schedule" attached hereto (the "Acquired Stock"), from Seller on
the terms and subject to the conditions set forth in this Agreement, and Seller
wishes to sell to Purchaser on the terms and subject to the conditions set forth
in this Agreement all of the Acquired Stock.
Agreement
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, and covenants, which are to be made and performed
by the respective parties, Purchaser and Seller, intending to be bound, hereby
agree as follows:
Section 1. Sale and Purchase of the Acquired Stock
1.1 Sale and Purchase of the Acquired Stock. At the Closing, subject to
compliance with all of the terms and conditions of this Agreement and in
reliance on the representations and warranties set forth in this
Agreement, Seller shall sell to Purchaser, and Purchaser shall purchase
from Seller, all of the Acquired Stock in accordance with this Agreement.
1.2 Purchase Price. The purchase price payable by Purchaser for the Acquired
Stock (the "Purchase Price") shall be cash in an amount equal to the total
of (a) Forty-Six Million, One Hundred Fifty Thousand Dollars ($46,150,000)
minus (b) the August 31 Purchase Price Decrease Amount, if any, plus (c)
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the August 31 Purchase Price Increase Amount, if any; provided, however,
that the Purchase Price shall be adjusted as provided in Section 1.4.
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1.3 Payment of the Purchase Price. The Purchase Price shall be paid by
Purchaser to Seller on the Closing Date by wire transfer of immediately
available funds to an account or accounts to be designated by Seller.
1.4 Post-Closing Adjustment to the Purchase Price.
(a) If the Closing Date Purchase Price Adjustment Amount is less than
zero (0), then Seller shall owe the absolute value of such amount so
calculated to Purchaser, subject to Sections 1.4(b) and (c) below.
If the Closing Date Purchase Price Adjustment Amount is greater than
zero (0), then Purchaser shall owe such amount so calculated to
Seller, subject to Sections 1.4(b) and (c) below.
(b) Upon final determination of the Closing Date Purchase Price
Adjustment Amount, the party owing the Closing Date Purchase Price
Adjustment Amount shall, within five (5) business days, pay to the
other party in immediately available funds, the sum of (i) the
Closing Date Purchase Price Adjustment Amount, plus (ii) daily
interest accrued thereon at a rate of seven percent (7%) per annum
from the Closing Date.
(c) Purchaser shall prepare or cause to be prepared the Closing Date
Balance Sheet, with the expense to be borne by Purchaser. As
promptly as possible after the Closing and in any event within
seventy-five (75) days after the Closing Date, Purchaser shall
deliver to Seller the Closing Date Balance Sheet and a statement
detailing the calculation of the Closing Date Purchase Price
Adjustment Amount. Purchaser agrees to cooperate with Seller to
provide Seller and Seller's independent accountants with reasonable
access to: (i) all information (including but not limited to the
workpapers of Purchaser's independent accountants) used by Purchaser
to prepare the Closing Date Balance Sheet and the calculation of the
Closing Date Purchase Price Adjustment Amount; and (ii) as well as
information arising subsequent to the Closing Date Balance Sheet
that reasonably relates to the Closing Date Balance Sheet and the
Closing Date Purchase Price Adjustment Amount. On or before the date
that is seventy-five (75) days following the delivery of the Closing
Date Balance Sheet and the calculation of the Closing Date Purchase
Price Adjustment Amount by Purchaser to Seller, Seller may object to
the Closing Date Balance Sheet and/or the calculation of the Closing
Date Purchase Price Adjustment Amount by delivering a detailed
written statement to Purchaser describing its objections. If Seller
objects to the Closing Date Balance Sheet and/or the Closing Date
Purchase Price Adjustment Amount as calculated by Purchaser, the
parties shall attempt to resolve such dispute by negotiation. If the
parties are unable to resolve such dispute within twenty (20) days
of any objection by Seller, the parties shall appoint KPMG LLP,
certified public accountants, or, if unavailable, such firm which is
one of the "Big Five" independent accounting firms (excluding ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP and PricewaterhouseCoopers LLP), as shall be mutually
agreeable to the parties, and KPMG LLP or such other accounting firm
shall review the Closing Date Balance
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Sheet and the Closing Date Purchase Price Adjustment Amount as
calculated by Purchaser and determine the adjustment to such
calculation of the Closing Date Purchase Price Adjustment Amount, if
any, with the expense of such review to be borne one-half by
Purchaser and one-half by Seller. The determination by KPMG LLP or
such other accounting firm of the Closing Date Purchase Price
Adjustment Amount shall be binding on the parties hereto; provided,
however, that the acceptance by Seller and Purchaser of such
determination of the Closing Date Purchase Price Adjustment Amount
shall not constitute or be deemed to constitute a waiver of the
rights of such party in respect of any other provision of this
Agreement.
Section 2. Closing
2.1 General. The closing of the transactions contemplated by Section 1 (the
"Closing") shall be held at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 4:00 p.m. on November 16,
2000.
2.2 Closing Transactions. Subject to the conditions set forth in this
Agreement, the parties shall consummate the following transactions (the
"Closing Transactions") at the Closing:
(a) Seller shall deliver to Purchaser, free and clear of all Liens and
all Permitted Encumbrances, one or more certificates representing
the Acquired Stock, duly endorsed (or accompanied by duly executed
stock powers) and otherwise in form acceptable for transfer on the
books of the Acquired Companies;
(b) Purchaser shall pay the Purchase Price as contemplated by Section
1.2; and
(c) Seller and Purchaser shall deliver the certificates and other
documents and instruments required to be delivered by or on behalf
of such party under Section 7 and Section 8 of this Agreement, as
applicable, or as may reasonably be requested by the other party to
evidence compliance with the terms hereof.
Section 3. Representations and Warranties of Seller
Seller represents and warrants to Purchaser that:
3.1 Organization and Corporate Power.
(a) The Organization Schedule attached hereto contains a complete and
accurate list for each Acquired Company of its name, its
jurisdiction of incorporation or organization, other jurisdictions
in which it is authorized to do business, and its capitalization
(including the identity of each stockholder or equity holder and the
number of shares or other equity interests held by each), determined
as of the date hereof. Except as set forth on the Organization
Schedule, none of the Acquired Companies owns or holds the right to
acquire any Capital Stock in any other
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Person. Seller is validly existing and in good standing as a
corporation under the laws of the State of Delaware, and, subject to
the satisfaction of its conditions precedent to Closing, has all
necessary corporate power to perform its obligations under this
Agreement.
(b) Each Acquired Company is a company duly organized, validly existing,
and in good standing under the laws of its jurisdiction of
incorporation or organization, with full organizational power and
authority to conduct the business as it is now being conducted and
to own or use the properties and assets that it purports to own or
use. Each Acquired Company is duly qualified to do business as a
foreign company and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the
failure to be so duly qualified or licensed and in good standing
would not individually or in the aggregate have a Material Adverse
Effect.
(c) Seller has delivered to Purchaser correct and complete copies of the
certificate of incorporation and bylaws (or equivalent governing
documents) of each Acquired Company, which documents reflect all
amendments made thereto at any time before the date hereof. Correct
and complete copies of the minute books containing the records of
meetings of the stockholders and board of directors (or equivalent
parties) and all committees of the board of directors (or equivalent
parties), the stock certificate books, and the stock record books of
the Acquired Companies have been furnished to Purchaser. None of the
Acquired Companies is in default under or in violation of any
provision of its certificate of incorporation or by-laws (or
equivalent governing documents).
3.2 Authorization of Transactions. Seller and each Acquired Company has all
requisite power and authority (including full corporate power and
authority) to execute and deliver the Transaction Documents to which it is
a party and, subject to the satisfaction of its conditions precedent to
Closing, to consummate the transactions contemplated hereby and thereby
and to carry out its obligations hereunder and thereunder. The board of
directors of Seller has duly approved the execution, delivery and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby. No other corporate proceedings on the
part of Seller or any Acquired Company is necessary to authorize and
permit the execution and delivery of the Transaction Documents to which it
is a party and, subject to the satisfaction of its conditions precedent to
Closing, the consummation of the transactions contemplated thereby. All
Transaction Documents to which Seller or any Acquired Company is a party
have been duly executed and delivered by Seller and/or such Acquired
Company and constitute the legal, valid and binding agreements of Seller
and/or such Acquired Company, enforceable against Seller and/or such
Acquired Company in accordance with their terms.
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3.3 Capitalization. The authorized Capital Stock of each Acquired Company
consists of the number and type of shares or other interests (and par
values) set forth opposite such Acquired Company's name on the
Organization Schedule. Except as set forth on the Organization Schedule,
all of the issued and outstanding Capital Stock of the Acquired Companies
have been duly authorized, are validly issued, fully paid and
nonassessable, and are held of record and owned beneficially by the
Persons and in the manner described on the Organization Schedule, free and
clear of all Liens and all Permitted Encumbrances, and are not subject to,
nor were they issued in violation of, any preemptive rights or rights of
first refusal. Except as set forth on the Organization Schedule, there are
no outstanding or authorized options, warrants, rights, stock purchase
plan, contracts, calls, puts, rights to subscribe, conversion rights, or
other agreements or commitments to which Seller or any Acquired Company is
a party or which are binding upon Seller or any Acquired Company providing
for the issuance, disposition, or acquisition of Seller's or any Acquired
Company's Capital Stock (other than this Agreement). Other than as set
forth on the Organization Schedule, there are no outstanding or authorized
stock appreciation, phantom stock, or similar rights with respect to
Seller or any Acquired Company. There are no voting trusts, proxies, or
any other agreements or understandings with respect to the voting of the
Capital Stock of any Acquired Company. No Acquired Company is subject to
any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of its Capital Stock and, other than as set forth on
the Organization Schedule, there are no agreements to register any sales
or resales of the Acquired Stock under the federal or state securities
laws. None of the outstanding shares of the Capital Stock of any of the
Acquired Companies was issued in violation of the Securities Act or the
securities or blue sky laws of any state or jurisdiction.
3.4 Absence of Conflicts. Except as set forth on the "Conflicts Schedule"
attached hereto, the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions
contemplated thereby by Seller and/or any Acquired Company do not and
shall not (a) conflict with or result in any breach of any of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in
a violation of, (d) give any third party the right to modify, terminate or
accelerate any obligation under, (e) result in the creation of any Lien
upon the Capital Stock or assets of any Acquired Company (including,
without limitation, the Acquired Stock) by any Person other than Purchaser
pursuant to, or (f) require any authorization, consent, approval, order,
exemption or other action by or notice or declaration to, or filing with,
any court or administrative or other governmental body or agency under:
(1) the certificate of incorporation or by-laws (or equivalent governing
documents) of Seller or any of the Acquired Companies; (2) any material
indenture, mortgage, lease, loan agreement or other agreement or
instrument to which Seller or any of the Acquired Companies is bound or
affected; (3) any material law, statute, rule or regulation to which
Seller or any of the Acquired Companies is subject (except in connection
with the applicable requirements of the HSR Act, the DGCL, the Exchange
Act, including, without limitation, the filing with and clearing by the
SEC and the Nasdaq Stock Market of the disclosure documents concerning
this Agreement and the transactions contemplated
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hereby); or (4) any judgment, order, decree, rule or regulation or any
court or any governmental agency or body having jurisdiction over any of
the Seller, the Acquired Companies or any of their respective assets or to
which Seller or any Acquired Company is subject.
3.5 Financial Statements and Related Matters. Attached hereto as the
"Financial Statements Schedule" are copies of (i) a summary description of
certain financial statement and accounting matters, (ii) an unaudited
combined balance sheet as of June 30, 2000 (the "June 30 Balance Sheet")
and (iii) the related unaudited combined statement of income for the
Acquired Companies for the six-month period ended on June 30, 2000
(together with the June 30 Balance Sheet, the "June 30 Financial
Statements"). Except as set forth on the Financial Statements Schedule,
the June 30 Financial Statements are accurate and complete in all material
respects, are consistent with the Acquired Companies' books and records
(which, in turn, are accurate and complete in all material respects),
present fairly the financial condition of the Acquired Companies and their
results of operations as of the time and for the period referred to
therein, and have been prepared in accordance with GAAP consistently
applied, subject to changes resulting from normal year-end adjustments
(which adjustments will not, either individually or in the aggregate, be
material) and to the absence of footnote disclosure. The Audited Financial
Statements are accurate and complete in all material respects, are
consistent with the Acquired Companies' books and records (which, in turn,
are accurate and complete in all material respects), present fairly the
financial condition of the Acquired Companies and their results of
operations as of the time and for the period referred to therein, and have
been prepared in accordance with GAAP, consistently applied.
3.6 Absence of Certain Developments. Except as set forth on the attached
"Developments Schedule," since June 30, 2000, none of the Acquired
Companies has:
(a) suffered any change that has had or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect;
(b) subjected any portion of its properties or assets to any Lien
(other than Permitted Encumbrances);
(c) entered into, amended or terminated any lease, contract,
agreement or commitment, or taken any other action or entered into any
other transaction other than in the Ordinary Course of Business;
(d) declared, set aside or paid outside of the Ordinary Course of
Business any dividends or made any other distributions (whether in cash or
in kind) with respect to any shares (or other interests) of the Capital
Stock of any Acquired Company;
(e) made any capital expenditures or commitments for capital
expenditures except in the Ordinary Course of Business; or
(f) committed to do any of the foregoing.
