AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SOURCEONE COMPUTER CORPORATION,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, AND R. ▇▇▇▇▇▇ ▇▇▇▇▇,
THE SHAREHOLDERS OF SOURCEONE COMPUTER CORPORATION,
EPLUS, INC.,
AND
EPLUS TECHNOLOGY, INC.
Dated as of October 2, 2001
TABLE OF CONTENTS
Page
Parties........................................................................1
Preamble.......................................................................1
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER....................................1
1.1 Merger.............................................................1
1.2 Time and Place of Closing..........................................2
1.3 Effective Time.....................................................2
1.4 Follow-On Merger...................................................2
ARTICLE 2 TERMS OF MERGER.....................................................3
2.1 Articles of Incorporation..........................................3
2.2 Bylaws.............................................................3
2.3 Directors and Officers.............................................3
ARTICLE 3 MANNER OF CONVERTING SHARES.........................................3
3.1 Conversion of Shares...............................................3
3.2 Fractional Shares..................................................4
3.3 Anti-dilution Provisions...........................................4
ARTICLE 4 EXCHANGE OF SHARES..................................................4
4.1 Exchange Procedures................................................4
4.2 Rights of Former SourceOne Shareholders............................5
4.3 Establishment of Escrow............................................5
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SOURCEONE AND THE SHAREHOLDERS....6
5.1 Organization, Standing, and Power..................................6
5.2 Authority; No Breach By Agreement..................................6
5.3 Capital Stock......................................................7
5.4 SourceOne Subsidiaries.............................................8
5.5 Financial Statements...............................................8
5.6 Absence of Undisclosed Liabilities.................................8
5.7 Absence of Certain Changes or Events...............................8
5.8 Tax Matters........................................................9
5.9 Assets............................................................10
5.10 Environmental Matters.............................................10
5.11 Compliance with Laws..............................................11
5.12 Labor Relations...................................................12
5.13 Employee Benefit Plans............................................12
5.14 MaterialContracts.................................................14
5.15 Legal Proceedings.................................................15
5.16 Reports...........................................................16
5.17 Statements True and Correct.......................................16
5.18 Tax and Regulatory Matters........................................16
5.19 Covenants and Warranties of Shareholders..........................17
i
5.20 Board Recommendation..............................................18
5.21 SourceOne Equity..................................................18
5.22 No Other Representations or Warranties............................18
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF EPLUS............................18
6.1 Organization, Standing, and Power.................................18
6.2 Authority; No Breach By Agreement.................................18
6.3 CapitalStock......................................................19
6.4 SEC Filings; Financial Statements.................................20
6.5 Absence of Undisclosed Liabilities................................20
6.6 Compliance with Laws..............................................21
6.7 Legal Proceedings.................................................21
6.8 Reports...........................................................21
6.9 Statements True and Correct.......................................21
6.10 Tax and Regulatory Matters........................................22
6.11 Matters Relating to Merger Sub....................................22
6.12 Absence of Certain Changes........................................22
6.13 Section 16.......................................................22
6.14 No Other Representations or Warranties............................23
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION...........................23
7.1 Affirmative Covenants of SourceOne................................23
7.2 Negative Covenants of SourceOne............. .....................23
7.3 Adverse Changes in Condition......................................25
7.4 Reports...........................................................25
ARTICLE 8 ADDITIONAL AGREEMENTS..............................................26
8.1 Shareholder Matters...............................................26
8.2 Exchange Listing..................................................26
8.3 Regulatory Filings; Required Consents.............................26
8.4 Filings with State Offices........................................27
8.5 Agreement as to Efforts to Consummate.............................27
8.6 Investigation and Confidentiality.................................27
8.7 Press Releases....................................................28
8.8 Certain Actions...................................................28
8.9 Tax Treatment.....................................................29
8.10 State Takeover Laws...............................................29
8.11 Employee Benefits and Contracts...................................29
8.12 Indemnification...................................................30
8.13 Personal Guarantees...............................................31
8.14 Restrictions on Conduct...........................................31
8.15 Restrictions on Transfer..........................................34
8.16 Follow-On Merger..................................................35
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.......... .......35
9.1 Conditions to Obligations of Each Party...........................35
ii
9.2 Conditions to Obligations of ePlus................................36
9.3 Conditions to Obligations of SourceOne............................37
ARTICLE 10 TERMINATION........................................................39
10.1 Termination.......................................................39
10.2 Effect of Termination.............................................40
ARTICLE 11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION....40
11.1 Survival of Representations and Warranties.......................40
11.2 Obligation of the Shareholders to Indemnify......................41
11.3 Obligation of ePlus to Indemnify.................................41
11.4 Notice of Loss or Asserted Liability.............................42
11.5 Opportunity to Contest...........................................42
11.6 Limitations on Indemnification...................................43
11.7 Subrogation Rights...............................................44
11.8 Insurance and Taxes..............................................44
11.9 Indemnification Payments.........................................44
11.10 Indemnification Exclusive Remedy.................................44
11.11 Arbitration......................................................44
ARTICLE 12 MISCELLANEOUS.....................................................45
12.1 Definitions......................................................45
12.2 Expenses.........................................................56
12.3 Brokers and Finders..............................................56
12.4 Entire Agreement.................................................56
12.5 Amendments.......................................................57
12.6 Waivers..........................................................57
12.7 Assignment.......................................................57
12.8 Notices..........................................................58
12.9 Governing Law....................................................59
12.10 Counterparts; Delivery By Facsimile..............................59
12.11 Captions.........................................................59
12.12 Interpretations..................................................59
12.13 Enforcement of Agreement.........................................59
12.14 Severability.....................................................59
Signatures....................................................................60
iii
LIST OF EXHIBITS
Exhibit Number Description
1. Form of Agreement of Merger. (ss. 1.1).
2. Form of Plan of Merger. (ss. 1.4).
3. Form of Escrow Agreement (ss.4.3).
4. Form of Claims Letter. (ss. 8.12(d)).
5. Opinion of SourceOne Counsel. (ss. 9.2(e)).
6. Opinion of SourceOne Special Counsel. (ss. 9.2(e)).
7. Form of Employment Agreement of ▇▇▇▇▇▇ ▇▇▇▇. (ss. 9.2(i)).
8. Form of Employment Agreement of R. ▇▇▇▇▇▇ ▇▇▇▇▇. (ss. 9.2(i)).
9. Opinion of ePlus Counsel. (ss. 9.3(d)).
iv
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is made and entered into as of October 2, 2001, by and among SourceOne Computer
Corporation ("SourceOne"), a corporation organized and existing under the Laws
of the State of California, and ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, and R. ▇▇▇▇▇▇ ▇▇▇▇▇,
the shareholders of SourceOne (each individually, a "Shareholder" and
collectively, the "Shareholders"), ePlus, inc. ("ePlus"), a corporation
organized and existing under the Laws of the State of Delaware, and ePlus
Technology, inc. ("ePlus Technology"), a corporation organized and existing
under the Laws of the Commonwealth of Virginia and a wholly-owned subsidiary of
ePlus.
Preamble
The Boards of Directors of SourceOne, ePlus and ePlus
Technology are of the opinion that the transactions described herein are in the
best interests of SourceOne, ePlus and ePlus Technology and their respective
shareholders and stockholders. This Agreement provides for the acquisition of
SourceOne by ePlus pursuant to the merger of a newly-formed, wholly-owned
subsidiary of ePlus to be organized under the laws of the State of California
("Merger Sub") with and into SourceOne. SourceOne shall be the surviving
corporation of the merger. At the effective time of the merger, the outstanding
shares of the common stock of SourceOne shall be converted into the right to
receive a combination of shares of the common stock of ePlus and a cash payment
as further set forth herein. As a result, the shareholders of SourceOne shall
become stockholders of ePlus. As promptly as possible after the merger of Merger
Sub with and into SourceOne, SourceOne shall be merged with and into ePlus
Technology. As a result of the subsequent merger of SourceOne with and into
ePlus Technology, ePlus Technology shall continue to conduct SourceOne's
business and operations as a wholly-owned subsidiary of ePlus. The transactions
described in this Agreement are subject to the approval of the shareholders of
SourceOne and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Mergers
(as defined below) together for federal income tax purposes shall be treated as
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
Certain terms used in this Agreement are defined in Section
12.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub shall be merged with and into SourceOne in accordance
with the relevant provisions of the CGCL and with the effect as provided therein
and herein and the separate existence of Merger Sub shall thereupon cease (the
"Merger"). SourceOne shall be the Surviving Corporation resulting from the
Merger and shall operate as a wholly-owned subsidiary of ePlus and continue to
be governed by the Laws of the State of California. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved and
adopted by the respective Boards of Directors of SourceOne and ePlus and the
Agreement of Merger, substantially in the form of Exhibit 1, which will be
approved and adopted by the Boards of Directors of SourceOne and Merger Sub upon
the organization of Merger Sub.
1.2 Time and Place of Closing. The closing of transactions contemplated
hereby (the "Closing") shall take place as soon as practicable, but not later
than the second business day, after the satisfaction or waiver of each of the
conditions set forth in Article 9 hereof (other than those conditions which, by
their terms, are to be satisfied or waived on the Closing Date) or at such other
time as the Parties hereto agree in writing (the "Closing Date"). The Closing
shall take place at such location as may be mutually agreed upon by the Parties.
In connection with the Closing, the parties hereto shall cause the Merger to be
consummated by filing the Agreement of Merger with the Secretary of State of the
State of California, in accordance with the relevant provisions of the CGCL.
1.3 Effective Time. The Merger and the other transactions contemplated by
this Agreement shall become effective as of the date and time that the Agreement
of Merger together with the required officer's certificates are filed with the
Secretary of State of the State of California (the "Effective Time"). At the
Effective Time, the effect of the Merger shall be as provided in this Agreement,
the Agreement of Merger and the applicable provisions of the CGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights privileges, powers and franchises of SourceOne
and the Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of SourceOne and the Merger Sub shall become the debts,
liabilities, and duties of the Surviving Corporation.
1.4 Follow-On Merger. As promptly as possible after the consummation of the
Merger, subject to the terms and conditions of this Agreement and the Plan of
Merger, substantially in the form of Exhibit 2, SourceOne shall be merged with
and into ePlus Technology in accordance with the relevant provisions of the
Virginia Stock Corporation Act and with the effect as provided therein and
herein and the separate existence of SourceOne shall thereupon cease (the
"Follow-On Merger," and together with the Merger, the "Mergers"). ePlus
Technology shall be the surviving corporation of the Follow-On Merger, shall
operate as a wholly-owned subsidiary of ePlus and continue to be governed by the
Laws of the Commonwealth of Virginia.
-2-
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of SourceOne
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation immediately after the Effective Time.
2.2 Bylaws. The Bylaws of SourceOne in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation immediately
after the Effective Time.
2.3 Directors and Officers. The directors of SourceOne in office
immediately prior to the Effective Time and such additional persons as may be
elected by ePlus shall be the directors of the Surviving Corporation immediately
after the Effective Time. The officers of the Surviving Corporation immediately
after the Effective Time shall be ▇▇▇▇▇▇ ▇▇▇▇, President, and R. ▇▇▇▇▇▇ ▇▇▇▇▇,
Chief Operating Officer.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of ePlus or SourceOne, or the stockholders or shareholders of either of the
foregoing, the shares of ePlus and SourceOne shall be converted as follows:
(a) Each share of ePlus Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and after
the Effective Time.
(b) Each share of Merger Sub Common Stock issued and outstanding at the
Effective Time shall be converted into and exchanged for one share of SourceOne
Common Stock.