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3.7 Taxes. Except as set forth on the attached "Taxes Schedule":
(a) Seller has, for the benefit of and with respect to each Acquired
Company, filed all Tax Returns which were required to be filed by
them prior to the date hereof and will file for all Tax Returns
required to be filed prior to the Closing, and all such Tax Returns
are and will be true, complete and accurate in all material respects
and have been or will be prepared in compliance with applicable law;
(b) all Taxes due and payable by each Acquired Company have been paid by
such Acquired Company or will be paid by the appropriate due date
and no amount of such Taxes is delinquent;
(c) no deficiency for any material amount of Tax which has not been
resolved has been asserted or assessed either (i) in writing by a
taxing authority against any of the Acquired Companies or (ii) as to
which Seller or the Acquired Companies have knowledge, and neither
Seller nor the Acquired Companies have knowledge that any such
written assessment or asserted Tax liability shall be made;
(d) there is no action, suit, claim, investigation, taxing authority
proceeding or audit now in progress, pending or threatened or as to
which Seller has knowledge to any of the Acquired Companies;
(e) none of the Acquired Companies has (i) waived any statute of
limitations, (ii) agreed to any extension of the period for
assessment, collection or filing or (iii) executed or filed any
power of attorney, in each case with respect to any Taxes for any
open year;
(f) none of the Acquired Companies is a party to or bound by any Tax
allocation, sharing, indemnity or similar agreement or arrangement
with any Person (other than Seller) and none of the Acquired
Companies has any current or potential contractual obligation to
indemnify any other Person(other than Seller) with respect to Taxes;
(g) none of the Acquired Companies has any obligation to make any
payment that could be non-deductible under Sections 280G, 162(m),
and 404 of the Code (or any corresponding provision of state, local
or foreign Tax law);
(h) no written claim has been made and delivered by a taxing authority
in a jurisdiction where any of the Acquired Companies does not pay
Taxes or file Tax Returns that Seller or any Acquired Company is or
may be subject to Taxes assessed by such jurisdiction;
(i) each of the Acquired Companies have withheld and paid all Taxes
required to have been withheld and paid (and has complied with all
information and back-up withholding requirements including
maintenance of required records with respect thereto) in connection
with amounts paid or owing to any employee, creditor,
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independent contractor, stockholder or other third party relating to
the Acquired Companies, except for immaterial amounts with respect
to employees and independent contractors;
(j) the Taxes Schedule contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which each of the
Acquired Companies is required to file Tax Returns relating to the
Acquired Companies;
(k) there are no Liens on any of the assets of any Acquired Company that
arose in connection with any failure (or alleged failure) to pay any
Tax;
(l) none of the Acquired Companies has filed a consent under Code (S)
341(f) concerning collapsible corporations;
(m) none of the Acquired Companies has been a United States real
property holding corporation within the meaning of Code (S)
897(c)(2) during the applicable period specified in Code (S) 897
(c)(1)(A)(ii);
(n) the Taxes Schedule lists all state, local, foreign income Tax
Returns filed with respect to each of the Acquired Companies for
taxable periods ended after December 31, 1996, indicates those Tax
Returns that have been audited and indicates those Tax Returns that
currently are the subject of audit; and the Acquired Companies have
delivered to Purchaser correct and complete copies of all federal
and state income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by any of the Acquired
Companies;
(o) none of the Acquired Companies has any liability for Taxes of any
Person under Treas. Reg. (S) 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by
contract or otherwise; and none of the Acquired Companies has been a
member of an Affiliated Group filing a consolidated federal income
Tax Return (other than a group the common parent of which was
Seller);
(p) the Taxes Schedule sets forth the following information with respect
to states for Acquired Companies where the Section 338 Election is
not recognized under the applicable law(s) of such state(s) as of
December 31,1999: (i) the basis of the Acquired Company in its
assets; (ii) the amount of any operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution of each Acquired Company; and (iii) the
amount of any deferred gain or loss allocable to any Acquired
Company arising out of any deferred intercompany transaction (as
defined in Treas. Reg. (S)1.1502-13);
(q) except as set forth in the Taxes Schedule, Seller is not a party to
any joint venture, partnership or other arrangement or contract with
respect to the Acquired Companies that could be treated as a
partnership for U.S. federal income tax
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purposes and the Acquired Companies do not have an interest, direct
or indirect, in any entities other than the Acquired Companies; and
(r) except as set forth on the Taxes Schedule, the unpaid Taxes of the
Acquired Companies (i) did not, as of June 30, 2000, exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
June 30 Balance Sheet (rather than in any notes thereto) and (ii) do not exceed
that reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Acquired Companies in filing
their Tax Returns.
3.8 Proprietary Rights.
(a) The "Proprietary Rights Schedule" attached hereto contains a
complete and accurate list of all Proprietary Rights owned, licensed
or used by any of the Acquired Companies, including (i) patented and
registered Proprietary Rights owned or used by any of the Acquired
Companies, (ii) pending patent applications and applications for
registrations of other Proprietary Rights filed by or on behalf of
or owned by any of the Acquired Companies, (iii) material
unregistered trade names, Internet domain names, web sites and
corporate names owned or used by Seller with respect to any of the
Acquired Companies and (iv) material unregistered trademarks,
service marks and logos and the computer software owned or used by
Seller with respect to any of the Acquired Companies. Except as to
licenses and agreements contained in customer contracts or entered
into in connection therewith, that grant customers the right to use
or assign rights in Proprietary Rights developed therefor, the
Proprietary Rights Schedule contains a complete and accurate list of
all material licenses and other rights granted by Seller or any of
the Acquired Companies to any third party with respect to any
Proprietary Rights, in each case identifying the subject Proprietary
Rights. Except as set forth on the Proprietary Rights Schedule,
Seller and the Acquired Companies own, free of all Liens, all right,
title and interest to, or have the right to use pursuant to a valid
license, all of the material Proprietary Rights set forth on the
Proprietary Rights Schedule and all other Proprietary Rights
reasonably necessary for the operation of the Acquired Companies as
presently conducted. Except as set forth on the Proprietary Rights
Schedule, the loss or expiration of any Proprietary Rights or
related group of Proprietary Rights owned or used by any of the
Acquired Companies has not had a Material Adverse Effect on the
Acquired Companies and such a loss or expiration of Proprietary
Rights is not pending or, to the knowledge of Seller, threatened in
writing.
(b) Except as set forth on the Proprietary Rights Schedule, (i) all of
the Proprietary Rights owned or used by the Acquired Companies are
valid and enforceable and have not been misused, and, to Seller's
knowledge, no claim by any third party contesting the validity,
enforceability, use or ownership of any such Proprietary Rights has
been made, is currently outstanding or has been threatened in
writing,
9
and, to Seller's knowledge, there are no grounds for the same; (ii)
to the knowledge of Seller, neither Seller nor any of the Acquired
Companies has received any written notices of invalidity,
infringement or misappropriation from any third party with respect
to any such Proprietary Rights; (iii) to the knowledge of Seller,
neither Seller nor any of the Acquired Companies has interfered
with, infringed upon, misappropriated or otherwise come into
conflict with any Proprietary Rights of any third parties; and (iv)
to the knowledge of Seller, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict
with any Proprietary Rights of the Acquired Companies.
(c) The transactions contemplated by this Agreement shall have no
Material Adverse Effect on the Acquired Companies' rights, title and
interest in and to any of their respective Proprietary Rights.
Seller and each of the Acquired Companies has taken all necessary
actions to maintain and protect their respective material
Proprietary Rights and shall continue to maintain and protect those
rights prior to the Closing so as to not materially and adversely
affect the validity or enforcement of such Proprietary Rights. To
the knowledge of Seller, the owners of any Proprietary Rights that
are licensed to any Acquired Company (other than third party
off-the-shelf computer software) have taken all necessary actions to
maintain and protect such Proprietary Rights.
(d) The Proprietary Rights Schedule also identifies each written
license, sublicense, agreement or permission pursuant to which any
of the Acquired Companies uses any Intellectual Property owned by a
third party, except shrink wrap software licenses (the "Written
Licenses"). None of the Acquired Companies is in material breach or
default of any Written License, and no event has occurred with
respect to any of the Acquired Companies which, with notice or the
lapse of time, would constitute a breach or default under any
Written License or permit termination, modification or acceleration
of any Written License.
3.9 Litigation; Proceedings. Except as set forth on the "Litigation Schedule"
attached hereto, there are (i) no actions, suits, complaints, charges,
proceedings, orders, investigations or claims (collectively, "Litigation")
pending or threatened against or affecting any of the Acquired Companies
(or to the knowledge of Seller, pending or threatened in writing against
or affecting any of the officers, directors or key employees of any of the
Acquired Companies) and (ii) no facts, events or circumstances that exist
(whether known or unknown) which are or could reasonably be expected to be
the basis for any Litigation, in each case with respect to the business of
the Acquired Companies at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any Litigation with
respect to the transactions contemplated by this Agreement). Except as set
forth on the Litigation Schedule, none of the Acquired Companies is
subject to any grievance arbitration proceedings under collective
bargaining agreements or otherwise or, to the knowledge of Seller, any
governmental investigations or inquiries. Except as set forth on the
Litigation Schedule, none of the Acquired Companies is subject to any
judgment,
10
order or decree of any court or other governmental agency (or settlement
enforceable therein), or any citations, fines or penalties heretofore
assessed against any of the Acquired Companies under any federal, state or
local law.
3.10 Brokers. Except as set forth on the "Brokerage Schedule" attached hereto,
Seller has not retained any broker or finder in connection with any of the
transactions contemplated by this Agreement, and Seller has not incurred
or agreed to pay, or taken any other action that would entitle any Person
to receive, any brokerage fee, finder's fee or other similar fee or
commission with respect to any of the transactions contemplated by this
Agreement.
3.11 Governmental Licenses and Permits. The "Permits Schedule" attached hereto
contains a listing and summary description of all Licenses used in the
conduct of the business of the Acquired Companies as presently conducted
(including, without limitation, Licenses owned or possessed by any of the
Acquired Companies). Except as indicated on the Permits Schedule, the
Acquired Companies own or possess all right, title and interest in and to
all of the Licenses that are necessary to conduct their business as
presently conducted. Each of the Acquired Companies is in compliance with
the terms and conditions of such Licenses and have received no notices
that they are in violation of any of the terms or conditions of such
Licenses. Each of the Acquired Companies has taken all necessary action to
maintain such Licenses. No loss or expiration of any such License is
threatened (in writing) or pending other than expiration in accordance
with the terms thereof. Except as indicated on the Permits Schedule, all
of the Licenses shall survive the transactions contemplated hereby.
3.12 Employees. Except as set forth on the "Employees Schedule" attached
hereto, to the knowledge of Seller, no key executive employee and no group
of key internal employees or independent contractors of any of the
Acquired Companies has any plans to terminate his, her or its employment
or relationship as an independent contractor with any of the Acquired
Companies other than in the Ordinary Course of Business. Except as set
forth on the Employees Schedule, each of the Acquired Companies has
complied with, and remains in compliance with, all applicable laws
relating to the employment of personnel and labor. Except as set forth on
the Employees Schedule attached hereto, each of the Acquired Companies is
in compliance in all respects with all written and oral employment
agreements with all past and present employees and offers to or employment
agreements with (whether written or oral), to the extent they exist,
prospective employees of the Acquired Companies. Except as set forth on
the Employees Schedule, none of the Acquired Companies is a party to or
bound by any collective bargaining agreement, nor has such party
experienced any material strikes, grievances, unfair labor practices
claims or other material employee or labor disputes. To the knowledge of
Seller, none of the Acquired Companies has engaged in any unfair labor
practice. Seller has no knowledge of any organizational effort presently
being made or which has been threatened in writing by or on behalf of any
labor union with respect to any employees of any of the Acquired
Companies. None of the Acquired Companies has implemented any plant
closing or mass layoff of employees as those terms are defined in the
Worker Adjustment
11
Retraining and Notification Act of 1988, as amended ("WARN"), or any
similar state or local law or regulation, and no layoffs that could
implicate such laws or regulations will have been implemented before
Closing without advance notification to Purchaser.
3.13 Employee Benefit Matters.
(a) Except as set forth on the "Benefit Plans Schedule" attached hereto,
with respect to current or former employees, directors or officers
(including the beneficiaries and dependents of the foregoing) of
each of the Acquired Companies, neither Seller nor any of its
Subsidiaries maintains or contributes to, or has an obligation to
contribute to, or has any actual or potential liability with respect
to any (i) deferred compensation or bonus or retirement plans or
arrangements, (ii) qualified or nonqualified defined contribution or
defined benefit plans or arrangements which are employee pension
benefit plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), or (iii)
employee welfare benefit plans, (as defined in Section 3(1) of
ERISA), stock option or stock purchase plans, or fringe benefit
plans or programs, whether in writing or oral and whether or not
terminated. Except as set forth on the Benefit Plans Schedule,
neither Seller nor any of the Acquired Companies nor any member of
their "controlled group" (within the meaning of Code Section 414)
contributes to, or has ever contributed or had an obligation to
contribute to, any multiemployer pension plan (as defined in Section
3(37) of ERISA), and neither Seller nor any of the Acquired
Companies nor any member of their controlled group maintains or has
ever maintained or contributed to, or had an obligation to
contribute to, any defined benefit plan (as defined in Section 3(35)
of ERISA). The plans and other arrangements, programs and agreements
referred to in the preceding two sentences are referred to
collectively as "Benefit Plans." Except as set forth on the Benefit
Plans Schedule, neither Seller nor any of the Acquired Companies
maintains or contributes to, or has an obligation to contribute to,
any Benefit Plan which provides health, accident or life insurance
benefits to former employees, their spouses or dependents, other
than in accordance with Section 4980B of the Code ("COBRA").
(b) Except as set forth on the Benefit Plans Schedule, each Benefit Plan
(and each related trust and insurance contract) set forth on the
Benefit Plans Schedule (i) complies in form and in operation in all
material respects with the requirements of applicable laws and
regulations, including ERISA and the Code and the nondiscrimination
rules thereof, (ii) has received or will have received all
contributions, premiums or payments which are due on or before the
Closing Date, and (iii) with respect to each Benefit Plan which is
intended to be qualified under Section 401(a) of the Code, is so
qualified and has received from the Internal Revenue Service a
favorable determination letter, and nothing to Seller's knowledge
has occurred or failed to occur which would materially adversely
affect or result in the revocation of such determination. Except as
disclosed on the Benefit Plans Schedule, each welfare benefit trust
or fund that is associated
12
with a Benefit Plan set forth on the Benefit Plans Schedule and that
is intended to be exempt from federal income tax under Section
501(c)(9) of the Code is so exempt.
(c) Except as set forth on the Benefit Plans Schedule, all required
reports and descriptions (including Form 5500 Annual Reports,
Summary Annual Reports and Summary Plan Descriptions) with respect
to the Benefit Plans set forth on the Benefit Plans Schedule have
been properly and timely filed with the appropriate government
agency and distributed to participants as required in accordance
with applicable law. Seller and each of the Acquired Companies have
complied in all material respects with the requirements of COBRA.
(d) Except as set forth on the Benefit Plans Schedule, with respect to
each Benefit Plan set forth on the Benefit Plans Schedule, (i) to
Seller's knowledge there have been no prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code with
respect to which an applicable exemption does not exist, (ii) to
Seller's knowledge, no fiduciary (as defined in Section 3(21) of
ERISA) has or could have any liability for breach of fiduciary duty
or any other failure to act or comply in connection with the
administration or investment of the assets of such Benefit Plans,
and (iii) no actions, investigations, suits or claims with respect
to the assets thereof (other than routine claims for benefits) are
pending and Seller does not have knowledge of any facts which could
reasonably be expected to give rise to any such actions, suits or
claims.
(e) Except as set forth on the Benefit Plans Schedule, neither Seller
nor any of the Acquired Companies has incurred or has any reason to
expect that it will incur, any liability to the Pension Benefit
Guaranty Corporation (other than routine premium payments, which
have been made on a timely basis) or otherwise under Title IV of
ERISA (including, but not limited to, any withdrawal liability or
liability due to insufficient funding) or under the Code with
respect to any employee pension benefit plan (as defined in Section
3(2) of ERISA) that Seller or any member of its "controlled group"
(within the meaning of Code Section 414) maintains or ever has
maintained or to which any of them contributes, ever has contributed
or ever has been required to contribute to; furthermore, no
"reportable event" within the meaning of Code Section 4043 has
occurred, nor does Seller or any of the Acquired Companies have any
reason to expect that such event will occur, with respect to any
employee pension benefit plan described herein.
(f) Except as set forth on the Benefit Plans Schedule, each individual
who has received compensation for the performance of services on
behalf of any Acquired Company has been properly classified as an
employee or independent contractor in accordance with applicable
laws.
13
(g) Except as set forth on the Benefit Plans Schedule, none of the
Acquired Companies maintains any Benefit Plan which provides
benefits to any current or former employee, officer or director (or
to their beneficiaries or dependents) employed or appointed to serve
outside the United States.
(h) Except as set forth on the Benefit Plans Schedule attached hereto,
no provision of any Benefit Plan would result in any limitation on
the ability of any of the Acquired Companies to terminate such
Benefit Plan with respect to the employees of the such Acquired
Company, as the case may be.
(i) Except as set forth on the Benefit Plans Schedule attached hereto,
the transactions contemplated by this Agreement shall not, whether
alone or upon the occurrence of any additional or subsequent event,
result in any payment of severance or other compensation to, or any
acceleration, vesting or increase in benefits under any Benefit Plan
for the benefit of, any current or former director, officer or
employee of any of the Acquired Companies.
(j) With respect to each Benefit Plan set forth on the Benefit Plans
Schedule, except as set forth on the Benefit Plans Schedule, no
promise or commitment to amend or improve any Benefit Plan for the
benefit of current or former directors, officers, or employees of
any of the Acquired Companies which is not reflected in any of the
documentation provided by Seller to Purchaser or its Affiliates has
been made.
3.14 Insurance. The "Insurance Schedule" attached hereto lists and briefly
describes (i) each insurance policy maintained by Seller or any of the
Acquired Companies with respect to any of the properties and assets used
in or related to the conduct of the business of the Acquired Companies, as
presently conducted, together with a claims history for the past one year
and (ii) any property, casualty, liability or workers' compensation
coverage to which any of the Acquired Companies was a party, named insured
or otherwise beneficiary of coverage since December 1, 1997 (to the
extent, and only during the period, such Acquired Company was owned
directly or indirectly by Seller). Except as reflected on the Insurance
Schedule, all of such insurance policies are in full force and effect, and
neither Seller nor any of the Acquired Companies is in default under any
such insurance policies and neither Seller nor any of the Acquired
Companies has been denied insurance coverage or has experienced a lapse in
coverage. Except as set forth on the Insurance Schedule, no Acquired
Company has any self-insurance or co-insurance programs, and the reserves
set forth on the June 30 Balance Sheet are adequate to cover all material
anticipated liabilities required to be set forth thereon under GAAP with
respect to self-insurance or coinsurance programs.
3.15 Officers and Directors; Bank Accounts. The "Officers, Directors and Bank
Accounts Schedule" attached hereto lists all officers and directors of
each of the Acquired Companies, and all bank accounts, safety deposit
boxes and lock boxes (designating each authorized signatory with respect
thereto) for each of the Acquired Companies.
14
3.16 Compliance with Laws. Except as set forth on the "Compliance Schedule"
attached hereto, each of the Acquired Companies has complied in all
material respects with and are in material compliance with all applicable
laws, statutes, standards, regulations, codes, orders, rules, judgments,
decrees and ordinances of foreign, federal, state and local governments
and all agencies thereof which are applicable to them or which the
Acquired Companies may otherwise be subject, and no claims have been filed
against any Acquired Companies alleging a violation of any such laws or
regulations, and none of the Acquired Companies has received written
notice of any such violations.
3.17 Environmental Matters. Except as set forth on the "Environmental Schedule"
attached hereto, each of the Acquired Companies has materially complied
with and is currently in compliance in all material respects with
Environmental and Safety Requirements, and none of the Acquired Companies
has received any oral or written notice, report or information regarding
any material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) or any corrective, investigatory or remedial
obligations arising under Environmental and Safety Requirements which
relate to any Acquired Company or any Acquired Company's properties or
facilities. Without limiting the generality of the foregoing, each of the
Acquired Companies has obtained and complied in all material respects
with, and are currently in compliance in all material respects with, all
permits, licenses and other authorizations that may be required pursuant
to any Environmental and Safety Requirements for the occupancy of
properties or facilities or the operation of their business. Except as set
forth on the Environmental Schedule, there has not been, and there is not
(a) any past or continuing release or threat of release of any Hazardous
Substance into the environment at, or (b) any manufacturing, refinement,
transportation, importation, use or processing of any Hazardous Substance
on or from, any real property currently or previously owned or leased by
any of the Acquired Companies. To the knowledge of Seller, except as set
forth on the Environmental Schedule, no Hazardous Substances of, or
generated by, any of the Acquired Companies have been disposed of or come
to rest at any site that has been included in any published federal, state
or local "Superfund" site list or any other governmental regulatory entity
list of hazardous or toxic waste sites. Except as set forth on the
Environmental Schedule, to the knowledge of Seller, there never has been,
and there currently is not, any underground storage tank, landfill,
surface impoundment or disposal area located on any real property leased
by any of the Acquired Companies or any entity that has been merged with
or into any of the Acquired Companies.
3.18 Contracts. The attached "Contracts Schedule" contains a true and complete
list of all Contracts of the types described below that are currently in
effect:
(a) all outstanding offers of employment and all employment and
consulting agreements (other than those pursuant to which the
aggregate base compensation to be paid by the Acquired Companies to
the offeree, employee or consultant is less than $150,000 per year
and Contracts with external consultants/employees entered into in
the Ordinary Course of Business);
15
(b) each Contract or option to sell or lease (as lessor) any property or
asset of the Acquired Companies, except in the Ordinary Course of
Business;
(c) each Contract pursuant to which any of the Acquired Companies (i)
possesses or uses, or has agreed to acquire or lease, any property
or asset and (ii) is required to make payments, accrue expenses or
incur charges in excess of $150,000 per annum;
(d) each Contract with suppliers, manufacturers, distributors or
providers of goods or services to any of the Acquired Companies,
including purchase orders, that individually involve liabilities in
excess of $150,000 per year, and all exclusive distribution, supply
or other Contracts (other than Contracts with external consultants
entered into in the Ordinary Course of Business);
(e) each Contract, plan or program pursuant to which payments, or an
acceleration of or increase in benefits, may be required upon or
after a change of control of any of the Acquired Companies;
(f) any other Contract, excluding customer Contracts in the Ordinary
Course of Business, the performance of which involves consideration
in excess of $150,000 per annum; and
(g) (i) the Contracts with the five (5) largest customers of the iSource
division of the Acquired Companies, (ii) the Contracts with the five
(5) largest customers of the Solutions division of the Acquired
Companies and (iii) the Contracts with twenty (20) of the twenty-
five (25) largest customers of the Staffing division of the Acquired
Companies, in each case in clauses (i), (ii) and (iii) above, based
on revenues for the year ended December 31, 1999.
Seller has heretofore made available or provided to Purchaser a true,
complete and correct copy or description of (i) each of the Contracts described
above, each as in effect on the date hereof and (ii) all written amendments and
supplements thereto and all written waivers thereunder. None of the Acquired
Companies, or, to the knowledge of Seller, any other party is in default under,
or in breach or violation of, nor has an event occurred that (with or without
notice, lapse of time or both) would constitute a default by any of the Acquired
Companies or, to the knowledge of Seller, any other party under, any Contract,
other than such defaults, breaches and violations under the Contracts as would
not in the aggregate reasonably be expected to have a Material Adverse Effect.
3.19 Assets. Except as set forth on the "Assets Schedule" attached hereto, the
assets, properties, rights and other interests of the Acquired Companies
being acquired by the Purchaser pursuant to this Agreement (through the
purchase of the Acquired Stock) or any agreement contemplated hereby
constitute all of the assets and rights that in the Seller's reasonable
opinion are necessary for the conduct of the business of the Acquired
Companies as it is presently conducted. Such assets, properties, rights,
and other interests are all of the assets and rights used in the business
of the Acquired Companies, subject to
16
all applicable agreements, restrictions and/or limitations on the
ownership and/or use of such assets, if any.
3.20 No Undisclosed Liabilities. Except as set forth on the attached
"Undisclosed Liabilities Schedule," since the June 30 Balance Sheet, none
of the Acquired Companies has incurred any material liability except:
(a) liabilities reflected or reserved for on the liabilities side of the
June 30 Balance Sheet;
(b) liabilities which have arisen after the date of the June 30 Balance
Sheet in the Ordinary Course of Business or otherwise in accordance
with the terms and conditions of this Agreement; and
(c) liabilities specifically identified and disclosed elsewhere in this
Agreement or the Disclosure Schedule attached hereto.
3.21 Real Estate. The Acquired Companies do not own any real estate. The
attached "Real Estate Schedule" sets forth a correct summary description
of all leases of real property to which any of the Acquired Companies is a
party (the "Leases"). Except as disclosed in the Real Estate Schedule
attached hereto, each of the Leases is legal, valid, binding, enforceable
and in full force and effect, and subject to giving the necessary notices
and obtaining the necessary consents as set forth on the Real Estate
Schedule, each of the Leases will continue to be legal, valid, binding,
enforceable and in full force and effect following the consummation of the
transactions contemplated hereby, in each case on terms identical to those
set forth in the Leases, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting enforcement of creditors' rights,
and as limited by general principles of equity that restrict the
availability of equitable remedies. Except as disclosed in the Real Estate
Schedule, true, complete and correct copies of all of the Leases have been
delivered to Purchaser. Except as disclosed in the Real Estate Schedule,
no action has been taken or omitted by any of the Acquired Companies, and,
to the knowledge of the Seller, no other event has occurred or condition
exists, that constitutes, or after notice or lapse of time or both would
constitute, a default under any Lease or that may reasonably be expected
to result in a loss of rights or the creation of any Lien thereunder or
pursuant thereto. The leasehold interests of the Acquired Companies are
not subject to any Lien, and each of the Acquired Companies is in quiet
possession of the properties covered by the Leases to which it is a party.
3.22 Customers and Suppliers. The attached "Customers and Suppliers Schedule"
sets forth a complete and accurate list of (a) the ten largest customers
(by dollar volume) of each of the Acquired Companies during the fiscal
year ended 1999; and (b) the ten largest suppliers (by dollar volume) of
materials or services to the Acquired Companies during the fiscal year
ended 1999. Except as disclosed on the attached Customers and Suppliers
Schedule no customer or supplier has indicated in writing that it intends
to stop or materially decrease the rate of business done with any of the
Acquired Companies
17
(other than as a result of routine fluctuations that are customary in the
Ordinary Course of Business), and no such supplier has indicated in
writing that it desires to renegotiate its current Contract(s) with any of
the Acquired Companies.
3.23 Indebtedness and Guarantees. Except as set forth in the June 30 Balance
Sheet or the Financial Statements Schedule attached hereto, none of the
Acquired Companies has indebtedness for borrowed money, capital lease
obligations, conditional sale or other title retention agreements or the
deferred purchase price of property or services (other than operating
leases, trade payables, professional fees and other accrued current
liabilities incurred in the Ordinary Course of Business) ("Indebtedness").
None of the Acquired Companies is a guarantor or otherwise liable for any
Indebtedness of any other Person.
3.24 Books and Records. The corporate (including minute books and stock record
books) and financial records of the Acquired Companies are complete and
correct in all material respects and have been maintained in all material
respects in accordance with applicable laws.
3.25 Conduct During Prior Exclusivity Period. Between September 8, 2000 and the
date of this Agreement, neither Seller nor any of Seller's Representatives
engaged in any discussions with or facilitated any interest by any third
party with respect to any Alternative Transaction.
3.26 Transactions with Affiliates. Except as set forth on the attached
"Affiliates Schedule," none of the Seller or its respective officers,
directors or Affiliates (excluding the Acquired Companies) (a) is a party
to any Contract with any of the Acquired Companies not terminable without
penalty upon notice of 120 days or less, (b) has a right to or interest in
any material asset, tangible or intangible, which is used in the
operations of any of the Acquired Companies or (c) has any Indebtedness to
or from any of the Acquired Companies.
3.27 Consents. The attached "Consents Schedule" sets forth a true, correct and
complete list of any Person whose consent or approval is required under
any Contract, and the Contract to which such consent relates, in
connection with the transactions contemplated by this Agreement, provided,
however, that the provisions of this Section 3.27 shall not apply to
customer Contracts, Contracts terminable without penalty upon notice of
120 days or less, or any Contracts the performance of which does not
involve consideration in excess of $25,000 over the term of such Contract.
3.28 No Illegal Payments. None of the Acquired Companies or any of the
directors, officers, employees, agents or Affiliates of any of the
Acquired Companies has directly or indirectly (a) given or agreed to give
any illegal gift, contribution or payment to any supplier, customer,
government official or employee or other Person who was or is in a
position to help or hinder any of the Acquired Companies (or assist in
connection with any actual or proposed transaction) or (b) made or agreed
to make any illegal contribution to any candidate for federal, state,
local or foreign public office, in each case which might
18
subject any of the Acquired Companies to any damage or penalty in any
civil, criminal or governmental litigation or proceeding.
Section 4. Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller that:
4.1 Organization and Corporate Power. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all necessary corporate power and authority to
enter into this Agreement and the other agreements contemplated hereby to
which Purchaser is a party and to perform its obligations hereunder and
thereunder.
4.2 Authorization of Transaction. The execution, delivery and performance of
this Agreement and the other agreements contemplated hereby to which
Purchaser is a party have been duly and validly authorized by all
requisite organizational action on the part of Purchaser, and no other
organizational proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement. This Agreement
constitutes, and each of the other agreements contemplated hereby to which
Purchaser is a party shall when executed constitute, a valid and binding
obligation of Purchaser, enforceable in accordance with their terms.
4.3 No Violation. Purchaser is not subject to or obligated under its
certificate of incorporation or by-laws (or equivalent governing
documents) or any applicable material law, rule or regulation of any
governmental authority, or any agreement or instrument, or any license,
franchise or permit, or any order, writ, injunction or decree, that would
be breached or violated by Purchaser's execution, delivery or performance
of this Agreement and the other agreements contemplated hereby to which
Purchaser is a party.