(c) Each share of SourceOne Common Stock (excluding shares held in treasury
by SourceOne or held by any ePlus Company, in each case other than in a
fiduciary capacity or as a result of debts previously contracted) issued and
outstanding immediately prior to the Effective Time, shall be automatically
cancelled and extinguished and converted into and exchanged for the right to
receive approximately 0.130952 (the "Stock Exchange Ratio") shares of ePlus
Common Stock and approximately $0.380956 in cash (together, the "Per Share
Merger Consideration"). Shares of SourceOne Common Stock held by SourceOne or
any ePlus Company, in each case other than in a fiduciary capacity or as a
result of debts previously contracted, shall be canceled and extinguished
without any rights to conversion thereof and no consideration shall be delivered
in exchange therefore.
-3-
3.2. Fractional Shares. Notwithstanding any other provision of this
Agreement or the Agreement of Merger, each holder of shares of SourceOne Common
Stock exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of ePlus Common Stock (after aggregating all
fractional shares of ePlus Common Stock to be received by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of ePlus Common Stock multiplied by $8.00. No such
holder will be entitled to dividends, voting rights, or any other rights as a
stockholder in respect of any fractional shares.
3.3 Anti-dilution Provisions. The Per Share Merger Consideration shall be
adjusted to reflect fully the effect of any stock split, reverse stock split,
stock dividend (including any dividend or general distribution of securities
convertible into or exchangeable or exercisable for ePlus Common Stock or
SourceOne Common Stock), reclassification, reorganization, recapitalization or
other like change with respect to ePlus Common Stock or SourceOne Common Stock
occurring after the date hereof and prior to the Effective Time, so as to
provide holders of SourceOne Common Stock the same economic effect as
contemplated by this Agreement prior to such stock split, reverse stock split,
stock dividend, reclassification, reorganization, recapitalization or other like
change.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. On the Closing Date, each Shareholder shall
surrender and endorse to ePlus the certificate or certificates representing all
outstanding shares of SourceOne Common Stock held by such Shareholder and shall
upon surrender thereof receive in exchange therefor (i) a cash payment (without
interest), by wire transfer of immediately available funds, or in such other
form and manner as may be mutually satisfactory, in an amount equal to
approximately $0.380956 multiplied by the number of shares of SourceOne Common
Stock held by such Shareholder as of the Effective Time, less such Shareholder's
pro-rata portion of the Escrowed Cash and (ii) a certificate or certificates
representing the number of shares of ePlus Common Stock equal to the Stock
Exchange Ratio multiplied by the number of shares of SourceOne Common Stock held
by such Shareholder as of the Effective Time, less such Shareholder's pro-rata
portion of the Escrowed Shares. To the extent required by Section 3.2 of this
Agreement, each Shareholder also shall receive, upon surrender of the
certificate or certificates representing such Shareholders' shares of SourceOne
Common Stock, cash in lieu of any fractional share of ePlus Common Stock to
which such holder may be otherwise entitled (without interest). Until so
surrendered, each outstanding certificate of SourceOne Common Stock shall be
deemed for all purposes, other than as provided in Section 4.2 below with
respect to the payment of dividends or other distributions payable to the
holders of shares of ePlus Common Stock, to represent the Per Share Merger
Consideration and payment for fractional shares into which such shares of
SourceOne Common Stock have been converted pursuant to Sections 3.1 and 3.2
-4-
hereof. ePlus shall not be obligated to deliver the consideration to which any
former holder of SourceOne Common Stock is entitled as a result of the Merger
until such holder surrenders such holder's certificate or certificates
representing the shares of SourceOne Common Stock for exchange as provided in
this Section 4.1. The certificate or certificates of SourceOne Common Stock so
surrendered shall be duly endorsed as ePlus may reasonably require. Any other
provision of this Agreement notwithstanding, neither ePlus nor SourceOne shall
be liable to a holder of SourceOne Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
4.2 Rights of Former SourceOne Shareholders. At the Effective Time, the
stock transfer books of SourceOne shall be closed as to holders of SourceOne
Common Stock immediately prior to the Effective Time and no transfer of
SourceOne Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 4.1 of this Agreement, each certificate theretofore representing shares
of SourceOne Common Stock shall from and after the Effective Time represent for
all purposes only the right to receive the consideration provided in Sections
3.1 and 3.2 of this Agreement in exchange therefor, subject, however, to ePlus'
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by SourceOne
in respect of such shares of SourceOne Common Stock in accordance with the terms
of this Agreement and which remain unpaid at the Effective Time. To the extent
permitted by Law, the holders of certificates representing shares of SourceOne
Common Stock issued and outstanding at the Effective Time shall be entitled to
vote after the Effective Time at any meeting of ePlus stockholders the number of
whole shares of ePlus Common Stock into which their respective shares of
SourceOne Common Stock are converted and have been issued, regardless of whether
such former SourceOne shareholders have exchanged their certificates
representing SourceOne Common Stock for certificates representing ePlus Common
Stock in accordance with the provisions of this Agreement. Whenever a dividend
or other distribution is declared by ePlus on the ePlus Common Stock, the record
date for which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of ePlus Common Stock issuable
pursuant to this Agreement, but no dividend or other distribution payable to the
holders of record of ePlus Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of SourceOne Common Stock issued and outstanding at the Effective Time
until such holder surrenders such certificate for exchange as provided in
Section 4.1 of this Agreement. However, upon surrender of such SourceOne Common
Stock certificate, both the ePlus Common Stock certificate (together with all
such undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
4.3 Establishment of Escrow. On the Closing Date, ePlus, the Escrow Agent
(as defined in the Escrow Agreement), and the Shareholders shall enter into the
Escrow Agreement, substantially in the form attached hereto as Exhibit 3 (the
"Escrow Agreement"), in order to establish an escrow of ePlus Common Stock. As
soon as practicable after the Effective Time, ePlus shall cause to be
-5-
distributed to the Escrow Agent a certificate or certificates representing
27,500 shares of ePlus Common Stock (the "Escrowed Shares") and $80,002 (the
"Escrowed Cash"). The Escrowed Shares shall be registered in the name of the
Escrow Agent as nominee for each Shareholder and held in escrow by the Escrow
Agent. The Escrowed Shares and Escrowed Cash shall be available to compensate
ePlus, on a pro rata basis, for certain damages as provided in Article 11 and
the Escrow Agreement. The Escrowed Shares and Escrowed Cash shall be withheld on
a pro rata basis from the consideration issued to each Shareholder pursuant to
Section 4.1. To the extent the Escrowed Shares and Escrowed Cash are not used to
compensate ePlus for certain damages as provided in Article 11, such Escrowed
Shares and Escrowed Cash shall be released to the Shareholders as provided in
Article 11 hereof and the Escrow Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SourceOne and the Shareholders
SourceOne and the Shareholders hereby jointly and severally represent and
warrant to ePlus as follows:
5.1 Organization, Standing, and Power. SourceOne is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
California, and has the corporate power and authority to carry on its business
as now conducted and to own, lease, and operate its material Assets. SourceOne
is duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions where
the character of its material Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed would not have, individually or
in the aggregate, a SourceOne Material Adverse Effect.
5.2 Authority; No Breach By Agreement.
(a) SourceOne has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and the Agreement of
Merger and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance of this Agreement, and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of SourceOne, subject to the approval of this Agreement and the Agreement
of Merger by the holders of all of the shares of SourceOne Common Stock, which
is the only shareholder vote required for approval of this Agreement and
consummation of the Merger by SourceOne. Subject to such requisite shareholder
approval, this Agreement represents a legal, valid, and binding obligation of
SourceOne, enforceable against SourceOne in accordance with its terms (except in
all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
-6-
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement and the Agreement
of Merger by SourceOne and the Shareholders, nor the consummation by SourceOne
and the Shareholders of the transactions contemplated hereby or thereby, nor
compliance by SourceOne and the Shareholders with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of SourceOne's
Articles of Incorporation or Bylaws, or (ii) subject to receipt of the requisite
Consents referred to in Section 9.1(b) of this Agreement, constitute or result
in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any material Asset of SourceOne under, any Contract or
Permit of SourceOne or any Shareholder, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a SourceOne Material Adverse Effect, or (iii) subject to receipt
of the requisite Consents referred to in Section 9.1(b) of this Agreement,
violate any material Law or material Order applicable to SourceOne or any
Shareholder or any of SourceOne's material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
NASDAQ NMS and the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation or both with respect to any
employee benefit plans, and other than the filing of the Agreement of Merger and
Officers' Certificates with the California Secretary of State and other than
Consents, filings, or notifications which, if not obtained or made, would not
have, individually or in the aggregate, a SourceOne Material Adverse Effect, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by SourceOne of the Merger and the other transactions
contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of SourceOne consists, as of the date of
this Agreement, of 10,000,000 shares of SourceOne Common Stock, of which
2,100,000 shares are issued and outstanding as of the date of this Agreement,
and not more than 2,100,000 shares will be issued and outstanding at the
Effective Time. All of the issued and outstanding shares of SourceOne Common
Stock are duly and validly issued and outstanding and are fully paid and
nonassessable under the CGCL. None of the outstanding shares of SourceOne Common
Stock has been issued in violation of any preemptive rights of the current or
past shareholders of SourceOne. SourceOne has not reserved any shares of
SourceOne Common Stock for issuance under the SourceOne Stock Plans. The
Shareholders are the only holders of SourceOne Common Stock.
(b) Except as set forth in Section 5.3(a) of this Agreement there are no
shares of capital stock or other equity securities of SourceOne outstanding and
no outstanding Rights relating to the capital stock of SourceOne.
-7-
5.4 SourceOne Subsidiaries. SourceOne has no Subsidiaries as of the date of
this Agreement and will have no Subsidiaries at the Effective Time.
5.5 Financial Statements. SourceOne has attached to Section 5.5 of the
SourceOne Disclosure Memorandum, and has delivered to ePlus copies of, all
SourceOne Financial Statements for periods ended prior to the date hereof and
will deliver to ePlus copies of all SourceOne Financial Statements prepared
subsequent to the date hereof and prior to the Effective Time. The SourceOne
Financial Statements (as of the dates thereof and for the periods covered
thereby) (i) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of SourceOne, which are or will be, as the
case may be, complete and correct in all material respects and which have been
or will have been, as the case may be, maintained in accordance with SourceOne's
past business practices, and (ii) present or will present, as the case may be,
fairly in all material respects the financial position of SourceOne as of the
dates indicated and the results of operations, changes in shareholder's equity,
and cash flows of SourceOne for the periods indicated, in accordance with GAAP
(subject to any exceptions as to consistency as may be indicated in the notes
thereto or, in the case of interim financial statements, to normal recurring
year-end adjustments which were not or are not expected to be material in amount
or effect).
5.6 Absence of Undisclosed Liabilities. SourceOne has no Liabilities that
are reasonably likely to have, individually or in the aggregate, a SourceOne
Material Adverse Effect, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of SourceOne, included in the
SourceOne Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business subsequent to June 30,
2001. SourceOne has not incurred or paid any Liability since June 30, 2001,
except for such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and except for the fees and expenses
relating to the Merger as described in Article 12 of this Agreement.
5.7 Absence of Certain Changes or Events. Since June 30, 2001, except as
disclosed in the SourceOne Financial Statements delivered prior to the date of
the Agreement or as otherwise disclosed in the SourceOne Disclosure Memorandum,
(i) there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a SourceOne
Material Adverse Effect, and (ii) SourceOne has not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of
SourceOne set forth in Section 7.2 of this Agreement, other than conducting the
process that has led up to the execution and consummation of this Agreement.