4.4 Governmental Authorities and Consents. Purchaser is not required to submit
any notice, report or other filing (except in connection with the
applicable requirements of the HSR Act) with any governmental authority in
connection with the execution or delivery by Purchaser of this Agreement
or the other agreements contemplated hereby to which Purchaser is a party
or the consummation of the transactions contemplated hereby or thereby. No
consent, approval or authorization of any governmental or regulatory
authority (except in connection with the applicable requirements of the
HSR Act) or any other party or person is required to be obtained by
Purchaser in connection with its execution, delivery and performance of
this Agreement and the other agreements contemplated hereby to which
Purchaser is a party or the transactions contemplated hereby or thereby.
4.5 Litigation. There are no material actions, suits, proceedings or orders
pending or, to Purchaser's knowledge, threatened against or affecting
Purchaser at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, that would adversely
affect Purchaser's performance under this Agreement or the other
agreements contemplated
19
hereby to which Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
4.6 Brokers. Purchaser has not retained any broker or finder in connection
with any of the transactions contemplated by this Agreement, and Purchaser
has not incurred or agreed to pay, or taken any other action that would
entitle any Person to receive, any brokerage fee, finder's fee or other
similar fee or commission with respect to any of the transactions
contemplated by this Agreement.
4.7 Access; Accredited Investor Status. Purchaser and its agents and
associates have been given full access to the assets, books, records,
contracts and employees of the Acquired Companies, and have been given the
opportunity to meet with officers and other representatives of Seller and
the Acquired Companies for the purpose of asking questions concerning, and
investigating and obtaining information regarding the Acquired Companies'
business, operations and legal affairs; provided, however, that nothing
contained in this Section 4.7 shall affect the representations and
warranties of Seller contained in Section 3 of this Agreement. Purchaser
is an "accredited investor" within the meaning of Regulation D promulgated
under the Securities Act and within the meaning of such term set forth in
any applicable state securities laws.
4.8 Funds. As of the Closing Date, Purchaser shall have funds sufficient to
pay the Purchase Price and to complete the transactions contemplated by
this Agreement.
4.9 Beneficial Ownership of Seller Common Stock; Acquisition of Acquired
Stock. As of the date hereof, Purchaser and all of its respective
Affiliates individually or collectively do not beneficially own (as such
term is defined and interpreted pursuant to Rule 13d-3 under the Exchange
Act) more than 4.99% of Seller Common Stock outstanding as of the date
hereof. Purchaser is acquiring the Acquired Stock for its own account and
for investment, and not with a view to, or for sale in connection with,
any distribution of any of such Acquired Stock.
Section 5. Pre-Closing Covenants of Seller
Seller agrees that, between the date of this Agreement and the Closing
Date:
5.1 Affirmative Covenants of Seller. Seller covenants and agrees that, from
the date of this Agreement and until the Closing or the date, if any, on
which this Agreement is earlier terminated pursuant to Section 10.1
hereof, unless Purchaser otherwise agrees in writing and except as
expressly contemplated by this Agreement, Seller shall cause each of the
Acquired Companies to:
(a) conduct the business and operations of the Acquired Companies
only in the Ordinary Course of Business;
(b) keep in full force and effect the corporate existence of the
Acquired Companies and all rights, franchises and material Proprietary
Rights relating or
20
pertaining to the Acquired Companies and use its reasonable best efforts to
cause its current insurance (or reinsurance) policies not to be canceled or
terminated or any of the coverage thereunder to lapse;
(c) use its reasonable best efforts to carry on the business of the
Acquired Companies in the Ordinary Course of Business and to keep the business
organizations and properties of the Acquired Companies intact in the Ordinary
Course of Business, including business operations, physical facilities, working
conditions and employees and relationships with lessors, licensors, suppliers
and customers and others having business relations with it;
(d) maintain the material assets of the Acquired Companies in such
ordinary repair, order and condition (normal wear and tear excepted) consistent
with historical needs, replace in accordance with reasonable business practices
its inoperable, worn out or obsolete assets with assets of good quality
consistent with prudent practices and current needs and, in the event of a
casualty, loss or damage to any of such assets or properties prior to the
Closing Date (whether or not such casualty, loss or damage is covered by
insurance), either repair or replace such damaged property or use the proceeds
of such insurance in such other manner as mutually agreed upon by Seller and
Purchaser;
(e) encourage all key employees of the Acquired Companies to continue
their employment with the Acquired Companies or the Purchaser or its
Subsidiaries after the Closing;
(f) maintain the books, accounts and records of the Acquired Companies in
accordance with past custom and practice as used in the preparation of their
financial statements;
(g) cooperate with Purchaser and use its reasonable best efforts (i) to
cause the conditions to Purchaser's obligations to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all Required Approvals necessary to consummate the transactions
contemplated hereby, including, without limitation, all approvals under the HSR
Act) and (ii) to execute and deliver all documentation reasonably required in
order for the Policy to be issued;
(h) maintain the existence of and use reasonable best efforts to protect
all material Proprietary Rights used by the Acquired Companies;
(i) maintain the existence of and protect all of the material governmental
permits, licenses, approvals and other authorizations of the Acquired Companies;
(j) comply in all material respects with all applicable laws, ordinances,
and regulations in the operation of the Acquired Companies;
21
(k) pay one-half of the insurance premium on the Policy on the
Closing Date, provided, however, that Seller shall have no obligation with
respect to such Policy if the transactions contemplated pursuant to this
Agreement are not consummated;
(l) cooperate with Purchaser in its reasonable investigation of the
business, assets and properties of the Acquired Companies and permit
Purchaser and its employees, agents, accounting, legal and other authorized
representatives, upon reasonable notice and at reasonable hours, to discuss
the affairs, finances and accounts of any of the Acquired Companies with
the officers, partners, key employees and independent accountants of the
Acquired Companies; and
(m) (i) deliver to Purchaser the Audited Financial Statements and a
written calculation of the August 31 Purchase Price Decrease Amount or the
August 31 Purchase Price Increase Amount, as the case may be; and (ii)
provide Purchaser and its representatives reasonable access to the work
papers relating to the Audited Financial Statements.
5.2 Negative Covenants of Seller. Seller covenants and agrees that, from the
date of this Agreement and until the Closing or the date, if any, on which
this Agreement is earlier terminated pursuant to Section 10.1 hereof,
unless Purchaser otherwise agrees in writing and except as expressly
contemplated by this Agreement, Seller shall use its commercially
reasonable best efforts to cause each of the Acquired Companies to not:
(a) make any loans, enter into or perform any non-arm's length transaction
with any Insider or make or grant any increase in any Acquired
Company's employee's or officer's compensation outside of the Ordinary
Course of Business or make or grant any increase in any employee
benefit plan, incentive arrangement or other benefit covering any of
the employees of the Acquired Companies outside of the Ordinary Course
of Business;
(b) except as specifically contemplated by this Agreement, enter into any
Contract or transaction, other than in the Ordinary Course of Business
and at arm's length, with unaffiliated Persons;
(c) cause any properties, assets, rights or interests related primarily to
the Acquired Companies prior to the date hereof to become primarily
used by or primarily related to Seller or any Subsidiary of Seller
(excluding the Acquired Companies), unless effected pursuant to an
arm's length Contract, subject to the prior written consent of
Purchaser (which consent shall not be unreasonably withheld);
(d) declare or pay any dividends, issue, purchase or redeem any shares of
its Capital Stock or any convertible securities into or exchangeable
for any of its Capital Stock, or make any other distributions to its
shareholders, in each case, other than in the Ordinary Course of
Business;
22
(e) grant any options or other rights to purchase or obtain
(including upon conversion, exchange or exercise) any of its
Capital Stock;
(f) incur, assume or guaranty any Indebtedness or any other
liabilities outside the Ordinary Course of Business; or
(g) amend the organizational documents of any of the Acquired
Companies.
5.3 Access. Subject to the provisions of the Non-Disclosure Agreement and
Section 6, Seller shall, after receiving reasonable advance notice
from Purchaser, give Purchaser reasonable access (during normal
business hours) to the books, records and Contracts of the Acquired
Companies for the purpose of enabling Purchaser to further investigate
and inspect, at Purchaser's sole expense (subject to reimbursement
pursuant to Section 10.2), the business, operations and legal affairs
of the Acquired Companies.
5.4 Conditions. Seller shall use commercially reasonable efforts to
satisfy on a timely basis the conditions set forth in Sections 7, 8.3,
8.4 and 8.5.
5.5 HSR Filing. As promptly as possible after the date of this Agreement,
and in any event within five (5) days thereafter, Seller shall file
the notification form required to be filed by Seller under the HSR Act
with respect to the transactions contemplated hereby.
5.6 Non-Solicitation. Seller covenants and agrees that, from the date of
this Agreement and until the Closing or the date, if any, on which
this Agreement is earlier terminated pursuant to Section 10.1 hereof,
unless Purchaser otherwise agrees in writing and except as expressly
contemplated by this Agreement, Seller shall ensure that neither
Seller nor any of Seller's Representatives directly or indirectly;
(a) solicits or encourages the initiation of any inquiry, proposal or
offer from any Person (other than Purchaser or its Affiliates or
Representatives) relating to any Alternative Transaction; or
(b) actively participates in any discussions or negotiations with, or
provides any non-public information to, any Person (other than
Purchaser or its Affiliates or Representatives) relating to any
Alternative Transaction.
5.7 Transfer of Certain Frozen Benefit Plans. Prior to the Closing, Seller
shall take such actions as may be necessary to cause a transfer of
sponsorship of the Frozen Benefit Plans from each of the Acquired
Companies to Seller.
Section 6. Pre-closing Covenants of Purchaser
6.1 Covenants of Purchaser. Purchaser agrees that between the date of
this Agreement and the Closing Date:
(a) Purchaser shall cooperate with Seller and use its reasonable best
efforts to cause the conditions to Seller's obligation to close
to be satisfied (including, without
23
limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the
making and obtaining of all third party and governmental filings,
authorizations, approvals, consents, releases and terminations);
(b) Purchaser shall cooperate with Seller and use its reasonable best
efforts to obtain all Required Approvals necessary to consummate
the transactions contemplated hereby (including, without
limitation, all approvals required under the HSR Act); and
(c) Purchaser shall not interfere in any manner with the business or
operations of the Acquired Companies or with the performance of
any of the Acquired Companies' employees.
6.2 Conditions. Purchaser shall (a) use commercially reasonable efforts to
satisfy on a timely basis the conditions set forth in Sections 8.1,
8.2, and 8.6; and (b) provide any information reasonably requested by
Seller in connection with Seller's efforts to satisfy on a timely
basis the condition set forth in Section 8.3, if applicable.
6.3 HSR Filing. As promptly as possible after the date of this Agreement,
and in any event within five (5) days thereafter, Purchaser shall
cause its ultimate parent entity (as defined in the HSR Act) to file
the notification form required to be filed by Purchaser's ultimate
parent entity under the HSR Act with respect to the transactions
contemplated hereby.
Section 7. Conditions to Obligation of Purchaser to Close
The obligation of Purchaser to purchase the Acquired Stock and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Closing Date, of the following
conditions (any of which may be waived by Purchaser in whole or in part):
7.1 Accuracy of Representations and Warranties. The representations and
warranties set forth in Section 3 hereof shall be true and correct in
all respects (but without regard to any materiality qualifications or
references to Material Adverse Effect contained in any specific
representation or warranty) as though originally made on the date of
this Agreement and as of the Closing Date of this Agreement, except
(x) for changes permitted by the terms of this Agreement; (y) that the
accuracy of representations and warranties that by their terms speak
as of the date of this Agreement or some earlier date will be
determined as of such specified date; and (z) where any such failure
of the representations and warranties, in the aggregate, to be true
and correct in all respects has not had or would not have a Material
Adverse Effect.
7.2 Performance. Seller shall have performed, in all material respects,
all obligations required by this Agreement to be performed by Seller
on or before the Closing Date.
24
7.3 Stockholder Approval. Any required approval or adoption of this
Agreement and the transactions contemplated hereby shall have been
approved or adopted by the requisite vote of stockholders of Seller in
accordance with the DGCL and Seller's Certificate of Incorporation,
which adoption shall not have been amended in any respect, withdrawn
or otherwise rescinded.
7.4 Required Approvals. The applicable waiting periods, if any, under the
HSR Act shall have expired or been terminated and any other
governmental filings, authorizations and approvals that are required
for the consummation of the Closing (the "Required Approvals") shall
have been obtained, except for any immaterial Required Approvals.
7.5 No Injunction. There shall not be in effect, as of the Closing Date,
any injunction or other binding order of any court or other tribunal
having jurisdiction over Seller or Purchaser that prohibits the
purchase of the Acquired Stock by Purchaser, and there shall not be
pending, as of the Closing Date, any action for an injunction or other
order of any court or other tribunal having jurisdiction over Seller
or Purchaser that: (i) would prohibit any of the transactions
contemplated by this Agreement; and (ii) in the reasonable opinion of
Purchaser, has had or could reasonably be likely to have a Material
Adverse Effect or a material adverse effect on the assets, business,
financial condition, operations or results of operations of any
Affiliates of Purchaser.
7.6 Audited Financial Statements. Seller shall have delivered to Purchaser
the Audited Financial Statements.
7.7 Closing Deliverables. On or prior to the Closing Date, Seller
shall have delivered to Purchaser all of the following:
(a) a certificate from Seller in a form reasonably satisfactory to
Purchaser, dated the Closing Date, stating that the preconditions
specified in Sections 7.1, 7.2 and 7.3 have been satisfied;
(b) copies of resolutions, certified by the Secretary of Seller, of
Seller's board of directors and stockholders (if required)
approving this Agreement and the transactions contemplated by
this Agreement;
(c) certificates of the Secretary of State of the state of
incorporation or organization of Seller and each Acquired Company
for each state where any of the Acquired Companies are qualified
to do business providing that such Acquired Company is in good
standing, except where any failure to be so qualified to do
business, individually or in the aggregate, would not give rise
to a Material Adverse Effect;
(d) a copy of the certificate of incorporation or equivalent
governing document for Seller and each Acquired Company,
certified by the appropriate authority in the jurisdiction in
which such entity was incorporated or organized;
25
(e) a copy of the bylaws or equivalent governing document for Seller
and each Acquired Company, certified by an officer of such
Acquired Company;
(f) all stock certificates and other instruments evidencing ownership
of each of the Acquired Companies;
(g) all minute books, stock books, ledgers and registers, corporate
seals and other corporate records relating to the organization,
ownership and maintenance of each Acquired Company;
(h) such other documents or instruments as Purchaser may reasonably
request to effect the transactions contemplated hereby;
(i) an executed counterpart of the Shared Services Agreement attached
hereto in the form of Exhibit B hereto; and
(j) (i) an executed copy of the opinion of Seller's outside counsel,
▇▇▇▇▇▇ Godward LLP; (ii) an executed copy of the opinion of
Seller's special Delaware counsel, Morris, Nichols, Arst and
Tunnel, with respect to certain matters under Section 271 of the
DGCL; and (iii) an executed copy of an opinion of Seller's
General Counsel as to the title of Seller to the Acquired Stock,
which opinions in clauses (i) through (iii) above (A) shall
provide that Purchaser's senior lenders may rely thereon and (B)
shall collectively be in the form of Exhibit C hereto.
(k) an executed counterpart of an assumption agreement among Seller,
and the Acquired Companies pursuant to which Seller shall assume
certain obligations of the Acquired Companies that are referenced
on Exhibit D attached hereto;
(l) an executed termination agreement in the form of Exhibit E
attached hereto by and between Seller and ▇▇▇▇▇ ▇▇▇▇ with respect
to ▇▇▇▇▇ ▇▇▇▇'▇ employment agreement with Seller;
(m) executed counterpart copies of non-solicitation agreements by and
between Purchaser and ▇▇▇▇▇ ▇▇▇▇▇▇ for the benefit of Purchaser
in the form of Exhibit F attached hereto and by and between
Purchaser and each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in
each case, for the benefit of Purchaser in the form of Exhibit G
attached hereto; and
(n) (i) an executed counterpart assignment in form and substance
reasonably satisfactory to Purchaser, pursuant to which Seller
assigns to Purchaser, in its capacity as the corporate parent of
the Acquired Companies, the right to direct any and all claims of
the Acquired Companies under Seller's occurrence-based insurance
policies relating to matters occurring prior to the Closing Date
with respect to the applicable insurance companies, subject to
any other written agreement between Purchaser and Seller in this
connection; (ii) an instruction letter to Seller's insurance
broker stating that the Acquired Companies have been
26
acquired by Purchaser and instructing such broker to forward
information on claims, if any, relating to matters occurring
prior to the Closing Date to a named contact at the Acquired
Companies and to forward copies of such information to
Purchaser's key contact; and (iii) a letter from Seller's
insurance broker indicating that premiums have been paid with
respect to Seller's occurrence-based insurance policies.
Any condition specified in this Section 7 may be waived by Purchaser
in its sole discretion; provided, however that no such waiver shall be effective
against Purchaser unless it is set forth in a writing executed by Purchaser.
Section 8. Conditions to Obligation of Seller to Close
The obligation of Seller to sell the Acquired Stock to Purchaser and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Closing Date, of the following
conditions (any of which may be waived by Seller in whole or in part):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Purchaser set forth in Section 4 shall be accurate in
all material respects as though originally made on the date of this
Agreement and as of the Closing Date.
8.2 Performance. Purchaser shall have performed, in all material respects,
all obligations required by this Agreement to be performed by
Purchaser on or before the Closing Date.
8.3 Stockholder Approval. Any required approval or adoption of this
Agreement and the transactions contemplated hereby shall have been
approved or adopted by the requisite vote of stockholders of Seller in
accordance with the DGCL and Seller's Certificate of Incorporation,
which adoption shall not have been amended in any respect, withdrawn
or otherwise rescinded.
8.4 Required Approvals. The Required Approvals shall have been obtained,
except for any immaterial Required Approvals.
8.5 No Injunction. There shall not be in effect, at the Closing Date, any
injunction or other binding order of any court or other tribunal
having jurisdiction over Seller or Purchaser that prohibits the sale
of the Acquired Stock by Seller, and there shall not be pending, as of
the Closing Date, any action for an injunction or other order of any
court or other tribunal having jurisdiction over Seller or Purchaser
that: (i) would prohibit any of the transactions contemplated by this
Agreement; and (ii) in the reasonable opinion of Seller, has had or
could reasonably be likely to have a material adverse effect on the
assets, business, financial condition, operations or results of
operations of Seller or any of its Affiliates (other than the Acquired
Companies).
27
8.6 Closing Deliverables. On or prior to the Closing Date, Purchaser shall
have delivered to Seller all of the following:
(a) a certificate from Purchaser in a form reasonably satisfactory to
Seller, dated the Closing Date, stating that the preconditions
specified in Sections 8.1 and 8.2 have been satisfied;
(b) copies of resolutions, certified by the Secretary of Purchaser, of the
stockholders of Purchaser and of Purchaser's board of directors,
approving this Agreement and the transactions contemplated by this
Agreement;
(c) certificates of the Secretary of State of the State of Delaware and
all other states where Purchaser is qualified to do business providing
that Purchaser is in good standing, except where any failure to be so
qualified to do business, individually or in the aggregate, would not
give rise to a Material Adverse Effect;
(d) a copy of the certificate of incorporation and bylaws or equivalent
governing documents of Purchaser certified by the appropriate
authority in the jurisdiction(s) in which such entity was incorporated
or organized;
(e) such other documents or instruments as Seller may reasonably request
to effect the transactions contemplated hereby;
(f) an executed copy of an opinion from Purchaser's outside counsel, Ropes
& ▇▇▇▇, in the form of Exhibit H hereto;
(g) an executed counterpart of an assumption agreement between the
applicable Acquired Company and Seller pursuant to which such Acquired
Company shall assume certain obligations of Seller that are referenced
on Exhibit I attached hereto.
Any condition specified in this Section 8 may be waived by Seller in its
sole discretion; provided, however that no such waiver shall be effective unless
it is set forth in a writing executed by Seller.
Section 9. Additional Covenants
9.1 Covenant of Seller Not to Compete; Nonsolicitation. In consideration of the
Purchase Price to be received under this Agreement, Seller agrees that, for
a period of five (5) years after the Closing Date, neither Seller nor any
of its officers, employees or Subsidiaries (including any Subsidiaries of
which the shares are spun-off or otherwise distributed to Seller's
stockholders during the aforementioned five (5) year period) shall,
directly or indirectly, do any of the following:
(a) own, manage, operate, control, act as consultant or advisor to, render
any services for, have any financial interest in, or otherwise be
connected in any manner with
28
the ownership, management, operation or control of any Person, firm,
partnership, corporation, or other entity that is engaged in the
permanent placement and temporary staffing of information technology
support services personnel, help desk services for non-custom
applications, education and training services for profit for non-
custom applications, or distributed information technology services
businesses (collectively the "Business") anywhere within North
America, provided, however, that any one or more of the following
items in clause (i) shall in no way constitute the Business and any
one or more of the following items in clause (i) or (ii) shall in no
way breach, violate, or otherwise in any manner conflict with the non-
competition covenant in the preceding clause: (i) the operation by
Seller directly or indirectly of all or a portion of its e-solutions,
e-services, e-consulting, system hosting, web hosting, custom software
application development, custom system integration development and
related network configuration and maintenance for any such software or
system development, or information technology solutions and consulting
(not including, however, permanent placement and temporary staffing of
information technology personnel, education and training services for
profit for non-custom applications and help desk services for non-
custom applications) businesses or clinical trials support services
business (collectively the "Retained Operations"); and (ii) the
ownership of not more than five percent (5%) of any class of
securities of any Person, firm, partnership, corporation, or other
entity which engages in the Business and has a class of securities
registered pursuant to Section 12 of the Exchange Act;
(b) solicit Business from any Person who to Seller's knowledge is a
customer of the Acquired Companies or solicit Business from any Person
who was a customer or account of any of the Acquired Companies at the
time of the Closing or within the preceding one year period; provided,
however, that nothing in this Section 9.1(b) shall restrict in any
manner the ability of the Seller or any of its Retained Operations to
solicit customers, suppliers, licensees, licensors or other business
relations of the Acquired Companies in connection with operating the
Retained Operations; and
(c) without the prior written consent of Purchaser, solicit or hire
any corporate officer, corporate management or key personnel of any of the
Acquired Companies or of any Subsidiary or Affiliate of any of the Acquired
Companies; provided, however, that nothing in the preceding clause shall limit
or prohibit general media advertisements or solicitations soliciting employees
generally, and, provided, further, that Seller shall not be prohibited from
soliciting or hiring any employee if such employee approaches Seller on his or
her own initiative, without any direct or indirect solicitation by Seller, or
such employee responds to a general media solicitation not targeted to any
employee of the Acquired Companies.
9.2 Confidentiality. Seller shall treat and hold as confidential for a period
of five (5) years following the Closing Date any information concerning the
Business or affairs of the Acquired Companies that is not available to the
public as of the date of this
29
Agreement or hereafter during such five-year period through no breach of
this covenant by Seller (the "Confidential Information"), refrain from
using any of the Confidential Information to the competitive disadvantage
of the Acquired Companies, except in connection with this Agreement, and
deliver promptly to Purchaser or destroy, at the request and option of
Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in Seller's possession or under Seller's control. In
the event that the Seller is requested or required (by oral question or
request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information, Seller shall notify Purchaser
promptly of the request or requirement so that Purchaser may seek an
appropriate protective order at the Purchaser's expense or waive compliance
with the provisions of this Section 9.2. If, in the absence of a protective
order or the receipt of a waiver hereunder, the Seller on the advice of
counsel, is compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, Seller may disclose the
Confidential Information to the tribunal; provided, however, that such
disclosing Person shall use his or its reasonable best efforts to obtain,
at the expense and request of Purchaser, an order or other assurance that
confidential treatment shall be accorded to such expense and portion of the
Confidential Information required to be disclosed as Purchaser shall
designate.
9.3 Divisibility; Remedy for Breach. Seller acknowledges that all of the
foregoing provisions of this Section 9 are reasonable and are necessary to
protect and preserve the value of the Acquired Companies and to prevent any
unfair advantage being conferred on Seller. If any of the covenants set
forth in this Section 9 are held to be unreasonable, arbitrary, or against
public policy, the restrictive time period herein shall be deemed to be the
longest period permissible by law under the circumstances and the
restrictive geographical area herein shall be deemed to comprise the
largest territory permissible by law under the circumstances. Seller
acknowledges and agrees that in the event of any breach by Seller of any
provisions of Sections 9.1 or 9.2, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, Purchaser
may, in addition to other rights and remedies existing in its favor, apply
to any court of law or equity of competent jurisdiction for specific
performances and/or injunctive relief or other equitable relief in order to
enforce any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages.
9.4 Transfer of 401(k) Plans. Effective as of the Closing Date, Purchaser shall
cause the Acquired Companies to adopt and maintain one or more defined
contribution plans (the "Purchaser 401(k) Plans") intended to be qualified
under Section 401(k) of the Code. In accordance with the applicable
provisions of Section 414(l) of the Code, Seller shall cause the assets and
liabilities of the Edgewater Technology, Inc. 401(k) Savings Plan (the
"Seller 401(k) Plan") attributable to the accounts (whether or not vested)
of each participant who is an employee of any of the Acquired Companies
(the "Participants") to be transferred by the trustee of the Seller 401(k)
Plan to the trustee of the Purchaser 401(k) Plans. Such transfer of assets
shall be in cash (but shall include any promissory notes or other evidences
of indebtedness with respect to outstanding loans,
30
and may, with Purchaser's consent, include other in kind assets), and
shall be made as of and as soon as practicable after a valuation date
under the Seller 401(k) Plan occurring immediately following the
Closing Date, or as of such later valuation date as may be mutually
selected by Purchaser and Seller. Such transfer shall account
appropriately for earnings during the period from the applicable
valuation date to the actual date of transfer (the "Transfer Date").
From the Closing Date until the Transfer Date, Purchaser shall cause
the Acquired Companies to make continuous payroll deductions each pay
period from the pay of each participant who has a loan(s) outstanding
from the Seller 401(k) Plan of amounts sufficient to pay the
installment payments of principal and interest on each such loan as
required by the promissory note or other evidence of indebtedness
relating to such loan. Purchaser shall cause the Acquired Companies to
pay such deducted amounts to the trustee of the Seller 401(k) Plan who
shall accept such payments for a credit against such loans. Purchaser
shall cause the Acquired Companies to provide any information necessary
to the trustee to process such payment. On or prior to the Closing
Date, Seller shall make on behalf of all Participants a contribution to
the Seller 401(k) Plan of the amounts of any salary reduction,
matching, and profit sharing contributions attributable to or payable
on account of any such Participant for any pay date occurring on or
prior to the Closing Date. As of the Closing Date, Seller shall amend
the Seller 401(k) Plan to exclude Participants from Seller 401(k) Plan
participation.
9.5 Frozen Benefit Plans. With respect to the Frozen Benefit Plans which
will be assumed by Seller in accordance with Section 5.7 hereof, after
the Closing (a) Seller shall take all steps necessary to promptly
notify participants of their right to receive a distribution of their
account balance under the Frozen Benefit Plans and (b) Seller shall
terminate the Frozen Benefit Plans as soon as reasonably practicable
following the Closing Date and shall distribute any remaining assets to
participants as soon as administratively feasible thereafter.
9.6 Incentive Bonus Payments. Seller agrees that it shall pay within 60
(sixty) days following the Closing Date, to the extent earned through
the Closing Date: (i) all bonuses payable to ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ pursuant to and in
accordance with the terms of the IntelliMark Executive Incentive Bonus
Plan; and (ii) all bonuses payable to ▇▇▇▇▇ ▇▇▇▇ from Seller.
9.7 Certain Real Estate Matters. During the period commencing on the date
hereof and ending ninety (90) days following the Closing Date, Seller
will use its commercially reasonable efforts to obtain consents with
respect to the Leases that require consent as reflected on the Real
Estate Schedule as a result of the transactions contemplated by this
Agreement
9.8 Certain Insurance Matters. Following the Closing Date, Seller agrees to
maintain that certain insurance policy, known as American International
Specialty Lines Insurance Company Employed Lawyer Professional
Liability Policy, policy number 00278576, through its existing term
ending on May 13, 2000, as well as purchasing a six
31
(6) year tail for such policy, thereby retaining such policy in full
force and effect through and until May 13, 2007.