-8-
5.8 Tax Matters.
(a) Since the date of SourceOne's incorporation, all Tax Returns required
to be filed by or on behalf of SourceOne have been timely filed, or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 2000, and, to the Knowledge of SourceOne, all
Tax Returns filed are complete and accurate in all material respects. All Tax
Returns for periods ending on or before the date of the most recent fiscal year
end immediately preceding the Effective Time will be timely filed or requests
for extensions will be timely filed. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes, that is reasonably likely to result in a determination
that would have, individually or in the aggregate, a SourceOne Material Adverse
Effect, except to the extent reserved against in the SourceOne Financial
Statements dated prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) SourceOne has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due (excluding such
statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) Adequate provision for any Taxes due or to become due for SourceOne for
the period or periods through and including the date of the respective SourceOne
Financial Statements has been made and is reflected on such SourceOne Financial
Statements.
(d) SourceOne is in compliance with, and its records contain the
information and documents (including properly completed IRS Forms W-9) necessary
to comply with, in all material respects, applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(e) SourceOne has not made any payments, is not obligated to make any
payments, and is not a party to any contract, agreement, or other arrangement
that could obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Internal Revenue Code, except as
set forth in Section 5.8(e) of the SourceOne Disclosure Memorandum; provided
that none of the contracts disclosed therein contains any "gross up" provision.
(f) There are no material Liens with respect to Taxes upon any of the
Assets of SourceOne .
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of SourceOne that occurred during or after any Taxable
-9-
Period in which SourceOne incurred a net operating loss that carries over to any
Taxable Period ending after December 31, 2000.
(h) SourceOne has not filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) SourceOne currently has no and has not had a permanent establishment in
any foreign country, as defined in any applicable Tax treaty or convention
between the United States and such foreign country.
5.9 Assets. SourceOne has good and marketable title, free and clear of all
Liens, to all of its Assets, other than such defects and Liens which would not
have a SourceOne Material Adverse Effect. All tangible properties used in the
businesses of SourceOne are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
SourceOne's past practices. All Assets which are material to SourceOne's
business on a consolidated basis, held under leases or subleases by SourceOne ,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect. SourceOne currently maintains insurance in
such amounts, scope, and coverage as determined by its management (in its
reasonable discretion) to be necessary for its operations as currently conducted
and currently proposed to be conducted. SourceOne has not received notice from
any insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no claims pending under such policies of insurance and no notices have been
given by SourceOne under such policies. The Assets of SourceOne include all
material Assets required to operate the business of the SourceOne Companies as
presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of SourceOne, SourceOne and its Operating Properties
are, and have been, in compliance with all Environmental Laws, except for
violations which would not have, individually or in the aggregate, a SourceOne
Material Adverse Effect.
(b) To the Knowledge of SourceOne, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other forum in
which SourceOne or any of its Operating Properties (or SourceOne in respect of
such Operating Property) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
-10-
potentially affecting) a site owned, leased, or operated by SourceOne or any of
its Operating Properties, except for such Litigation pending or threatened that
would not have, individually or in the aggregate, a SourceOne Material Adverse
Effect, nor, to the Knowledge of SourceOne, is there any reasonable basis for
any Litigation of a type described in this sentence, except such as would not
have, individually or in the aggregate, a SourceOne Material Adverse Effect.
(c) During the period of (i) SourceOne's ownership or operation of any of
its current Operating Properties, or (ii) SourceOne's holding of a security
interest in an Operating Property, to the Knowledge of SourceOne, there have
been no releases, discharges, spillages, or disposals of Hazardous Material in,
on, under, adjacent to, or affecting (or potentially affecting) such properties,
except such as would not have, individually or in the aggregate, a SourceOne
Material Adverse Effect. Prior to the period of (i) SourceOne's ownership or
operation of any of its current Operating Properties, or (ii) SourceOne's
holding of a security interest in an Operating Property, to the Knowledge of
SourceOne, there were no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, or affecting any such property or Operating
Property, except such as would not have, individually or in the aggregate, a
SourceOne Material Adverse Effect.
5.11 Compliance with Laws. SourceOne has in effect all Permits necessary
for it to own, lease, or operate its material Assets and to carry on its
business as now conducted, except for those Permits the absence of which would
not have, individually or in the aggregate, a SourceOne Material Adverse Effect,
and there has occurred no Default under any such Permit, other than Defaults
which would not have, individually or in the aggregate, a SourceOne Material
Adverse Effect. Additionally, SourceOne:
(a) is not in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments);
(b) is not in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for Defaults which would
not have, individually or in the aggregate, a SourceOne Material Adverse Effect;
or
(c) since the date of its organization, has not received any written
notification or written communication from any agency or department of federal,
state, or local government or any Regulatory Authority or the staff thereof (i)
asserting that SourceOne is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where such
noncompliance would have, individually or in the aggregate, a SourceOne Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of which
would have, individually or in the aggregate, a SourceOne Material Adverse
Effect, or (iii) requiring SourceOne to enter into or consent to the issuance of
a cease and desist order, formal agreement, directive, commitment, or memorandum
of understanding, or to adopt any Board resolution or similar undertaking.
-11-
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to ePlus.
5.12 Labor Relations. SourceOne is not the subject of any Litigation
asserting that it has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or comparable state Law) or seeking to compel
it to bargain with any labor organization as to wages or conditions of
employment, nor is SourceOne a party to or bound by any collective bargaining
agreement, Contract, or other agreement or understanding with a labor union or
labor organization, nor is there any strike or other labor dispute involving
SourceOne, pending or, to the Knowledge of SourceOne, threatened in writing, or
to the Knowledge of SourceOne, is there any activity involving any SourceOne
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans.
(a) SourceOne has disclosed to ePlus in writing prior to the execution of
the Agreement and in Section 5.13 of the SourceOne Disclosure Memorandum, and
has delivered or made available to ePlus prior to the execution of this
Agreement correct and complete copies in each case of, all SourceOne Benefit
Plans. For purposes of this Agreement, "SourceOne Benefit Plans" means all
written pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs or agreements, all medical,
vision, dental, or other written health plans, all life insurance plans, and all
other written employee benefit plans or fringe benefit plans, including written
"employee benefit plans" as that term is defined in Section 3(3) of ERISA
maintained by, sponsored in whole or in part by, or contributed to by, SourceOne
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate. Any of the SourceOne Benefit Plans
which is an "employee welfare benefit plan," as that term is defined in Section
3(l) of ERISA, or an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "SourceOne ERISA Plan." Any
SourceOne ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code or Section 3(35) of ERISA) is
referred to herein as a "SourceOne Pension Plan." SourceOne does not have an
"obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)).
Each "employee pension benefit plan," as defined in Section 3(2) of ERISA,
maintained by SourceOne that was intended to qualify under Section 401(a) of the
Internal Revenue Code, is disclosed as such in Section 5.13 of the SourceOne
Disclosure Memorandum.
(b) SourceOne has delivered or made available to ePlus prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such
SourceOne Benefit Plans (including insurance contracts), and all amendments
-12-
thereto, (ii) with respect to any such SourceOne Benefit Plans or amendments,
all determination letters, material rulings, material opinion letters, material
information letters, or material advisory opinions issued by the Internal
Revenue Service, the United States Department of Labor, or the Pension Benefit
Guaranty Corporation after December 31, 1994, (iii) annual reports or returns,
audited or unaudited financial statements, actuarial valuations and reports, and
summary annual reports prepared for any SourceOne Benefit Plan with respect to
the most recent plan year, and (iv) the most recent summary plan descriptions
and any material modifications thereto.
(c) All SourceOne Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, and any other applicable Laws, the breach
or violation of which is reasonably likely to have, individually or in the
aggregate, a SourceOne Material Adverse Effect. Each SourceOne ERISA Plan which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal Revenue Service,
and SourceOne is not aware of any circumstances likely to result in revocation
of any such favorable determination letter. Each trust created under any
SourceOne ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Internal Revenue Code and SourceOne is not aware of any
circumstance which will or could reasonably result in revocation of such
exemption. With respect to each SourceOne Benefit Plan to the Knowledge of
SourceOne, no event has occurred which will or could reasonably give rise to a
loss of any intended Tax consequences under the Internal Revenue Code or to any
Tax under Section 511 of the Internal Revenue Code that is reasonably likely,
individually or in the aggregate, to have a SourceOne Material Adverse Effect.
There is no material pending or, to the Knowledge of SourceOne, threatened
Litigation relating to any SourceOne ERISA Plan.
(d) SourceOne has not engaged in a transaction with respect to any
SourceOne Benefit Plan that, assuming the Taxable Period of such transaction
expired as of the date of this Agreement, would subject SourceOne to a material
Tax or penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a SourceOne Material Adverse Effect. Neither
SourceOne nor any administrator or fiduciary of any SourceOne Benefit Plan (or
any agent of any of the foregoing) has engaged in any transaction, or acted or
failed to act in any manner which could subject SourceOne to any direct or
indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
co-fiduciary, or other duty under ERISA, where such Liability, individually or
in the aggregate, is reasonably likely to have a SourceOne Material Adverse
Effect. No oral or written representation or communication with respect to any
aspect of the SourceOne Benefit Plans has been made to employees of SourceOne
which is not in accordance with the written or otherwise preexisting terms and
provisions of such plans, where any Liability with respect to such
representation or disclosure is reasonably likely to have a SourceOne Material
Adverse Effect.
(e) No SourceOne Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the Assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
-13-
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position or
funded status of any SourceOne Pension Plan, (ii) no change in the actuarial
assumptions with respect to any SourceOne Pension Plan, and (iii) no increase in
benefits under any SourceOne Pension Plan as a result of plan amendments or
changes in applicable Law, any of which is reasonably likely to have,
individually or in the aggregate, a SourceOne Material Adverse Effect. Neither
any SourceOne Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by SourceOne, or
the single-employer plan of any entity which is considered one employer with
SourceOne under Section 4001 of ERISA or Section 414 of the Internal Revenue
Code or Section 302 of ERISA (whether or not waived) (a "SourceOne ERISA
Affiliate") has an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA. All
contributions with respect to a SourceOne Pension Plan or any single-employer
plan of a SourceOne ERISA Affiliate have or will be timely made and there is no
lien or expected to be a lien under Internal Revenue Code Section 412(n) or
ERISA Section 302(f) or Tax under Internal Revenue Code Section 4971. SourceOne
has not provided, nor is it required to provide, security to a SourceOne Pension
Plan or to any single-employer plan of a SourceOne ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code. All premiums required to be
paid under ERISA Section 4006 have been timely paid by SourceOne.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by SourceOne with respect to any defined benefit plan currently or
formerly maintained by any of them or by any SourceOne ERISA Affiliate that has
not been satisfied in full (other than Liability for Pension Benefit Guaranty
Corporation premiums, which have been paid when due, except to the extent any
failure would not have a SourceOne Material Adverse Effect).
(g) SourceOne has no obligations for retiree health and retiree life
benefits under any of the SourceOne Benefit Plans other than with respect to
benefit coverage mandated by applicable Law.