Section 10. Termination of Agreement
10.1 Right to Terminate Agreement. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written agreement of Seller and Purchaser;
(b) by Seller or Purchaser, if the Closing has not occurred on or
prior to December 29, 2000; provided, however, that neither
Purchaser nor Seller shall be entitled to terminate this Agreement
pursuant to this Section 10.1(b) if such party's failure to
fulfill any of its obligations in any material respect under this
Agreement has prevented the consummation of the transactions
contemplated hereby at or prior to such time;
(c) by Seller or Purchaser, if there shall be any law or regulation
enacted or adopted in final form that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Seller
or Purchaser from consummating the transactions contemplated
hereby is entered and such judgment, injunction, order or decree
shall have become final and non-appealable;
(d) by Seller or Purchaser, if this Agreement and/or the transactions
contemplated hereby are required to be approved by stockholders of
Seller and such transactions are not properly approved at any
stockholders' meeting of Seller or any adjournment or postponement
thereof by the requisite affirmative vote of the holders of the
outstanding shares of Seller Common Stock as required under the
DGCL;
(e) by Purchaser, upon breach of any material representation, warranty
or covenant on the part of Seller set forth in this Agreement, or
if any representation or warranty of Seller shall have become
untrue, in either case such that the conditions set forth in
Section 7.1 or 7.2 would not be satisfied (a "Terminating Seller
Breach"); provided, however, that, if such Terminating Seller
Breach is curable by Seller through exercise of all reasonable
efforts and for so long as Seller continues to exercise such
reasonable efforts, Purchaser may not terminate this Agreement
under this Section 10.1(e); and provided, further that the
preceding proviso shall not in any event be deemed to extend any
date set forth in clause (b) of this Section 10.1;
(f) by Seller, upon (i) the failure to occur of any event or the
occurrence of any event which would cause or reasonably could be
expected to cause, the representation or warranty in Section 4.8
of this Agreement to be or become untrue (a "Financing Breach") or
(ii) the breach of any material representation, warranty or
covenant
32
on the part of Purchaser set forth in this Agreement, or if any
representation or warranty of Seller shall have become untrue, in
either case such that the conditions set forth in Section 8.1 or
8.2 would not be satisfied (a "Terminating Purchaser Breach");
provided, however, that, if such Terminating Purchaser Breach is
curable by Purchaser through exercise of all reasonable efforts
and for so long as Seller continues to exercise such reasonable
efforts, Seller may not terminate this Agreement under this
Section 10.1(f); and provided, further, that for purposes of a
Financing Breach, reasonable efforts shall include a capital call
by Purchaser or its ultimate parent entity; and provided, further,
that the preceding proviso shall not in any event be deemed to
extend any date set forth in clause (b) of this Section 10.1; or
(g) by Seller or Purchaser, in connection with (i) approval by the
Board of Directors of the Seller of a definitive agreement concerning an
Alternative Transaction, (ii) the execution of a definitive agreement by Seller
concerning an Alternative Transaction or (iii) any recommendation by the Board
of Directors of Seller to the stockholders of Seller to approve an Alternative
Transaction.
Such right of termination shall be exercised by written notice of
termination given by the terminating party to the other party hereto in the
manner hereinafter provided.
10.2 Effect of Termination.
(a) Upon the termination of this Agreement effected exclusively
pursuant to Section 10.1(a)-(f) hereof or under the circumstances set forth in
Section 10.1(g) when no amount shall be payable under Section 10.2(b) hereof (a
"Section 10.2(a) Election"), each party's right of termination under Section
10.1 is in addition to any other rights it may have under this Agreement or
otherwise, and such exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to a Section 10.2(a)
Election, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Section 12.6 will survive; provided,
however, that if this Agreement is so terminated by a party because of the
breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
(b) In the event that this Agreement is terminated for the
reasons set forth in Section 10.1(g) hereof and the Seller or the Acquired
Companies consummate an Alternative Transaction on or prior to December 31,
2000: (i) at a price greater than $46 million, Seller shall be liable to
reimburse Purchaser for all of its reasonable and documented out-of-pocket due
diligence and other transaction expenses up to a maximum of $1 million (the
"Expense Reimbursement Liability"); or (ii) under circumstances involving
Seller's breach of Sections 3.25 and 5.6 hereof, Seller shall be liable to
Purchaser for the Expense Reimbursement Liability and for an additional fee in
the amount of $1.4 million (it being understood that any payment made pursuant
to this clause (ii) shall satisfy any obligation under clause (i) of this
Section
33
10.2(b)). It is expressly agreed that the remedies of Purchaser set forth in
this Section 10.2(b) shall be its exclusive remedies for any termination
effected pursuant to Section 10.1(g) hereof and that following any such
termination, all other obligations of Seller under this Agreement shall
terminate.
Section 11. Indemnification Related Matters; Taxes
11.1 Expiration of Representations, Warranties and Covenants. Except for
Sections 1.4, 9, 10.2, 11.1, 11.2 and 12.6 and the terms of the Non-
Disclosure Agreement, the terms of which shall survive the Closing in
accordance with the terms thereof, all of the representations,
warranties and covenants of Seller and Purchaser set forth in this
Agreement shall terminate and expire, and shall cease to be of any force
or effect, on the Closing Date, and all liability of Seller and
Purchaser with respect to such representations, warranties and covenants
shall thereupon be extinguished with respect to such parties and their
directors, officers, employees, successors, assigns, lenders and agents,
including but not limited to Purchaser's insurance agent and
underwriter(s) with respect to the Policy.
11.2 Indemnification; Tax Covenants.
(a) From and after the Closing Date, Seller agrees to indemnify,
without any gross-up for Taxes, each of Purchaser, the Acquired
Companies and their respective directors, officers and Affiliates
(collectively the "Purchaser Indemnified Parties") against all
Taxes: (i) imposed on Seller or any member of an affiliated group
with which Seller files a consolidated or combined income Tax
Return (other than the Acquired Companies), with respect to any
taxable period that ends on or before the Closing Date or
includes the Closing Date; (ii) imposed on any Acquired Company
with respect to any taxable period or portion thereof that ends
on or before the Closing Date; or (iii) attributable to making
the Section 338 Election; provided, however, that no indemnity
shall be provided under this Agreement for any Taxes resulting
from (x) a reduction in any net operating loss, capital loss or
Tax credit carryover allocable to any Acquired Company or (y) any
transaction of any Acquired Company occurring on or after the
Closing Date. Any indemnity payment made hereunder by Seller to
any Purchaser Indemnified Party shall, in accordance with Section
11.2(p)(i), be treated as an adjustment to the Purchase Price for
Tax purposes; provided, however, that to the extent all or any
portion of any indemnification claim hereunder is finally
determined by the applicable Tax authority to be treated other
than as an adjustment to the Purchase Price and the payment of
such claim is considered taxable income to such Purchaser
Indemnified Party, then Seller shall also indemnify such
Purchaser Indemnified Party for the gross-up on Taxes for such
claim.
(b) From and after the Closing Date, Purchaser and the Acquired
Companies shall indemnify, without any gross-up for Taxes, Seller
and its directors, officers and Affiliates (collectively, the
"Seller Indemnified Parties") against all Taxes
34
properly due and imposed on or with respect to the Acquired
Companies, but erroneously imposed upon any Seller Indemnified
Party by a Tax authority, that: (i) arose on or after the Closing
Date with respect to transactions of the Acquired Companies
occurring wholly after the Closing Date; (ii) are not subject to
indemnification pursuant to Section 11.2(a); and (iii) have not
been paid (or will not be paid when due) by Purchaser or the
Acquired Companies to such Tax authority or the appropriate Tax
authority. Any indemnity payment made hereunder shall, in
accordance with Section 11.2(p)(i), be treated as an adjustment
to the Purchase Price for Tax purposes; provided, however, that
to the extent that all or any portion of any indemnification
claim hereunder is finally determined by the applicable Tax
authority to be treated other than as an adjustment to the
Purchase Price and the payment of such claim is considered
taxable income to such Seller Indemnified Party, then Purchaser
shall also indemnify such Seller Indemnified Party for the gross-
up on Taxes for such claim.
(c) Payment by the indemnitor of any amount due under this Section
11.2 shall be made within ten days following written notice by
the indemnitee that payment of such amounts to the appropriate
Tax authority is due, provided that the indemnitor shall not be
required to make any payment earlier than two days before it is
due to the appropriate Tax authority. In the case of a Tax that
is contested in accordance with the provisions of Section
11.2(h), payment of the Tax to the appropriate Tax authority will
not be considered to be due earlier than the date a final
determination to such effect is made by the appropriate Taxing
authority or a court.
(d) For purposes of this Agreement, in the case of any Tax that is
imposed on a periodic basis and is payable for a period that
begins before the Closing Date and ends after the Closing Date,
the portion of such Taxes payable for the period ending on the
Closing Date shall be (i) in the case of any Tax other than a Tax
based upon or measured by income, the amount of such Tax for the
entire period multiplied by a fraction, the numerator of which is
the number of days in the period ending on the Closing Date and
the denominator of which is the number of days in the entire
period and (ii) in the case of any Tax based upon or measured by
income, the amount which would be payable if the taxable year
ended on the Closing Date. Any credit shall be prorated based
upon the fraction employed in clause (i) of the next preceding
sentence. Notwithstanding the foregoing, for purposes of Section
11.2(a) hereof, any Tax imposed on an Acquired Company as a
result of or in connection with the application of
Treas. Reg.(S). 1.1502-6 (or any similar provision of federal,
state, local or foreign law) shall be treated as imposed with
respect to a taxable period that ends on or before the Closing
Date, and the full amount of any such Tax (without apportionment
under this Section 11.2(d)) shall, together with interest,
penalties, additions to tax and all other items described in the
definition of "Tax", be subject to indemnity by Seller under
Section 11.2(a); provided, however, as to federal income Tax
matters, the foregoing clause shall only apply with respect to
Taxes imposed on a member of
35
an Affiliated Group to which an Acquired Company belonged prior
to the Closing Date. Notwithstanding the foregoing, for purposes
of Section 11.2(a) hereof, any Tax attributable to the making of
the Section 338 Election shall be treated as imposed with respect
to a taxable period that ends on or before the Closing Date, and
the full amount of any such Tax (without apportionment under this
Section 11.2(d)) shall, together with interest, penalties,
additions to tax and all other items described in the definition
of Tax, be subject to the indemnity by Seller under Section
11.2(a).
(e) Notwithstanding anything in Sections 11.2(a) through 11.2(d) to
the contrary, (i) if any Acquired Company is included in a
consolidated, combined or unitary Tax Return or report of
Purchaser, then neither Seller nor any of its Affiliates shall be
responsible for any Tax imposed or measured by the income,
property or business activities of any entity owned directly or
indirectly by Purchaser, other than any Acquired Company, but
only as it relates to Seller's indemnity obligation in Section
11.2(a) and/or (ii) if any Acquired Company was included in a
consolidated, combined or unitary Tax Return of Seller, then
neither Purchaser nor any of its Affiliates shall be responsible
for any Tax imposed or measured by the income, property or
business activities of any entity owned directly or indirectly by
Seller, other than any Acquired Company, but only as it relates
to Purchaser's indemnity obligations in Section 11.2(b).
(f) Purchaser shall promptly pay to Seller any refund or credit
(including any interest paid or credited with respect thereto)
received by Purchaser or any Acquired Company of Taxes: (i)
relating to taxable periods or portions thereof ending on or
before the Closing Date; or (ii) attributable to an amount paid
by Seller under Section 11.2(a).
(g) If Purchaser and each Acquired Company shall not make an election
under Section 172(b)(3) of the Code to relinquish the entire
carryback period with respect to any net operating loss, capital
loss or tax credit attributable to such Acquired Company in any
taxable period beginning after the Closing Date that could be
carried back to a taxable year of such Acquired Company ending on
or before the Closing Date, then Purchaser or each Acquired
Company may carry back such net operating loss, capital loss or
tax credit, as the case may be, to such prior taxable year;
provided, however, that neither Seller nor any affiliate thereof
shall be required to pay to Purchaser, any Acquired Company, or
any of their affiliates any refund or credit of Taxes that
results from such carryback or to otherwise indemnify Purchaser,
any Acquired Company, or any of their affiliates for such refund
or credit of Taxes.
(h) After the Closing Date, Purchaser shall promptly notify Seller in
writing of the commencement of any Tax audit or administrative or
judicial proceeding or of any demand or claim on Purchaser or any
Acquired Company which, if determined adversely to the taxpayer
or after the lapse of time would be grounds
36
for indemnification under Section 11.2(a) or 11.2(b). Such notice
shall contain factual information (to the extent known to
Purchaser or any Acquired Company) describing the asserted Tax
liability in reasonable detail and shall include copies of any
notice or other document received from any taxing authority in
respect of any such asserted Tax liability. If Purchaser fails to
give Seller prompt notice of an asserted Tax liability as
required by this Section 11.2(h), then Purchaser acknowledges
that such failure by Purchaser may give rise to damages, costs
and expenses to Seller.
(i) Seller may elect to direct, through tax counsel of its own
choosing and at its own expense, any audit, claim for refund and
administrative or judicial proceeding involving any asserted
liability with respect to which indemnity may be sought under
Section 11.2(a) (any such audit, claim for refund or proceeding
relating to an asserted Tax liability is referred to herein as a
"Contest"), but only with respect to the specific issue or issues
included in the Contest that are covered under the indemnity
pursuant to Section 11.2(a). If Seller elects to direct a
Contest, it shall within 30 calendar days of receipt of the
notice of asserted Tax liability notify Purchaser of its intent
to do so, and Purchaser shall cooperate and shall cause each
Acquired Company or its respective successor or successors to
cooperate, at Seller's expense, in each phase of such Contest. If
Seller elects not to direct the Contest, fails to notify
Purchaser of its election as herein provided or contests its
obligation to indemnify under Section 11.2(a), Purchaser or any
Acquired Company may pay, compromise or contest, such asserted
Tax liability. In any event, Seller may participate, at its own
expense, in the Contest. If Seller chooses to direct the Contest,
Purchaser shall promptly empower and shall cause the Acquired
Companies or their respective successors promptly to empower (by
power of attorney and such other documentation as may be
necessary and appropriate) such representatives of Seller as it
may designate to represent Purchaser or the Acquired Companies or
their respective successors in the Contest insofar as the Contest
involves an asserted Tax liability for which Seller would be
liable under Section 11.2(a). Notwithstanding anything to the
contrary in this Section 11.2(i), Purchaser may at Purchaser's
expense direct any Contest if it has a "reasonable business
purpose" for doing so, if it informs Seller of such "reasonable
business purpose" in writing. A "reasonable business purpose"
includes, but is not limited to, (A) a precedent regarding
methods of accounting, (B) issues regarding the creditworthiness
of Seller, (C) an issue that would have a future impact on the
economic or tax situation of Purchaser or the Acquired Companies,
or (D) an issue affecting the goodwill of Purchaser or the
Acquired Companies. If Purchaser exercises its right to direct
any Contest for a "reasonable business purpose" (such other
Contests are hereinafter referred to as "Other Contests"), then
Seller may "participate" (as defined below) in any Other Contest
at Seller's expense. With respect to Other Contests, Purchaser
agrees that it will not agree to any settlement with the
applicable Tax authority without Seller's prior written consent,
such consent of Seller not to be unreasonably withheld, unless
the sum (the "Purchaser's Aggregate Liability") of (i)
Purchaser's actual
37
liability with respect to such Other Contest and (ii) the
additional amounts Purchaser would be projected to pay in Taxes
(and Tax benefits lost or to be lost) as a result of the
settlement of such Other Contest (as derived by reference to the
Tax position of Purchaser immediately prior to the settlement of
the Other Contest) is greater than or equal to an amount that is
three (3) times greater than Seller's actual liability (the
"Seller's Aggregate Liability") with respect to such Other
Contest, in which case Purchaser can settle such Other Contest
without Seller's consent. Purchaser will promptly provide Seller
a detailed written calculation, along with the underlying
assumptions, of the Purchaser's Aggregate Liability and the
Seller's Aggregate Liability, if Purchaser desires to settle such
Other Contest without Seller's prior written consent. If Seller
notifies Purchaser within five (5) business days of the receipt
of the detailed calculation and underlying assumptions referenced
in the preceding sentence that it disagrees with Purchaser's
calculation of the Purchaser's Aggregate Liability and/or the
Seller's Aggregate Liability, then Purchaser and Seller will,
within five (5) business days of such notice, agree on a
nationally recognized accounting firm (other than a firm which
then serves, has been selected to serve in the future or has
served within the past three (3) years as the independent auditor
for Purchaser, Seller or any of their Affiliates) to calculate
the Purchaser's Aggregate Liability and the Seller's Aggregate
Liability, which calculation will be binding on Purchaser and
Seller. If Purchaser and Seller cannot agree on a nationally
recognized accounting firm within such five (5) business day
period, each of Purchaser and Seller will select an accounting
firm and the two accounting firms so selected will, within five
(5) business days, agree on a nationally recognized accounting
firm to calculate the Purchaser's Aggregate Liability and the
Seller's Aggregate Liability, which calculation shall be binding
on Purchaser and Seller. The fees and expenses of the accounting
firms employed pursuant to this section will be shared equally by
Purchaser and Seller. The term "participate" or "participation"
shall include: (i) participation in conferences, meetings or
proceedings with any Tax authority, the subject matter of which
includes an item for which Seller has an indemnity obligation
under Section 11.2 (a), as well as receipt of copies of
correspondence and information from the appropriate Tax authority
with respect to such Other Contest; (ii) participation in
appearances before any court or tribunal, the subject matter of
which Seller has an indemnity obligation under Section 11.2 (a);
and (iii) with respect to matters described in the preceding
clauses (i) and (ii), participation in the submission and
determination of the content of the documentation of fact and
law, briefs, and the conduct of oral arguments and presentations;
provided, however, that Seller shall not speak or otherwise
communicate during such conferences, meetings, proceedings, court
or tribunal appearances, oral arguments or other presentations.
(j) Seller shall prepare and file any Tax Returns and schedules
relating to the Acquired Companies for the period ending on or
before the Closing Date. Such Tax Returns and schedules shall be
prepared on a basis consistent with those prepared for prior tax
years unless a different treatment of any item is required by
38
an intervening change in law. Purchaser shall prepare or cause
each Acquired Company to prepare any Tax Return relating to such
Acquired Company for any period ending after the Closing Date.
(k) The parties agree that in connection with the sale of the
Acquired Stock contemplated hereby, the parties shall cause an
express election pursuant to Section 338(h)(10) of the Code (the
"Section 338 Election") to be made in respect of the Acquired
Companies, and shall comply with the rules and regulations
applicable to such Section 338 Election.
(l) For purposes of executing the Section 338 Election, on or prior
to the Closing Date, Purchaser and Seller (and/or other entities
as necessary) jointly shall execute four copies (three for
Purchaser and/or for Seller) of Internal Revenue Service Form
8023 (or any successor form) and all attachments required to be
filed therewith pursuant to applicable Treasury regulations. The
forms relating to the Section 338 Election for federal, state and
local Tax purposes hereinafter shall be referred to as the
"Forms." Purchaser and Seller agree that the Forms shall be filed
with the appropriate tax authorities not earlier than 60 days
before the latest date for the filing thereof. At least 120 days
prior to the latest date for the filing of each Form, Purchaser
shall prepare and submit to Seller any necessary corrections,
amendments or supplements to such Form and the attachments
thereto, as executed by Purchaser and Seller (and/or other
entities as necessary) on or before the Closing Date. Purchaser
shall not file any Form or the attachments thereto as corrected,
amended or supplemented unless it shall have obtained Seller's
consent thereto, which consent shall not be unreasonably
withheld. On or prior to the 30th day after Seller's receipt of
such corrections, amendments or supplements from Purchaser,
Seller shall deliver to Purchaser either (A) its consent to such
filing or (B) a written notice specifying in reasonable detail
all disputed items and the basis therefor. If, within 30 days
after Purchaser's receipt of the written notice described in
clause (B) above, Purchaser and Seller have been unable to
resolve their differences, any remaining disputed issues shall be
submitted to a nationally recognized independent public
accounting firm in the United States (other than a firm which
then serves, has been selected to serve in the future or has
served within the past three (3) years as the independent auditor
for Purchaser or any of its Affiliates) selected by Purchaser and
reasonably acceptable to Seller (the "Referee"), to resolve in a
final binding manner after hearing the views of all of the
parties. In that event, Purchaser and Seller shall execute and
consent to the filing of the corrected, amended or supplemented
Form in the manner determined by such accounting firm. In no
event, however, shall the Forms be filed later than 15 days
before they are due. The fees and expenses of the accounting firm
shall be shared equally.
(m) For purposes of making a Section 338 Election, Purchaser and
Seller shall agree upon an allocation of Purchaser's "adjusted
grossed-up basis" in the Acquired Stock (within the meaning of
the Treasury Regulations under section 338 of the
39
Code) to the tangible and intangible assets of the Acquired
Companies as of the Closing Date, subject to the remaining
requirements of this Section 11.2(m) (the "Allocation").
Purchaser shall prepare, as soon as reasonably practicable
following the Closing Date, a draft of the Allocation and provide
a copy of such draft Allocation to Seller for Seller's review.
Seller shall promptly review the draft Allocation and consent to
such draft Allocation, unless Purchaser's basis for such draft
Allocation is unreasonable. Consistent with the preparation and
review of the draft Allocation, Purchaser and Seller shall use
their reasonable commercial efforts to complete the Allocation of
the Purchase Price among the assets of the Acquired Companies in
accordance with Sections 338 and 1060 of the Code and any
comparable provisions of state, local or foreign laws, as
appropriate, no later than sixty (60) days following the Closing
Date. The Allocation shall be binding upon Purchaser and Seller
for purposes of allocating the "deemed selling price" (within the
meaning of the Treasury Regulations) among the assets of the
Acquired Companies. Neither party shall file any Tax Return, or
take a position with a Tax authority, that is inconsistent with
the Allocation. If Purchaser and Seller shall not be able to
agree to the Allocation as set forth above, then they shall
submit any dispute to the Referee or such other independent
accounting firm as may be mutually acceptable to Seller and
Purchaser to resolve all disputed matters related to the
Allocation as set forth above, and such resolution shall be
binding on both parties.
(n) Seller and Purchaser will provide each other with such
cooperation and information as either of them reasonably may
request of the other in filing any Tax Return, amended Tax Return
or claim or refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit
or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of relevant Tax
Returns or portions thereof, together with accompanying schedules
and related work papers and documents reining to rulings or other
determinations by taxing authorities. Each party shall make its
employees available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder.
Each party will retain all Tax Returns, schedules and work papers
and all material records or other documents relating to Tax
matters of the Acquired Companies for the taxable period first
ending after the Closing Date and for all prior taxable periods
until the later of: (i) the expiration of the statute of
limitations of the taxable periods to which such Tax Returns and
other documents relate, without regard to extensions except to
the extent notified by the other party in writing of such
extensions for the respective Tax periods; or (ii) six (6) years
following the due date (without extension) for such Tax Returns.
Any information obtained under this Section 11.2(n) shall be kept
confidential, except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in
conducting an audit or other proceeding.
40
(o) Notwithstanding Section 11.2(a) of this Agreement, Purchaser and
Seller each agree to assume liability for and to pay one-half (1/2) of
all sales, use, transfer, stamp, stock transfer, real property
transfer and similar Taxes incurred as a result of the Closing
Transactions contemplated hereby.
(p) The Parties agree as follows with respect to the following
miscellaneous Tax matters:
(i) the parties agree to treat all payments made under this Section
11.2 as adjustments to the Purchase Price for Tax purposes;
(ii) this Section 11.2 shall be the sole provision governing Tax
matters and indemnities therefor under this Agreement;
(iii) for purposes of this Section 11.2 all references to Purchaser,
Seller, and the Acquired Companies include successors; and
(iv) the covenants and agreements of the parties hereto contained in
this Section 11.2 shall survive the Closing and shall remain in
full force and effect until the expiration of all statutes of
limitations with respect to any Taxes that would be
indemnifiable by Seller under Section 11.2(a) of this Agreement.
Section 12. Miscellaneous Provisions
12.1 Time of Essence. Time is of the essence of this Agreement.
12.2 Compliance with Laws. Each party hereto shall execute such agreements and
other documents, and shall take such other actions, as the other parties
hereto may reasonably request (prior to, at or after the Closing) for the
purpose of ensuring that the transactions contemplated by this Agreement
are carried out in full compliance with the provisions of all applicable
laws and regulations.
12.3 Further Assurances. Each party hereto shall execute and/or cause to be
delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may
reasonably request (prior to, at or after the Closing) for the purpose of
carrying out or evidencing any of the transactions contemplated hereby.
12.4 Publicity. No press release, publicity, disclosure or notice to any
Person concerning any of the transactions contemplated by this Agreement
shall be issued, given, made or otherwise disseminated by any of the
parties hereto or any of such party's Associates at any time (whether
prior to, at or after the Closing) without the prior written approval of
the other parties hereto; provided, however, any party hereto may make
any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly traded
securities (in which case the disclosing
41
party will provide the other party with the opportunity to review in
advance the disclosure).
12.5 Access of Seller to Books and Records. At all times after the Closing
Date, Purchaser shall give Seller and Seller's agents reasonable access
to the books and records of the Acquired Companies (to the extent such
books and records relate to the period prior to the Closing Date) during
normal business hours and after receipt of prior written notice.
12.6 Expenses. Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution and performance of this
Agreement and the transactions contemplated thereby. The obligation of
Seller to pay for one-half of the premium for the Policy pursuant to
Section 5.1(k) shall be effective only if the transactions contemplated
hereby are consummated.
12.7 Governing Law. This Agreement shall be construed in accordance with, and
governed in all respects by, the laws of the State of Delaware (without
giving effect to principles of conflicts of law).
12.8 Notices. All notices and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given and duly
delivered (i) upon confirmation of facsimile, (ii) one business day
following the date when sent by overnight delivery and (iii) five
business days following the date mailed when mailed by registered or
certified mail return receipt requested and postage prepaid to the
intended recipient at the following address (or at such other address as
the intended recipient shall have specified in a written notice given to
the other party hereto):
if to Purchaser:
IM Acquisition, Inc.
c/o Charlesbank Equity Fund V, Limited Partnership
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇)▇▇▇-▇▇▇▇
with a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, Esq.
Fax: (▇▇▇)▇▇▇-▇▇▇▇
42
if to Seller:
Edgewater Technology, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Godward LLP
One Freedom Square
Reston Town Center
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
12.9 Table of Contents and Headings. The table of contents of this Agreement
and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
12.10 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective
successors and assigns. None of the parties hereto may assign either
this Agreement or any of its rights or interests or delegate any of its
obligations under this Agreement to any other Person without the prior
written consent of the other party hereto; provided, however, that (a)
Seller may, prior to the Closing, assign to any Person its right to
receive all or any portion of the amount payable to Seller under
Section 1.2 and (b) Purchaser may collaterally assign its rights under
this Agreement to its senior lenders, although any such assignment by
Purchaser's senior lenders of Purchaser's rights previously assigned to
such senior lenders hereunder may not be made without Seller's prior
written consent.
12.11 Parties in Interest. Nothing in this Agreement is intended to provide
any rights or remedies to any Person (including any employee or
creditor of the Company) other than the parties hereto.
12.12 Severability. In the event that any provision of this Agreement, or the
application of such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to
any extent, the remainder of this Agreement, and the application of
such provision to Persons or circumstances other than those as to which
it
43
is determined to be invalid, unlawful, void or unenforceable, shall
not be affected and shall continue to be valid and enforceable to the
fullest extent permitted by law.
12.13 Entire Agreement. This Agreement, and the Non-Disclosure Agreement set
forth the entire understanding of Purchaser and Seller and supersede
all other agreements and understandings between Purchaser and Seller
relating to the subject matter hereof and thereof.
12.14 Waiver. No failure on the part of either party hereto to exercise any
power, right, privilege or remedy under this Agreement, and no delay on
the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver
thereof; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
12.15 Amendments. This Agreement may not be amended, modified, altered or
supplemented except by means of a written instrument executed on behalf
of both Purchaser and Seller.
12.16 Interpretation of Agreement.
(a) Each party hereto acknowledges that it has participated in the
drafting of this Agreement, and any applicable rule of
construction to the effect that ambiguities are to be resolved
against the drafting party shall not be applied in connection
with the construction or interpretation of this Agreement.
(b) Whenever required by the context hereof, the singular number
shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; and the neuter
gender shall include the masculine and feminine genders.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words
"without limitation."
(d) References herein to "Sections," "Exhibits" and "Schedules" are
intended to refer to Sections of and Exhibits and Schedules to
this Agreement.
(e) The Exhibits and Schedules to this Agreement are
incorporated herein by reference and made a part hereof.
12.17 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
44
IN WITNESS WHEREOF, Purchaser and Seller have caused this Stock
Purchase Agreement to be executed as of the date first written above.
IM Acquisition, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Title: Vice President
--------------------------
Edgewater Technology, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Title: Executive Vice President
--------------------------
45
EXHIBIT A TO
STOCK PURCHASE AGREEMENT
Defined Terms
-------------
For purposes of this Agreement (including the Disclosure Schedules
thereto):
"Acquired Companies" shall have the meaning specified in the recitals
to this Agreement.
"Acquired Companies Schedule" shall have the meaning specified in the
recitals to this Agreement.
"Acquired Stock" shall have the meaning specified in the recitals to
this Agreement.
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such first Person, where "control"
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section 1504
of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Affiliates Schedule" shall have the meaning specified in Section 3.26
of this Agreement.
"Agreement" means this Stock Purchase Agreement, including all Exhibits
and Schedules hereto, as it may be amended from time to time in accordance with
its terms.
"Allocation" shall have the meaning specified in Section 11.2(m) of
this Agreement.