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, or otherwise) becoming due to any director or
any employee of SourceOne from SourceOne under any SourceOne Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any SourceOne
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
5.14 Material Contracts.
(a) Section 5.14 of the SourceOne Disclosure Memorandum identifies each of
the following Contracts to which SourceOne, or any of its Assets, businesses, or
operations, is a party, or is bound or affected by, or receives benefits under:
(i) any employment, severance, termination, consulting, or retirement Contract
-14-
providing for aggregate payments to any Person in any calendar year in excess of
$50,000, (ii) any Contract for the borrowing of money (other than Contracts
evidencing trade payables arising in the ordinary course of business), any
currency exchange, commodities or other hedging arrangement, or any leasing
transaction of the type required to be capitalized in accordance with GAAP, or
for the guarantee, support, indemnification, assumption or endorsement of, or
any similar commitment with respect to, the Liabilities of any other Person,
(iii) any Contract which prohibits or restricts SourceOne from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person other than SourceOne, (iv) any Contract with
any Person with whom SourceOne does not deal at arm's length within the meaning
of the Internal Revenue Code, (v) any Contract involving Intellectual Property
(other than Contracts entered into in the ordinary course with customers and
"shrink-wrap" software licenses), (vi) any Contract relating to the provision of
data processing, network communication, or other technical services to or by
SourceOne (other than Contracts entered into in the ordinary course with
customers), (vii) any Contract relating to the purchase or sale of any goods or
services (other than Contracts entered into in the ordinary course of business
and involving payments under any individual Contract not in excess of $50,000),
and (viii) any other Contract that expires or may be renewed at the option of
any Person other than SourceOne so as to expire more than one year after the
date of this Agreement (the "SourceOne Contracts").
(b) With respect to each SourceOne Contract: (i) to the Knowledge of
SourceOne, the Contract is in full force and effect; (ii) SourceOne is not in
Default thereunder, other than Defaults which would not have, individually or in
the aggregate, a SourceOne Material Adverse Effect; (iii) SourceOne has not
repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of SourceOne, in Default
under such Contract in any respect, other than Defaults which would not have,
individually or in the aggregate, a SourceOne Material Adverse Effect, or has
repudiated or waived any material provision thereunder. All of the indebtedness
of SourceOne for money borrowed is prepayable at any time by SourceOne without
penalty or premium.
(c) No customer which individually accounted for more than 5% of
SourceOne's consolidated gross revenues during the 12-month period preceding the
date of this Agreement, and no material supplier of SourceOne has canceled or
otherwise terminated, or has made any written threat to SourceOne to cancel or
otherwise terminate, its relationship with SourceOne, or has decreased
materially its services or supplies to SourceOne in the case of any such
supplier, or its usage of the services or products of SourceOne in the case of
such customer, and to the Knowledge of SourceOne, no such supplier or customer
intends to cancel or otherwise terminate its relationship with SourceOne or to
decrease materially its services or supplies to SourceOne or its usage of the
services or products of SourceOne, as the case may be.
5.15 Legal Proceedings.
(a) There is no Litigation instituted or pending, or, to the Knowledge of
SourceOne, threatened against SourceOne, or against any director or employee of
SourceOne in connection with actions taken in such persons' capacities as
-15-
directors or employees or employee benefit plan of SourceOne, or against any
Asset, interest, or right of any of them, that would have, individually or in
the aggregate, a SourceOne Material Adverse Effect, nor are there any Orders of
any Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against SourceOne, that would have, individually or in the
aggregate, a SourceOne Material Adverse Effect. There is no dispute instituted
or pending, or, to the Knowledge of SourceOne, threatened with any of
SourceOne's current or former employees, agents, brokers, distributors, vendors,
customers, business consultants, representatives or independent contractors (or
any current or former employees of any of the foregoing Persons).
(b) Section 5.15(b) of the SourceOne Disclosure Memorandum includes a list
of all Litigation as of the date of this Agreement to which SourceOne is a party
and which names a SourceOne Company as a defendant or cross-defendant.
5.16 Reports. Since the date of its organization SourceOne has timely filed
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with any Regulatory
Authorities, except failures to file which would not have, individually or in
the aggregate, a SourceOne Material Adverse Effect. As of their respective
dates, each of such reports and statements, including all exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
5.17 Statements True and Correct. No statement, certificate, instrument, or
other writing furnished or to be furnished by SourceOne to ePlus pursuant to
this Agreement or pursuant to any other document, agreement, or instrument
referred to herein contains or will contain any untrue statement of material
fact or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All copies of Contracts delivered to ePlus and its Representatives
by or on behalf of SourceOne that are unsigned by one or more parties thereto
(i) have been signed by all parties thereto in the form supplied to ePlus, and
(ii) are true and correct copies of such Contracts and include all amendments,
supplements and modifications thereto or waivers currently in effect thereunder.
5.18 Tax and Regulatory Matters. Except as specifically contemplated by
this Agreement, to SourceOne's Knowledge, neither SourceOne nor any Affiliate
thereof has taken or agreed to take any action, and SourceOne has no Knowledge
of any fact or circumstance (other than facts and circumstances relating to
ePlus, Merger Sub or their respective Affiliates) that is reasonably likely to
(i) prevent the transactions contemplated hereby, including the Mergers, from
qualifying for treatment as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, or (ii) materially impede or delay receipt
of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement. To the Knowledge of SourceOne, there exists no fact, circumstance, or
reason why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without imposition of any
condition of the type described in the last sentence of such Section 9.1(b).
-16-
5.19 Covenants and Warranties of Shareholders.
(a) Each Shareholder represents, warrants, covenants, and agrees that: (i)
the ePlus Common Stock received by the Shareholder as a result of the Merger
will be taken for the Shareholder's own account and not for others, directly or
indirectly, in whole or in part; and (ii) any distribution by the Shareholder of
ePlus Common Stock has not been registered under the 1933 Act and shares of
ePlus Common Stock received pursuant to the Merger can only be sold by the
Shareholder (1) following registration under the 1933 Act, (2) in conformity
with the holding period, volume, and other requirements of Rule 144 promulgated
by the SEC as the same now exist or may hereafter be amended, or (3) to the
extent some other exemption from registration under the 1933 Act might be
available.
(b) Each Shareholder understands and agrees that stop transfer instructions
with respect to the shares of ePlus Common Stock received by the Shareholder
pursuant to the Merger will be given to ePlus' transfer agent to ensure
compliance with the provisions of Section 5.19(a).
(c) Each Shareholder has carefully read this Agreement and discussed its
requirements and impact upon such Shareholder's ability to sell, transfer, or
otherwise dispose of the shares of ePlus Common Stock received by the
undersigned, to the extent such Shareholder believes necessary, with its counsel
or counsel for SourceOne.
(d) Each Shareholder, represents and warrants that, by virtue of his or her
education, business experience, investing experience, or any combination of the
foregoing, he or she has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks of a
prospective investment in ePlus Common Stock and acknowledges and agrees that
ePlus' belief that the undersigned comes within this description is reasonable.
(e) Each Shareholder represents that it is either: (i) an Accredited
Investor, as such term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act ("Rule 501"), or (ii) if not an Accredited Investor, a person who
alone or with his or her "purchaser representative" as such term is defined in
Rule 501 has such knowledge and experience in financial and business matters
that he or she is capable of evaluating the merits and risks of making an
investment in ePlus Common Stock pursuant to this Agreement.
(f) Each Shareholder represents that the Escrow Agreement, upon its
execution by such Shareholder at Closing, represents a legal, valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
-17-
5.20 Board Recommendation. The Board of Directors of SourceOne, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the Agreement of Merger and the transactions contemplated hereby
and thereby, including the Merger, taken together, are fair to and in the best
interests of the holders of SourceOne Common Stock, and (ii) resolved to
recommend that the holders of the shares of SourceOne Common Stock approve this
Agreement.
5.21 SourceOne Equity. SourceOne's owner's equity, calculated in accordance
with GAAP, as of the Closing Date will be equal to or greater than $700,000.
5.22 No Other Representations or Warranties. Except as otherwise expressly
provided in this Agreement, SourceOne hereby disclaims the making of any
representations or warranties, express or implied, regarding SourceOne, its
Assets, Liabilities or business. ePlus acknowledges that, except as otherwise
expressly provided in this Agreement, ePlus is not relying upon any
representations or warranties made by SourceOne or anyone acting or claiming to
act on SourceOne's behalf concerning SourceOne's business. ePlus further
acknowledges that it has not received from SourceOne any accounting, tax, legal
or other advice with respect to this transaction and is relying solely upon the
advice of its own accounting, tax, legal and other advisors.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ePlus
ePlus hereby represents and warrants to SourceOne and the Shareholders as
follows:
6.1 Organization, Standing, and Power. ePlus is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware and ePlus Technology is a corporation duly organized, validly existing,
and in good standing under the Laws of the State of Virginia, and each has the
corporate power and authority to carry on its respective businesses as now
conducted and to own, lease, and operate its material Assets. ePlus and ePlus
Technology are duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its respective material Assets or the
nature or conduct of its respective businesses require it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed would not have, individually or in the aggregate, an ePlus Material
Adverse Effect.
6.2 Authority; No Breach By Agreement.
(a) ePlus and ePlus Technology each have the corporate power and authority
necessary to execute, deliver, and perform its respective obligations under this
-18-
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of ePlus and ePlus Technology. The Board of Directors of ePlus and ePlus
Technology have approved this Agreement, the Agreement of Merger and the
transactions contemplated hereby and thereby. The stockholders of ePlus are not
required to approve this Agreement, the Agreement of Merger and the Mergers. The
sole stockholder of ePlus Technology has approved the Plan of Merger and the
Follow-On Merger. This Agreement represents a legal, valid, and binding
obligation of both ePlus and ePlus Technology, enforceable against ePlus and
ePlus Technology in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by ePlus or ePlus
technology, nor the consummation by ePlus and ePlus Technology of the
transactions contemplated hereby, nor compliance by ePlus or ePlus Technology
with any of the provisions hereof, will (i) conflict with or result in a breach
of any provision of ePlus' Articles of Incorporation or Bylaws, (ii) constitute
or result in a Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any material Asset of any ePlus Company under, any
Contract or Permit of any ePlus Company, where such Default or Lien, or any
failure to obtain such Consent, would have, individually or in the aggregate, an
ePlus Material Adverse Effect, or (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b) of this Agreement, violate any material
Law or material Order applicable to any ePlus Company or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans
and other than the filing of the Agreement of Merger and officers' certificates
with the California Secretary of State, and other than Consents, filings, or
notifications which, if not obtained or made, would not have, individually or in
the aggregate, an ePlus Material Adverse Effect, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
ePlus of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of ePlus consists, as of
the date of this Agreement, of (i) 50,000,000 shares of ePlus Common Stock, of
which 10,159,964 shares were issued and outstanding as of June 30, 2001, and
(ii) 2,000,000 shares of ePlus Preferred Stock, none of which are issued and
outstanding. All of the issued and outstanding shares of ePlus Common Stock are,
-19-
and all of the shares of ePlus Common Stock to be issued in exchange for shares
of SourceOne Common Stock upon consummation of the Merger, when issued in
accordance with the terms of this Agreement, will be, duly and validly issued
and outstanding and fully paid and nonassessable under the DGCL, free of any
Liens or other encumbrances and issued in compliance with all applicable
federal, state and foreign Laws. None of the outstanding shares of ePlus Common
Stock has been, and none of the shares of ePlus Common Stock to be issued in
exchange for shares of SourceOne Common Stock upon consummation of the Merger
will be, issued in violation of any preemptive rights of the current or past
stockholders of ePlus.
6.4 SEC Filings; Financial Statements.
(a) ePlus has timely filed and made available to SourceOne all forms,
reports, and documents required to be filed by ePlus with the SEC (collectively,
the "ePlus SEC Reports") and will between the date of this Agreement and Closing
timely file all ePlus SEC Reports required to be filed after the date hereof.
The ePlus SEC Reports (i) at the time filed, complied, or will comply, as the
case may be, in all material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be, and (ii) at the time filed, did
not, or will not, as the case may be, (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such ePlus SEC Reports or necessary in order to make
the statements in such ePlus SEC Reports, in light of the circumstances under
which they were made, not misleading.
(b) Each of the ePlus Financial Statements (including, in each case, any
related notes) contained in the ePlus SEC Reports, including any ePlus SEC
Reports filed after the date of this Agreement until the Effective Time, as of
their respective filing dates, were or will be complete and correct in all
material respects, complied or will comply as to form in all material respects
with the applicable accounting requirements and published rules and regulations
of the SEC with respect thereto, was or will be prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC), and fairly presented or will
fairly present the consolidated financial position of ePlus and its Subsidiaries
as at the respective dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount or
effect.
6.5 Absence of Undisclosed Liabilities. No ePlus Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, an ePlus Material Adverse Effect, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of ePlus as of
June 30, 2001, included in the ePlus Financial Statements or reflected in the
notes thereto and except for Liabilities incurred in the ordinary course of
business subsequent to June 30, 2001.
-20-
6.6 Compliance with Laws. Each ePlus Company has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which
would not have, individually or in the aggregate, an ePlus Material Adverse
Effect, and there has occurred no Default under any such Permit, other than
Defaults which would not have, individually or in the aggregate, an ePlus
Material Adverse Effect. None of the ePlus Companies:
(a) is in Default under its Articles of Incorporation or Bylaws (or other
governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which would
not have, individually or in the aggregate, an ePlus Material Adverse Effect; or
(c) since the date of its organization, has received any written
notification or communication from any agency or department of federal, state,
or local government or any Regulatory Authority or the staff thereof (i)
asserting that any ePlus Company is not in compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, an ePlus Material Adverse Effect, (ii) threatening to revoke any
Permits, the revocation of which is reasonably likely to have, individually or
in the aggregate, an ePlus Material Adverse Effect, or (iii) requiring any ePlus
Company to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business.
6.7 Legal Proceedings. There is no Litigation instituted or pending, or, to
the Knowledge of ePlus, threatened in writing against any ePlus Company, or
against any Asset, employee benefit plan, interest, or right of any of them,
that is reasonably likely to have, individually or in the aggregate, an ePlus
Material Adverse Effect, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against any ePlus
Company, that are reasonably likely to have, individually or in the aggregate,
an ePlus Material Adverse Effect.
6.8 Reports. Since the date of organization, each ePlus Company has timely
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with any Regulatory
Authorities, except failures to file which would not have, individually or in
the aggregate, an ePlus Material Adverse Effect. As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws.
6.9 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any ePlus Company or any Affiliate
-21-
thereof to SourceOne or the Shareholders pursuant to this Agreement contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.10 Tax and Regulatory Matters. No ePlus Company or any Affiliate thereof
has taken or agreed to take any action, and ePlus has no Knowledge of any fact
or circumstance (other than facts and circumstances relating to SourceOne or its
Affiliates) that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Mergers, from qualifying for treatment as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section or otherwise prevent consummation of the transactions
contemplated hereby or delay the Effective Time beyond the date set forth in
Section 10.1(e) of this Agreement or the Agreement of Merger.
6.11 Matters Relating to Merger Sub. Merger Sub is a corporation duly
organized under the Laws of the State of California, and has the corporate power
and authority to carry on its business as contemplated by this Agreement and the
Agreement of Merger and to own, lease, and operate its material Assets. Merger
Sub has the corporate power and authority necessary to execute, deliver, and
perform its obligations under this Agreement and the Agreement of Merger and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance of the Agreement of Merger and the consummation of the
transactions contemplated therein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Merger Sub, subject to the approval of the Agreement of Merger by ePlus
as the sole stockholder of Merger Sub, which is the only stockholder vote
required for approval of the Agreement of Merger, and the consummation of the
Merger by Merger Sub. Merger Sub was formed solely for the purpose of engaging
in the Merger and the other transactions contemplated hereby, and has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
6.12 Absence of Certain Changes. Since June 30, 2001 and as of the date
hereof, there has not occurred: (i) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by ePlus or any revaluation by ePlus of any of its Assets; (ii) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to the shares of ePlus, or any direct or indirect redemption, purchase
or other acquisition by ePlus of any of its shares of capital stock, other than
repurchases of stock as a result of termination of employees; (iii) any
agreement by ePlus to do any of the things described in the preceding clauses
(i) through (ii).
6.13 Section 16. At the times of the Closings of the Merger and the
Follow-On Merger and immediately thereafter, neither ▇▇▇▇▇▇ ▇▇▇▇ nor R. ▇▇▇▇▇▇
▇▇▇▇▇ will be a director or officer of ePlus or any principal business unit,
division or Subsidiary of ePlus, or otherwise a Section 16 person for purposes
of Section 16 of the 1934 Act and the rules and regulations promulgated
thereunder.
-22-
6.14 No Other Representations or Warranties. Except as otherwise expressly
provided in this Agreement, ePlus hereby disclaims the making of any
representations or warranties, express or implied, regarding ePlus, its Assets,
Liabilities or business. SourceOne acknowledges that, except as otherwise
expressly provided in this Agreement, SourceOne is not relying upon any
representations or warranties made by ePlus or anyone acting or claiming to act
on ePlus' behalf concerning ePlus' business. SourceOne further acknowledges that
it has not received from ePlus any accounting, tax, legal or other advice with
respect to this transaction and is relying solely upon the advice of its own
accounting, tax, legal and other advisors, except that SourceOne and the
Shareholders are relying upon the ▇▇▇▇▇▇ & Bird, LLP tax opinion being delivered
to them pursuant to Section 9.3 (e) hereof.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of SourceOne. Unless the prior written consent of
ePlus shall have been obtained, and except as otherwise expressly contemplated
herein, SourceOne shall use commercially reasonable efforts to (i) operate its
business only in the usual, regular, and ordinary course, (ii) preserve intact
its business organization and Assets and maintain its rights and franchises,
(iii) maintain its current employee relationships, and (iv) take no action which
would (a) adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentence of Section
9.1(b) of this Agreement, or (b) adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement.
7.2 Negative Covenants of SourceOne. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement,
SourceOne covenants and agrees that it will not do or agree or commit to do, any
of the following without the prior written consent of ePlus, which consent shall
not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any SourceOne Company, or
(b) except for short-term borrowings with a maturity of one year or less in
the ordinary course of business consistent with past practices, incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other Person, or
impose, or suffer the imposition, on any Asset of SourceOne of any Lien or
permit any such Lien to exist (other than in connection with Liens in effect as
of the date hereof that are disclosed in the SourceOne Disclosure Memorandum);
or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
-23-
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any SourceOne Company, or declare or pay any dividend or make
any other distribution in respect of SourceOne Common Stock, except that
SourceOne may distribute cash out of the SourceOne AAA Account (which is a
component of owner's equity) provided that such distributions may be made only
with prior written notice to ePlus; or
(d) except for this Agreement or pursuant to the exercise of Rights
outstanding as of the date of this Agreement and pursuant to the terms thereof
in existence on the date of this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of SourceOne Common Stock or any other
capital stock of any SourceOne Company, or any stock appreciation rights, or any
option, warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of SourceOne or
issue or authorize the issuance of any other securities in respect of or in
substitution for shares of SourceOne Common Stock, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber any Asset having a book value in
excess of $10,000 other than in the ordinary course of business for reasonable
and adequate consideration, or transfer or license to any Person other than
SourceOne or otherwise extend, amend or modify in any material respect any
rights to material Intellectual Property other than in the ordinary course of
business (including changing any domain names or failing to renew existing
domain name registrations on a timely basis), or enter into grants to future
Intellectual Property rights, other than as may be required by applicable Law;
or
(f) purchase any securities or make any material investment, either by
purchase of stock or securities, contributions to capital, Asset transfers, or
purchase of any Assets, in any Person other than a wholly-owned SourceOne
Subsidiary, or otherwise acquire direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the employees or
officers of any SourceOne Company, except as required by Law or Contract; pay
any severance or termination pay or any bonus other than pursuant to written
policies or written Contracts in effect on the date of this Agreement; enter
into or amend any severance agreements with officers of any SourceOne Company;
grant any increase in fees or other increases in compensation or other benefits
to directors of any SourceOne Company; or voluntarily accelerate the vesting of
any stock options or other stock-based compensation or employee benefits or
waive any stock repurchase rights, accelerate, amend, or change the period of
exercisability of any Equity Rights or restricted stock, or reprice any Equity
Rights granted under any SourceOne Stock Plan or authorize cash payments in
exchange for any Equity Rights; or
-24-
(h) enter into or amend any employment Contract between any SourceOne
Company and any Person (unless such amendment is required by Law) that the
SourceOne Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered and in accordance
with the SourceOne Benefit Plans), at any time on or after the Effective Time;
or
(i) adopt any new employee benefit plan of any SourceOne Company or make
any material change in or to any existing employee benefit plans of any
SourceOne Company other than any such change that is required by Law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
(j) make any significant change in any Tax or accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in Tax Laws or regulatory accounting requirements or GAAP or make any
material election with respect to Taxes; or
(k) commence any Litigation other than as necessary for the prudent
operation of its business or settle any Litigation involving any Liability of
SourceOne for material money damages or restrictions upon the operations of
SourceOne; or
(l) except in the ordinary course of business, modify, amend, or terminate
any material Contract or waive, release, compromise, or assign any material
rights or claims.
7.3 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a SourceOne Material Adverse Effect or an ePlus Material Adverse
Effect as applicable, or (ii) would cause or constitute a material breach of any
of its representations, warranties, or covenants contained herein, and to use
its reasonable efforts to prevent or promptly to remedy the same.
7.4 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. Any report that any Party,
its respective Subsidiaries or Affiliates is responsible for filing with any
Regulatory Authority in connection with the transaction contemplated hereby will
comply as to form in all material respects with the provisions of applicable
Law. If financial statements are contained in any such reports filed with the
SEC, such financial statements will fairly present in all material respects the
consolidated financial position of the entity filing such statements as of the
dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
-25-
dates, such reports filed with the SEC will comply in all material respects with
the Securities Laws and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Shareholders Matters. SourceOne shall solicit written consents in lieu
of a Shareholders' Meeting or call a Shareholders' Meeting as soon as reasonably
practicable for the purpose of obtaining approval of this Agreement, the
Agreement of Merger and the Merger and such other related matters as it deems
appropriate. In connection with such solicitation or Shareholders' Meeting, (i)
the Board of Directors of SourceOne shall recommend to its shareholders the
approval of the matters submitted for approval, and (ii) the Board of Directors
and officers of SourceOne shall use their reasonable efforts to obtain such
shareholders' approval. Each of the Shareholders agrees to execute promptly any
written consent in lieu of a Shareholders' Meeting necessary for approval of
this Agreement, the Agreement of Merger and the Merger and such other related
matters as are deemed necessary to obtain shareholder approval of the Merger or
to vote all of its shares of SourceOne Common Stock in favor of approval of this
Agreement, the Agreement of Merger and the Merger and such other related matters
as are deemed necessary to obtain shareholder approval of the Merger. The
Shareholders also agree not to sell, pledge, transfer or otherwise dispose of
any shares of SourceOne Common Stock which they hold prior to the Effective Time
without the express written consent of ePlus. ePlus and SourceOne shall make all
necessary filings with respect to the Merger under the Securities Laws.
8.2 Exchange Listing. ePlus shall list on the Nasdaq NMS, to the extent
required by its rules and regulations, the shares of ePlus Common Stock to be
issued to the holders of SourceOne Common Stock pursuant to the Merger, and
ePlus shall give all notices and make all filings with the Nasdaq National
Market required in connection with the transactions contemplated herein.