"Alternative Transaction" shall mean the sale of the Acquired Stock or
any merger, consolidation, liquidation, restructuring, recapitalization, sale or
similar transaction involving only all or any material portion of the assets of
the Acquired Companies, in each case to which Purchaser (or any of its
Affiliates) is not a party; provided, however, that any merger, consolidation,
liquidation, restructuring, recapitalization, sale or similar transaction
involving the Seller shall not be deemed to be an Alternative Transaction if the
other party to such transaction is apprised of the Transaction Documents and
prior to any closing concerning such Seller transaction agrees in writing to
perform, and does so perform, Seller's obligations under this Agreement and the
other agreements contemplated hereby.
"Assets Schedule" shall have the meaning specified in Section 3.19 of
this Agreement.
"Audited Financial Statements" shall mean, with respect to the Acquired
Companies, the audited combined balance sheet for the Acquired Companies as of
August 31, 2000, and related audited combined statements of income, cash flows
and changes in stockholders' equity for the Acquired Companies for the twelve
month period ended on such date, prepared in accordance with GAAP, with such
financial statements accompanied by an unqualified audit opinion from Seller's
independent accountants.
"August 31 Adjusted Net Working Capital" shall mean $21,944,717 per the
calculation on Exhibit J to this Agreement.
"August 31 Purchase Price Decrease Amount" shall mean $5,136,283.
"August 31 Purchase Price Increase Amount" shall mean $0.
"Benefit Plans Schedule" shall have the meaning specified in Section
3.13(a) of this Agreement.
"Brokerage Schedule" shall have the meaning specified in Section 3.10
of this Agreement.
"Business" shall have the meaning the meaning specified in Section 9.1
hereof.
"Capital Stock" shall mean (i) in the case of a corporation, any and
all shares of capital stock, (ii) in the case of an association or business
entity, any and all shares, interests, participation, rights or other
equivalents (however designated) of capital stock, (iii) in the case of a
partnership or limited liability company, any and all partnership or membership
interests (whether general or limited), (iv) in any case, any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person, and
(v) in any case, any right to acquire any of the foregoing.
"Closing" shall have the meaning specified in Section 2.1 to this
Agreement.
"Closing Date" shall mean the time and date as of which the Closing
actually takes place.
"Closing Date Adjusted Net Working Capital" shall mean Net Working
Capital derived from the Closing Date Balance Sheet increased or decreased by
the items articulated on the Schedule of Adjustments in the form of Exhibit J to
this Agreement.
"Closing Date Balance Sheet" shall mean a combined balance sheet of the
Acquired Companies as of the Closing Date prepared in accordance with GAAP,
consistently applied.
"Closing Date Purchase Price Adjustment Amount" shall mean: the total
of (a) the Closing Date Adjusted Net Working Capital, minus (b) $27,081,000 plus
(c) the August 31 Purchase Price Decrease Amount, if any, minus (d) the August
31 Purchase Price Increase Amount, if any, provided, however, that in no event
shall the calculation hereunder exceed the Purchase Price.
"Closing Transactions" shall have the meaning specified in Section 2.2
of this Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Compliance Schedule" shall have the meaning specified in Section 3.16
of this Agreement.
"Conflicts Schedule" shall have the meaning specified in Section 3.4 of
this Agreement.
"Consents Schedule" shall have the meaning specified in Section 3.27 of
this Agreement.
"Contract" means any written or oral contract, obligation, commitment
or agreement of an Acquired Company.
"Contracts Schedule" shall have the meaning specified in Section 3.18
of this Agreement.
"Contest" shall have the meaning specified in Section 11.2(i) of this
Agreement.
"Customers and Suppliers Schedule" shall have the meaning specified in
Section 3.22 of this Agreement.
"Determination Date" shall have the meaning specified in Section 1.4(b)
of this Agreement.
"Developments Schedule" shall have the meaning specified in Section 3.6
of this Agreement.
"DGCL" shall mean the General Corporation Law of the State of Delaware,
as amended.
"Disclosure Schedule" shall mean the attached schedules as listed on
the Index of Exhibits and Schedules attached hereto.
"Employees Schedule" shall have the meaning specified in Section 3.12
of this Agreement.
"Environmental and Safety Requirements" means all federal, state, local
and foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Schedule" shall have the meaning specified in Section
3.17 of this Agreement.
"ERISA" shall have the meaning specified in Section 3.13 of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Financial Statements Schedule" shall have the meaning specified in
Section 3.5 of this Agreement.
"Forms" shall have the meaning specified in Section 11.2(e) of this
Agreement.
"Frozen Benefit Plans" shall mean those Benefit Plans of the Acquired
Companies identified as frozen on the Benefit Plans Schedule.
"GAAP" shall mean generally accepted accounting principles in the
United States as promulgated by the Financial Accounting Standard Board and the
American Institute of Certified Public Accountants or the various committees
thereof.
"Hazardous Substance" means any hazardous materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or by-products, asbestos or
asbestos-containing materials, polychlorinated biphenyls (PCBs), noise, lead or
lead-based paints or materials, radon or radiation.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, and the rules promulgated thereunder.
"Indebtedness" shall have the meaning specified in Section 3.23 of this
Agreement.
"Independent Accounting Firm" has the meaning set forth in Section
1.4(b) of this Agreement.
"Insider" means, (i) any executive officer of Seller or any of its
Subsidiaries, (ii) any stockholder owning beneficially 5% or more of the Capital
Stock of Seller (excluding any Person not otherwise referenced in clauses (i),
(iii) or (iv) hereof that has filed, with respect to Seller, a beneficial
ownership report on Schedule 13G under the Exchange Act), (iii) any partner of
Seller or any of its Subsidiaries, or (iv) any Affiliate of Seller or any of its
Subsidiaries, any spouse or descendant (natural or adopted) of any such
individual, or any entity in which any such Person owns a controlling interest.
"Insurance Schedule" shall have the meaning specified in Section 3.14
of this Agreement.
"IntelliMark Executive Incentive Bonus Plan" means that certain
incentive bonus plan for the executives of IntelliMark, Inc. that report
directly to ▇▇▇▇▇ ▇▇▇▇ for the calendar year January 1, 2000 through December
31, 2000, which incentive bonus plan is subject to revenue and ebitda
performance goals, as orally amended or amended in writing from time to time.
"June 30 Balance Sheet" shall have the meaning specified in Section 3.5
of this Agreement.
"June 30 Financial Statements" shall have the meaning specified in
Section 3.5 of this Agreement.
"knowledge" and "aware" and terms of similar import mean, with respect
to Seller or any of the Acquired Companies, as the case may be, the actual
knowledge of any of the executive officers or directors of Seller or the
Acquired Companies, as applicable, with respect to the particular matter in
question.
"Leases" shall have the meaning specified in Section 3.21 of this
Agreement.
"Licenses" means all permits, licenses, franchises, certificates,
approvals and other authorizations of third parties or foreign, federal, state
or local governments or other similar rights.
"Liens" means, except with respect to any and all Permitted
Encumbrances, any mortgage, pledge, security interest, encumbrance, restrictions
on transfer lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against Seller or any Affiliate,
any filing or agreement to file a financing statement as debtor under the UCC or
any similar statute other than to reflect ownership by a third party of property
leased to Seller or any of its Subsidiaries under a lease which is not in the
nature of a conditional sale or title retention agreement.
"Litigation" shall have the meaning specified in Section 3.9 of this
Agreement.
"Litigation Schedule" shall have the meaning specified in Section 3.9
of this Agreement.
"Material Adverse Effect" shall mean any material adverse effect on the
assets, business, financial condition, operations or results of operations of
the Acquired Companies, taken as a whole, other than any change or effect
arising out of or resulting from: (i) general economic conditions; or (ii)
affecting the staffing services and solutions industry.
"Net Working Capital" shall mean the amount determined by subtracting
the total liabilities of the Acquired Companies from the total current assets of
the Acquired Companies.
"Non-Disclosure Agreement" shall mean the Letter Agreement between
Charlesbank Capital Partners, LLC and Seller dated as of June 16, 2000 and
executed by Charlesbank Capital Partners, LLC on June 19, 2000.
"Officers, Directors and Bank Accounts Schedule" shall have the meaning
specified in Section 3.15 of this Agreement.
"Ordinary Course of Business" means the ordinary course of any of the
Acquired Companies' businesses, in each case consistent with past practice.
"Organization Schedule" shall have the meaning specified in the
recitals to this Agreement.
"Other Contests" shall have the meaning specified in Section 11.2(i) of
this Agreement.
"Permits Schedule" shall have the meaning specified in Section 3.11 of
this Agreement.
"Permitted Encumbrances" shall mean: (A) statutory liens for current
taxes or other governmental charges with respect to such property not yet due
and payable or the amount or validity of which is being contested in good faith
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, which reserves are included in the Acquired Companies; (B)
mechanics, carriers, workers, repairers and similar statutory liens arising or
incurred in the Ordinary Course of Business for amounts which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect; (C)
zoning, entitlement, building and other land use regulations imposed by
governmental agencies having jurisdiction over such property which are not
violated by the current use and operation of such property; (D) covenants,
conditions, restrictions, easements and other matters of record affecting title
to such property which do not unreasonably interfere with the current use,
occupancy, or value, or the marketability of title, of such property; (E)
pledges or deposits in connection with or to secure workmen's compensation,
unemployment insurance pension or other employee benefits; (F) any Lien
renewing, extending or refunding any Lien permitted hereunder; (G) Liens and
imperfections of title the existence of which would not materially affect the
use of the property subject thereto, consistent with past practice; and (H)
encumbrances resulting from the failure to obtain the consent of a third party
(except for such consents as are required to be obtained under the applicable
Contacts of the Acquired Companies as a result of the transactions contemplated
by this Agreement) in respect of the assignment of or conveyance of rights under
any Contract of the Acquired Companies in connection with the transaction
contemplated by this Agreement.
"Person" shall mean any individual, corporation, limited liability
company, association, general partnership, limited partnership, venture, trust,
association, firm, organization, company, business, entity, union, society,
government (or political subdivision thereof) or governmental agency, authority
or instrumentality.
"Policy" means an insurance policy for indemnity for losses and damages
that Purchaser suffers relating to this Agreement during the period covered
thereby, the terms and conditions of which shall include a total aggregate
indemnity of $20 million and a deductible of at least $1 million.
"Proprietary Rights" shall mean as to the Acquired Companies any
patent, patent application, trademark (whether registered or unregistered and
whether or not relating to a published work), trademark application, trade name,
fictitious business name, service ▇▇▇▇ (whether registered or unregistered),
service ▇▇▇▇ application, copyright (whether registered or unregistered),
copyright application, maskwork, maskwork application, trade secret, know-how,
franchise, computer software, invention, design, blueprint, proprietary product,
technology or other intellectual property right or intangible asset.
"Proprietary Rights Schedule" shall have the meaning specified in
Section 3.8(a) of this Agreement.
"Purchase Price" shall have the meaning specified in Section 1.2.
"Purchaser" shall mean IntelliMark Acquisition, Inc., a Delaware
corporation.
"Purchaser's Aggregate Liability" shall have the meaning specified in
Section 11.2 (f) of this Agreement.
"Purchaser Indemnified Parties" shall have the meaning specified in
Section 11.2 (a) of this Agreement.
"Real Estate" shall have the meaning specified in Section 3.21 of this
Agreement.
"Real Estate Schedule" shall have the meaning specified in Section 3.21
of this Agreement.
"Referee" shall have the meaning specified in Section 11.2(e) of this
Agreement.
"Representatives" shall mean a Person's officers, directors, employees,
agents, attorneys, accountants, investment bankers, advisors and
representatives.
"Required Approvals" shall have the meaning specified in Section 7.4 of
this Agreement.
"SEC" means the Securities and Exchange Commission of the United
States.
"Section 338 Election" shall have the meaning specified in Section
11.2(k) of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Seller" shall mean Edgewater Technology, Inc., a Delaware corporation.
"Seller's Aggregate Liability" shall have the meaning specified in
Section 11.2(f) of this Agreement.
"Seller Indemnified Parties" shall have the meaning specified in
Section 11.2(b) of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation a
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, limited liability
company, association or other business entity a majority of the partnership or
other similar ownership interest of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes of this definition, a Person is
deemed to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if such Person is allocated a
majority of the gains or losses of such partnership, limited liability company,
association or other business entity or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of
Taxes of any party or the administration of any laws, regulations or
administrative requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
receipts, sales, use, employment, franchise, profits, property, services, value
added, withholding, social security, accumulated earnings, alternative or add-on
minimum, transfer, privilege, payroll, capital stock, unemployment, excise,
occupancy, custom, occupation or other taxes, stamp taxes and duties,
assessments or charges of any kind whatsoever (whether payable directly or by
withholding), together with any interest and any penalties (from the date any
such tax is due or the date any such estimate is due for any such tax),
additions to tax or additional amounts imposed by any taxing authority with
respect thereto, and liability for such items of another Person under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, or by contract or otherwise.
"Taxes Schedule" shall have the meaning specified in Section 3.7 of
this Agreement.
"Transaction Documents" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any party in connection with the transactions contemplated to be consummated
pursuant to this Agreement.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
"UCC" means the Uniform Commercial Code.
"Undisclosed Liabilities Schedule" shall have the meaning specified in
Section 3.20 of this Agreement.
"WARN" shall have the meaning specified in Section 3.12 of this
Agreement.
"Written Licenses" shall have the meaning specified in Section 3.8 of
this Agreement.
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
Exhibit A - Listing of Defined Terms
Exhibit B - Form of the Shares Services Agreement
Exhibit C - Form of the Legal Opinions from ▇▇▇▇▇▇ Godward LLP, Morris, Nichols,
Arsht and Tunnel and Seller's General Counsel
Exhibit D - List of Certain Items to be Assumed by Seller
Exhibit E - Form of Termination Agreement by and between ▇▇▇▇▇ ▇▇▇▇ and Seller
Exhibit F - Form of Nonsolicitation Agreement by and between Purchaser and ▇▇▇▇▇
▇. ▇▇▇▇▇▇
Exhibit G - Form of Nonsolicitation Agreement by and between Purchaser
and each of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Exhibit H - Form of Legal Opinion from Ropes & ▇▇▇▇
Exhibit I - List of Certain Items to be Assumed by Purchaser
Exhibit J - Form of the Schedule of Adjustments
SCHEDULES
---------
Acquired Companies Schedule
Affiliates Schedule
Assets Schedule
Benefit Plans Schedule
Brokerage Schedule
Compliance Schedule
Conflicts Schedule
Consents Schedule
Contracts Schedule
Customers and Suppliers Schedule
Developments Schedule
Employees Schedule
Environmental Schedule
Financial Statements Schedule
Insurance Schedule
Litigation Schedule
Officers, Directors and Bank Accounts Schedule
Organization Schedule
Permits Schedule
Proprietary Rights Schedule
Real Estate Schedule
Taxes Schedule
Undisclosed Liabilities Schedule