8.3 Regulatory Filings; Required Consents. The Parties hereto shall
cooperate with each other and use their reasonable efforts to promptly prepare
and file all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all Consents of
all Regulatory Authorities and other Persons which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including the
Merger). Each Party shall have the right to review in advance, and to the extent
practicable each will consult the other on, in each case subject to applicable
Laws relating to the exchange of information, all the information relating to
the other Party which appears in any filing made with, or written materials
-26-
submitted to, any Regulatory Authority or other Person in connection with the
transactions contemplated by this Agreement and will promptly notify each other
of any communication with any Regulatory Authority or other Person and provide
the other Party with an opportunity to participate in any meetings with a
Regulatory Authority or other Person relating thereto. In exercising the
foregoing right, each of the Parties hereto shall act reasonably and as promptly
as practicable. The Parties agree that they will consult with each other with
respect to the obtaining of all Consents of all Regulatory Authorities and other
Persons necessary or advisable to consummate the transactions contemplated by
this Agreement and each Party will keep the other apprised of the status of
matters relating to contemplation of the transactions contemplated herein. To
the extent permitted by Law, the Parties shall deliver to each other copies of
all filings, correspondence and orders to and from all Regulatory Authorities in
connection with the transactions contemplated hereby. Each Party also shall
promptly advise the other upon receiving any communication from any Regulatory
Authority whose Consent is required for consummation of the transactions
contemplated by this Agreement which causes such Party to believe that there is
a reasonable likelihood that any requisite Consent will not be obtained or that
the receipt of any such Consent will be materially delayed.
8.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, ePlus and SourceOne shall file with the Secretary
of State of the State of California in connection with the Closing the documents
required to be filed pursuant to the applicable provisions of the CGCL.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement, provided that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.
8.6 Investigation and Confidentiality.
(a) After the date hereof and prior to the Effective Time and subject to
applicable Laws relating to the exchange of information, each Party shall keep
the other Party advised of all material developments relevant to its business
and to consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of its business and properties and of its
financial and legal conditions as the other Party reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
-27-
(b) In addition to the Parties' respective obligations under Section 10 of
that certain Letter Agreement, dated January 19, 2001, by and among SourceOne,
ePlus, and the Shareholders, which section is hereby reaffirmed and adopted, and
incorporated by reference herein, each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) SourceOne shall use its reasonable efforts to exercise its rights, and
shall use its reasonable efforts not to waive any rights, under confidentiality
agreements entered into with Persons who were considering an Acquisition
Proposal with respect to SourceOne in order to preserve the confidentiality of
the information relating to SourceOne provided to such Persons and their
Affiliates and Representatives.
(d) After the date hereof and prior to the Effective Time, each Party
agrees to give the other Party notice as soon as practicable after any
determination by it of any fact or occurrence relating to the other Party which
it has discovered through the course of its investigation and which represents,
or is reasonably likely to represent, either a material breach of any
representation, warranty, covenant or agreement of the other Party or which has
had or is reasonably likely to have a SourceOne Material Adverse Effect or an
ePlus Material Adverse Effect, as applicable.
8.7 Press Releases. SourceOne and ePlus shall consult with each other as to
the form and substance of any press release or other public disclosure
materially related to this Agreement or any other transaction contemplated
hereby; provided, that nothing in this Section 8.7 shall be deemed to prohibit
any Party from making any disclosure which its counsel deems necessary or
advisable in order to satisfy such Party's disclosure obligations imposed by
Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, neither SourceOne nor any Affiliate thereof,
nor any Representatives thereof shall directly or indirectly solicit any
Acquisition Proposal by any Person. Neither SourceOne nor any Affiliate or
Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but SourceOne may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent it is required to do so in order to comply with its legal
obligations as advised by outside counsel. SourceOne shall promptly advise ePlus
following the receipt of any Acquisition Proposal and shall keep ePlus
reasonably informed of the details and status thereof. SourceOne shall (i)
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Persons conducted heretofore with respect
-28-
to any of the foregoing, and (ii) direct and use its reasonable efforts to cause
all of its Affiliates and Representatives not to engage in any of the foregoing.
8.9 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to knowingly take no action which
would cause the Merger not, to qualify for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes.
8.10 State Takeover Laws. If any "moratorium," "control share," "fair
price," "business combination," or other anti-takeover laws and regulations of
the State of California (collectively, "Takeover Laws") shall become applicable
to the transactions contemplated hereby, SourceOne and the members of the Board
of Directors of SourceOne shall grant such approvals and take such actions as
are necessary so that the Merger and the other transactions contemplated hereby
may be commenced as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effect of such statute or regulation
on the transactions contemplated hereby, except, in each such case, to the
extent required in the exercise of the fiduciary duties of the Board of
Directors of SourceOne under applicable law as advised by independent counsel.
8.11 Employee Benefits and Contracts. Following the Effective Time, ePlus
and/or Surviving Corporation shall provide or cause to be provided that under
each employee benefit plan, policy, program or arrangement where service is
relevant to a determination of an employee's eligibility to participate,
vesting, or level or amount of benefits (other than accrual of benefits under a
defined benefit pension plan), employees of SourceOne who become employees
and/or officers of ePlus and/or the Surviving Corporation shall be credited with
their period of service with SourceOne prior to the Closing, to the extent
permitted by applicable law and applicable tax qualification requirements, and
subject to any generally applicable break in service or similar rules. Subject
to approval of any insurance carrier (which approval ePlus and/or Surviving
Corporation shall use best efforts to obtain) and to the extent consistent with
applicable law and applicable tax qualification requirements, ePlus and/or the
Surviving Corporation shall make available, or cause to be made available, to
those employees and/or officers of SourceOne who become employees and/or
officers of ePlus and/or the Surviving Corporation, medical, dental, disability
and other welfare benefits plans and programs, to the extent the same is offered
by ePlus and/or the Surviving Corporation generally to their similarly-situated
employees and officers. In determining an employee's and/or officer's share of
the cost of coverage under any plan or program of ePlus and/or the Surviving
Corporation for the year in which the Closing occurs, ePlus and/or the Surviving
Corporation shall make commercially reasonable efforts to credit the employee
and/or officer with any pre-Closing copays and deductibles made by or on behalf
of such employee and/or officer under each comparable plan maintained by
SourceOne prior to the Effective Time for such year. ePlus shall not be required
to have any preexisting condition limitation, actively-at-work requirement or
similar limitation waived unless SourceOne or its successor entity) or the
applicable insurance carrier makes available a HIPAA Certificate evidencing
prior coverage under the corresponding or analogous SourceOne Benefit Plan.
-29-
ePlus shall not be required to credit any pre-Closing co-pays and deductibles
made by or on behalf of such employees and/or officers of SourceOne who become
employees and/or officers of ePlus and/or Surviving Corporation unless SourceOne
(or its successor entity) or the applicable insurance carrier provides written
documentation of the amount of any such expenses incurred by or on behalf of
such employees and/or officers. ePlus also shall, or shall cause Surviving
Corporation to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Section 8.11 of the SourceOne Disclosure
Memorandum between SourceOne and any current or former director, officer, or
employee thereof, and all provisions for vested benefits or other vested amounts
earned or accrued through the Effective Time under the SourceOne Benefit Plans.
(b) If requested by ePlus, SourceOne shall, prior to the Closing Date,
terminate any one or more of the SourceOne Benefit Plans and shall cease making
contributions to any such SourceOne Benefit Plans, provided that, as conditions
of such termination (i) SourceOne's employees who become employees of ePlus
and/or the Surviving Corporation shall receive employee benefits which in the
aggregate are comparable to those provided from time to time by ePlus and its
subsidiaries to their respective similarly situated employees; and (ii)
SourceOne's employees shall be eligible to participate in ePlus' 401(k) plan
immediately following the Closing Date, subject to compliance with the
eligibility provisions of such plan. To the extent ePlus does not request the
termination of SourceOne's 401(k) plan prior to the Closing Date, ePlus shall
remove ▇▇▇▇▇▇ ▇▇▇▇ as trustee of the SourceOne 401(k) Plan and appoint a new
trustee effective immediately after the Effective Time.
8.12 Indemnification.
(a) After the Effective Time, ePlus will, or will cause Surviving
Corporation to, indemnify and hold harmless the present and former officers and
directors of SourceOne (solely in their capacities as such) in respect of acts
or omissions occurring on or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the extent such officer or
director had a right to such indemnification under SourceOne's Articles of
Incorporation, Bylaws or under a Contract with SourceOne, in each case in effect
on the date hereof, and will, or will cause Surviving Corporation to, honor any
such rights to indemnification or exculpation found in such documents. In
addition, ePlus will not, and will not allow Surviving Corporation to, amend,
repeal or otherwise modify SourceOne's or the Surviving Corporation's Articles
of Incorporation, Bylaws or equivalent organizational documents, or any Contract
relating to indemnification of the present and former officers and directors of
SourceOne, in any manner that would adversely affect the rights thereunder of
such individuals, unless such modification is required by applicable Law, and
will ensure, or will cause the Surviving Corporation to ensure, that such
documents will contain provisions with respect to exculpation and
indemnification that are at least as favorable to such officers and directors as
those contained in such Articles of Incorporation, Bylaws and Contracts (as in
effect on the date hereof), unless required to be modified by applicable Law.
(b) Any Person wishing to claim indemnification under paragraph (a) of this
Section 8.12 (each, an "Indemnified Party"), upon learning of any such Liability
-30-
or Litigation, shall promptly notify ePlus thereof. In the event of any such
Liability or Litigation (whether arising before or after the Effective Time),
(i) ePlus shall have the right to assume the defense thereof and ePlus shall not
be liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if ePlus elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between ePlus and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and ePlus shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received; provided,
that ePlus shall be obligated pursuant to this paragraph 8.12(b) to pay for only
one firm of counsel for all Indemnified Parties in any jurisdiction, (ii) the
Indemnified Parties will cooperate in the defense of any such Litigation, and
(iii) ePlus shall not be liable for any settlement effected without its prior
written consent; and provided further that ePlus shall have no obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(c) If ePlus or the Surviving Corporations or any of their respective
successors or assigns shall consolidate with or merge into any other Person and
shall not be the continuing or surviving Person of such consolidation or merger
or shall transfer all or substantially all of its Assets to any Person, then and
in each case, ePlus shall, and shall cause the Surviving Corporation or their
respective successors and assigns, to ensure that proper provision is made so
that the successors and assigns of ePlus and/or the Surviving Corporation shall
fully and completely assume the obligations set forth in this Section 8.12.
(d) SourceOne shall use its reasonable efforts to cause each of the
directors and officers of SourceOne and each other Person who is party to an
indemnification agreement with SourceOne to execute and deliver to ePlus1010
Claims Letters, substantially in the form of Exhibit 4 attached hereto ("Claims
Letters").
8.13 Personal Guarantees. ePlus will use its best efforts to cause the
termination of the personal guarantees of the Shareholders relating to
SourceOne's business listed in Section 8.13 of the SourceOne Disclosure
Memorandum (the "Personal Guarantees") by the Effective Time; provided that, if
the Shareholders waive the closing condition set forth in Section 9.3(g) of this
Agreement, ePlus agrees to indemnify the Shareholders against any liability
arising from such Personal Guarantees after the Effective Time until they are
terminated.
8.14 Restrictions on Conduct.
(a) General. Executives, SourceOne and ePlus understand and agree that the
purpose of the provisions of this Section 8.14 is to protect legitimate business
interests of SourceOne and ePlus, as more fully described below, and is not
intended to impair or infringe upon either Executive's right to work, earn a
living, or acquire and possess property from the fruits of his labor. Each
Executive hereby acknowledges that the post-employment restrictions set forth in
-31-
this Section 8.14 are reasonable and that they do not, and will not, unduly
impair the ability of Executive to earn a living after the termination of this
Agreement. Therefore, subject to the limitations of reasonableness imposed by
law upon the restrictions set forth herein, each Executive agrees to be subject
to the restrictions set forth in this Section 8.14.
(b) Restrictive Covenants.
(i) Restriction on Disclosure and Use of Confidential Information.
Each Executive understands and agrees that the Confidential Information
constitutes a valuable asset of SourceOne and its affiliated entities, and
may not be converted to Executives' own use. Accordingly, each Executive
hereby agrees that Executive shall not, directly or indirectly, at any time
during or after the Restricted Period reveal, divulge, or disclose to any
Person not expressly authorized by SourceOne any Confidential Information,
and shall not, directly or indirectly, at any time during the Restricted
Period use or make use of any Confidential Information in connection with
any business activity other than that of SourceOne, ePlus or their
Subsidiaries and Affiliates. The parties acknowledge and agree that this
Section 8.14 is not intended to, and does not, alter either SourceOne's
rights or either Executive's obligations under any state or federal
statutory or common law regarding trade secrets and unfair trade practices.
Anything herein to the contrary notwithstanding, Executives shall not
be restricted from disclosing or using Confidential Information that: (a)
is or becomes generally available to the public other than as a result of
an unauthorized disclosure by Executive in violation of this Agreement; (b)
becomes available to either Executive in a manner that is not in
contravention of applicable law from a source (other than ePlus, SourceOne
or their affiliated entities or one of their officers, employees, agents or
representatives) that is not bound by a confidential relationship with
ePlus, SourceOne or their affiliated entities or by a confidentiality or
other similar agreement; (c) was known or becomes known to either Executive
on a non-confidential basis from a person (other than SourceOne or its
affiliated entities or one of its or their officers, employees, agents or
representatives) who has no obligation (pursuant to applicable law or a
confidentiality or other similar agreement) to keep such information
confidential before its disclosure to either Executive; or (d) is required
to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure by either Executive is required by
law, such Executive shall provide SourceOne with prompt notice of such
requirement so that SourceOne may seek an appropriate protective order
prior to any such required disclosure by such Executive.
(ii) Noncompetition with SourceOne and ePlus. The parties acknowledge:
(A) that each Executive's services for SourceOne will require special
expertise and talent in the provision of Competitive Services and that each
Executive has had and will continue to have substantial contacts with
customers of SourceOne and ePlus; (B) that each Executive will be placed in
a position of trust and responsibility with SourceOne and he has had and
will continue to have access to a substantial amount of Confidential
Information and that SourceOne is placing him in such position and giving
him access to such information in reliance upon his agreement not to
compete with SourceOne and ePlus during the Restricted Period; (C) that due
-32-
to his management duties, each Executive has been and will continue to be
the repository of a substantial portion of the goodwill of SourceOne and
would have an unfair advantage in competing with SourceOne; (D) that due to
each Executive's special experience and talent, the loss of either
Executive's services to SourceOne and ePlus cannot reasonably or adequately
be compensated solely by damages in an action at law; (E) that each
Executive is capable of competing with SourceOne; and (F) that each
Executive is capable of obtaining gainful, lucrative and desirable
employment that does not violate the restrictions contained in this Section
8.14. In consideration of the compensation and benefits being paid and to
be paid by SourceOne and the substantial consideration paid by ePlus to
each Executive for his SourceOne Common Stock, each Executive hereby agrees
that, during the Restricted Period and within the Restricted Territory,
neither Executive, unless acting in accordance with ePlus' prior written
consent, will directly or indirectly, on his own or on behalf of any Person
(i) provide any Competitive Services, or (ii) be affiliated with (as a
Principal or Representative) any Person engaged, in whole or in part, in
the provision of Competitive Services in a capacity where such Executive's
duties or responsibilities for such Person will include strategic planning,
policymaking or management; provided, however, that the provisions of this
Section 8.14 shall not be deemed to prohibit the ownership by either
Executive of any securities of SourceOne or its affiliated entities or not
more than five percent (5%) of any class of securities of any corporation
having a class of securities registered pursuant to the Securities Exchange
Act of 1934, as amended. Executives acknowledge that (x) the provisions of
this Section 8.14(b)(ii) are reasonable and necessary to protect the
legitimate interests of ePlus and SourceOne and (y) any violation of this
Section 8.14(b)(ii) will result in irreparable injury to ePlus and
SourceOne and damages at law would not be reasonable or adequate
compensation to ePlus and SourceOne for a violation of thereof.
(iii)Nonsolicitation of Protected Employees. Executives understand and
agree that the relationship between ePlus and SourceOne and each of their
Protected Employees constitutes a valuable asset of ePlus and SourceOne and
may not be converted to Executives' own use. Accordingly, Executives hereby
agree that during the Restricted Period, neither Executive shall directly
or indirectly on Executive's own behalf or as a Principal or Representative
of any Person or otherwise solicit or induce any Protected Employee to
terminate his or her employment relationship with ePlus or SourceOne or to
enter into employment with any other Person who provides or sells Competing
Services.
(iv) Restriction on Relationships with Protected Clients. Executives
understand and agree that the relationship between ePlus and SourceOne and
each of their Protected Clients constitutes a valuable asset of ePlus and
SourceOne and may not be converted to Executives' own use. Accordingly,
Executives hereby agree that, during the Restricted Period, neither
Executive shall, without the prior written consent of ePlus, directly or
indirectly, on Executive's own behalf or as a Principal or Representative
of any Person or otherwise, solicit a Protected Client for the purpose of
providing or selling Competitive Services.
(c) Enforcement of Restrictive Covenants.
-33-
(i) Rights and Remedies Upon Breach. In the event either Executive
breaches, or threatens to commit a breach of, any of the provisions of the
restrictive covenants contained in this Section 8.14 (the "Restrictive
Covenants"), ePlus and/or SourceOne shall have the right and remedy to
enjoin, preliminarily and permanently, such Executive from violating or
threatening to violate the Restrictive Covenants and to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to ePlus or SourceOne
and that money damages would not provide an adequate remedy. The foregoing
right and remedy shall be independent of any others and severally
enforceable, and shall be in addition to, and not in lieu of, any other
rights and remedies available to ePlus or SourceOne at law or in equity.
(ii) Severability of Covenants. Executives acknowledge and agree that
the Restrictive Covenants are reasonable and valid in time and scope and in
all other respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, are invalid or unenforceable, the remainder
of the Restrictive Covenants shall not thereby be affected and shall be
given full effect, without regard to the invalid portions. The court is
further authorized to enforce, construe, or interpret the Restrictive
Covenants in a manner that will reasonably protect SourceOne's and ePlus'
legitimate business interests.
(iii)Reformation. The parties hereunder agree that it is their
intention that the Restrictive Covenants be enforced in accordance with
their terms to the maximum extent possible under applicable law. The
parties further agree that, in the event any court of competent
jurisdiction shall find that any provision hereof is not enforceable in
accordance with its terms, the court shall reform the Restrictive Covenants
such that they shall be enforceable to the maximum extent permissible at
law.
8.15 Restrictions on Transfer.
(a) Prior to any proposed transfer of any Merger Shares, the Holder thereof
shall give written notice to ePlus of its intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
requested by ePlus, shall be accompanied by an opinion of counsel reasonably
satisfactory to ePlus to the effect that the proposed transfer may be effected
without registration under the Securities Act, whereupon such Holder shall be
entitled to transfer the Merger Shares in accordance with the terms of its
notice. Each certificate issued in connection with a transfer of Merger Shares
as above provided shall bear the legend set forth in Section 8.15(b), except
that such certificate or instrument shall not bear such legend if (i) such
transfer is in accordance with the provisions of Rule 144 (or any other rule
permitting public sale without registration under the Securities Act) or (ii)
the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee would be entitled to transfer such
Merger Shares in a public sale without registration under the Securities Act.
-34-
(b) Each certificate evidencing Merger Shares issued to any Holder in
connection with the Merger shall bear a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(c) In the event that any Merger Shares shall cease to be subject to the
restrictions on transfer set forth in this Agreement, ePlus shall, upon the
written request of the Holder thereof, issue to such Holder a new certificate
evidencing such Merger Shares without the legend required by Section 8.15(b)
hereof endorsed thereon.
8.16 Follow-On Merger. ePlus, ePlus Technology, SourceOne and the
Shareholders agree that they will each use their best efforts, as promptly as
possible following the Effective Time, to consummate the Follow-On Merger.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and the Agreement of Merger and to
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 12.6 of this Agreement:
(a) Shareholder Approval. The shareholders of SourceOne shall have approved
this Agreement, and the consummation of the transactions contemplated hereby,
including the Merger, as and to the extent required by Law and by the provisions
of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 9.1(b) of this Agreement) or for the preventing of any Default under
-35-
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a SourceOne
Material Adverse Effect or an ePlus Material Adverse Effect.
(d) Legal Proceedings. No court or governmental or Regulatory Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced, or
entered any Law or Order (whether temporary, preliminary, or permanent) or taken
any other action which prohibits, restricts, or makes illegal consummation of
the transactions contemplated by this Agreement.
(e) Exchange Listing. To the extent required by rule or regulation, the
shares of ePlus Common Stock issuable pursuant to the Merger shall have been
approved for listing on the Nasdaq National Market, subject to official notice
of issuance.
9.2 Conditions to Obligations of ePlus. The obligations of ePlus to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by ePlus pursuant to Section 12.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of SourceOne set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of SourceOne set
forth in Sections 5.3 and 5.21 of this Agreement shall be true and correct
(except for inaccuracies which are de minimis in amount). The representations
and warranties of SourceOne set forth in Sections 5.18 and 5.19 of this
Agreement shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of SourceOne set forth
in this Agreement (including the representations and warranties set forth in
Sections 5.3, 5.18, 5.19 and 5.21) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a SourceOne Material Adverse
Effect; provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material," "SourceOne
Material Adverse Effect," or variations thereof, or to the "Knowledge" of
SourceOne or to a matter being "known" by SourceOne shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of SourceOne to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material respects.
(c) Certificates. SourceOne shall have delivered to ePlus (i) a
certificate, dated as of the Effective Time and signed on its behalf by a duly
authorized officer, to the effect that the conditions of its obligations set
forth in Section 9.2(a) and 9.2(b) of this Agreement have been satisfied, and
-36-
(ii) certified copies of the resolutions duly adopted by SourceOne's Board of
Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as ePlus and its counsel shall request.
(d) Claims Letters. Each of the directors and officers of SourceOne and
each other Person who is party to an indemnification agreement with SourceOne
shall have executed and delivered to ePlus a Claims Letter.
(e) Legal Opinion. ePlus shall have received two written opinions, dated as
of the Effective Time, one of Terra Law LLP, counsel to SourceOne, and one of
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, special counsel to SourceOne, in substantially the form
of Exhibit 5 and Exhibit 6, respectively.
(f) Escrow Agreement. The Shareholders and the Escrow Agent (as defined in
the Escrow Agreement) shall have executed and delivered to ePlus the Escrow
Agreement
(g) Termination of SourceOne Stock Plans. SourceOne shall have terminated
the SourceOne Stock Plans and other benefit plans and shall have provided ePlus
with evidence of its termination of the SourceOne Stock Plans and other benefit
plans.
(h) Tax Matters. ePlus shall have received a written opinion from ▇▇▇▇▇▇ &
Bird LLP, in form reasonably satisfactory to ePlus, dated the Closing Date,
substantially to the effect that the Mergers, considered together, should
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code. In rendering such opinion, such counsel shall be entitled to rely
upon representations of ePlus and SourceOne and the Shareholders reasonably
satisfactory in form and substance to such counsel.
(i) Employment Agreements. ePlus and each of ▇▇▇▇▇▇ ▇▇▇▇ and R. ▇▇▇▇▇▇
▇▇▇▇▇ shall have entered into the employment agreements in substantially the
form of Exhibit 7 and Exhibit 8 , respectively, to this Agreement.
(j) SourceOne Equity. SourceOne's owner's equity, as shown on the SourceOne
Financial Statements delivered pursuant to Section 5.5 of this Agreement and
calculated in accordance with GAAP, as of the last day of the month immediately
preceding the Closing Date shall be at least $700,000.
9.3 Conditions to Obligations of SourceOne. The obligations of SourceOne to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by SourceOne pursuant to Section 12.6(b) of this Agreement:
-37-
(a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of ePlus set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of ePlus set
forth in Section 6.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimis in amount). The representations and warranties
of ePlus set forth in Section 6.10 of this Agreement shall be true and correct
in all material respects. There shall not exist inaccuracies in the
representations and warranties of ePlus set forth in this Agreement (including
the representations and warranties set forth in Sections 6.3 and 6.10) such that
the aggregate effect of such inaccuracies has, or is reasonably likely to have,
an ePlus Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material," "ePlus Material Adverse Effect," or variations thereof, or to the
"Knowledge" of ePlus or to a matter being "known" by ePlus shall be deemed not
to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of ePlus to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material respects.
(c) Certificates. ePlus shall have delivered to SourceOne (i) a
certificate, dated as of the Effective Time and signed on its behalf by a duly
authorized officer to the effect that the conditions of its obligations set
forth in Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by ePlus' Board of Directors
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the consummation of
the transactions contemplated hereby, all in such reasonable detail as SourceOne
and its counsel shall request.
(d) Legal Opinion. SourceOne shall have received a written opinion, dated
as of the Effective Time, of counsel to ePlus, in substantially the form of
Exhibit 9.
(e) Tax Matters. SourceOne shall have received a written opinion from
▇▇▇▇▇▇ & Bird LLP, in form reasonably satisfactory to SourceOne, dated the
Closing Date, substantially to the effect that the Mergers, considered together,
should constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and ePlus and SourceOne will be "parties to a
reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code. In rendering such opinion, such counsel shall be entitled to rely upon
representations of ePlus and SourceOne and the Shareholders reasonably
satisfactory in form and substance to such counsel.
-38-
(f) Escrow Agreement. ePlus and the Escrow Agent (as defined in the Escrow
Agreement) shall have executed and delivered the Escrow Agreement.
(g) Personal Guarantees. The Personal Guarantees shall have been terminated
and the Shareholders shall have no liability thereunder.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of
SourceOne, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of the Board of Directors of ePlus and the Board of
Directors of SourceOne; or
(b) By the Board of Directors of either SourceOne or ePlus (provided that
the terminating Party is not then in material breach of any covenant or other
agreement contained in this Agreement) in the event of a breach or inaccuracy of
any representation or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach or inaccuracy and which breach or
inaccuracy would provide the terminating Party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 9.2(a)
of this Agreement in the case of SourceOne and Section 9.3(a) of this Agreement
in the case of ePlus; or
(c) By the Board of Directors of either SourceOne or ePlus (provided that
the terminating Party is not then in material breach of any covenant or other
agreement contained in this Agreement) in the event of a material breach by the
other Party of any covenant or agreement contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach; or
(d) By the Board of Directors of either SourceOne or ePlus in the event (i)
any Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, or (ii) the shareholders of
SourceOne fail to vote their approval of the matters submitted for the approval
by such shareholders upon their solicitation or at the Shareholders' Meeting; or
(e) By the Board of Directors of either SourceOne or ePlus in the event
that the Merger shall not have been consummated by September 30, 2001, if the
failure to consummate the transactions contemplated hereby on or before such
-39-
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e).
10.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement
shall become void and have no effect and there shall be no liability or
obligation on the part of ePlus, Merger Sub, SourceOne, the Shareholders, or
their respective officers, directors, stockholders, representatives or
affiliates, except that (a) the provisions of this Section 10.2, Article 11,
Article 12 and Section 8.6(b) of this Agreement shall survive any such
termination and abandonment, and (b) a termination pursuant to Sections 10.1(b)
or 10.1(c) of this Agreement shall not relieve the breaching Party from
Liability for an uncured breach of a representation, warranty, covenant, or
agreement due to the willful misconduct or fraud of such breaching Party and
giving rise to such termination; provided that, in any event, the Parties'
Liability for any Losses caused by an uncured breach of a representation,
warranty, covenant, or agreement giving rise to a termination (excluding
breaches resulting from the willful misconduct or fraud of such breaching Party
for which Liability shall be unlimited) shall in no instance exceed the
reasonable and actual costs and expenses of the non-breaching Party in
negotiating this Agreement and the transactions hereunder through the
termination date.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
11.1 Survival of Representations and Warranties.
(a) All representations, warranties, agreements and covenants made or
undertaken by the Parties in this Agreement are material, have been relied upon
by the other Parties, shall survive the Effective Time hereunder, shall not
merge in the performance of any obligation by any party hereto and shall
terminate and expire (i) with respect to any "General Claim" (as herein defined)
with respect to which a Claims Notice has not been given pursuant to Section
11.4 of this Agreement on the first anniversary of the Effective Time; provided
that notwithstanding the above, the covenants in Section 3.1(c) and in this
Article 11 shall terminate and expire on the first anniversary of the date on
which such covenant or agreement is to be performed hereunder; and (ii) with
respect to any "Tax Claim" (as herein defined) with respect to which a Claims
Notice has not been given pursuant to Section 11.4 of this Agreement, on the
later of (x) the date upon which the Liability to which any such Tax Claim may
relate is barred by all applicable statutes of limitation and (y) the date upon
which any claim for refund or credit related to such Tax Claim is barred by all
applicable statutes of limitation. As used in this Agreement, the following
terms have the following meanings:
(1) "General Claim" means any claim based upon, arising out of or
otherwise in respect of any inaccuracy in any representation or warranty or
any breach of any covenant or agreement made or to be performed by (i)
-40-
SourceOne or any Shareholder, or (ii) ePlus pursuant to this Agreement;
provided that a "General Claim" shall not include any Tax Claim; and
(2) "Tax Claim" means any claim based upon, arising out of or
otherwise in respect of any inaccuracy in any representation or warranty or
any breach of any covenant or agreement made or to be performed by
SourceOne or any Shareholder pursuant to this Agreement related to any
Taxes.
(b) SourceOne and the Shareholders acknowledge and agree that ePlus has
performed and intends to perform such investigation of SourceOne, SourceOne's
business and Assets as it may deem necessary or appropriate; however, no
investigation by ePlus will diminish or obviate any of the representations,
warranties, covenants, or agreements made or to be performed by SourceOne or the
Shareholders pursuant to this Agreement or ePlus' right to fully rely upon such
representations, warranties, covenants, and agreements, except as otherwise
provided herein.
11.2 Obligation of the Shareholders to Indemnify. The Shareholders jointly
and severally agree to indemnify ePlus against, and hold ePlus harmless from,
all Losses asserted against, imposed upon or incurred by ePlus by reason of,
resulting from, arising out of, based upon or otherwise in respect of the
following notwithstanding any actual or alleged negligence of ePlus:
(a) any breach or inaccuracy in any representation or warranty made by
SourceOne or any Shareholder pursuant to this Agreement; provided that for
purposes of this sentence only, those representations and warranties which are
qualified by references to "material" or "SourceOne Material Adverse Effect" or
to the "Knowledge" of SourceOne or the Shareholders or variations of such terms
shall be deemed not to include such qualifications; or
(b) any breach of any covenant or agreement made or to be performed by any
Shareholder pursuant to this Agreement.
11.3 Obligation of ePlus to Indemnify. ePlus agrees to indemnify each
Shareholder against, and hold each of them harmless from, all Losses asserted
against, imposed upon or incurred by such Shareholder by reason of, resulting
from, arising out of, based upon or otherwise in respect of the following
notwithstanding any actual or alleged negligence of any Shareholder:
(a) any breach or inaccuracy in any representation or warranty made by
ePlus pursuant to this Agreement; provided that for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "ePlus Material Adverse Effect" or to the "Knowledge" of ePlus or
variations of such terms shall be deemed not to include such qualifications; or
-41-
(b) any breach of any covenant or agreement made or to be performed by
ePlus pursuant to this Agreement.
11.4 Notice of Loss or Asserted Liability. Promptly after (i) becoming
aware of circumstances that have resulted in a Loss for which any Person or
Persons entitled to indemnification pursuant to Section 11.2 or 11.3 of this
Agreement intends to seek indemnification under such Section (the "Party Seeking
Indemnification") or (ii) receipt by the Party Seeking Indemnification of
written notice of any demand, claim, or circumstances which, with the lapse of
time, the giving of notice or both, would give rise to a claim or the
commencement (or threatened commencement) of any Litigation that may result in a
Loss (an "Asserted Liability"), the Party Seeking Indemnification shall give
notice thereof (the "Claims Notice") to any other party or parties obligated to
provide indemnification pursuant to Section 11.2 or 11.3 of this Agreement (the
"Indemnifying Party") and, during the period of Escrow, to the Escrow Agent. The
Claims Notice shall describe the Loss or the Asserted Liability in reasonable
detail, and shall indicate the amount (reasonably estimated, if necessary) of
the Loss that has been or may be suffered by the Party Seeking Indemnification,
the date each such item was paid, or properly accrued in accordance with GAAP or
arose, the nature of the misrepresentation, breach of warranty or claim to which
such item is related and the specific representation, warranty or covenant
alleged to have been the subject of such misrepresentation, breach or claim, and
shall be signed by an officer of the Party Seeking Indemnification, to the
extent appropriate. The Claims Notice may be amended on one or more occasions
with respect to the amount of the Asserted Liability or the Loss at any time
prior to final resolution of the obligation to indemnify relating to the
Asserted Liability or the Loss. If a Claims Notice is not provided promptly as
required by this Section 11.4, the Party Seeking Indemnification nonetheless
shall be entitled to indemnification by the Indemnifying Party to the extent
that the Indemnifying Party has not established that it has been prejudiced by
such late receipt of the Claims Notice. Notwithstanding the foregoing sentence,
however, if the Claims Notice is not provided prior to compromise or payment of
any Asserted Liability by the Party Seeking Indemnification, the Party Seeking
Indemnification shall only be entitled to indemnification by the Indemnifying
Party to the extent that the Party Seeking Indemnification has established that
the Indemnifying Party has not been prejudiced by such compromise or payment.
11.5 Opportunity to Contest. The Indemnifying Party may elect to compromise
or contest, at its own expense and with counsel reasonably acceptable to the
Party Seeking Indemnification, any Asserted Liability. If the Indemnifying Party
elects to compromise or contest such Asserted Liability, it shall within 30 days
(or sooner, if the nature of the Asserted Liability so requires) notify the
Party Seeking Indemnification and the Escrow Agent of its intent to do so by
sending a notice to the Party Seeking Indemnification (the "Contest Notice"),
and the Party Seeking Indemnification shall cooperate, at the expense of the
Indemnifying Party, in the compromise or contest of such Asserted Liability. If
the Indemnifying Party elects not to compromise or contest the Asserted
Liability, fails to notify the Party Seeking Indemnification of its election as
herein provided or contests its obligation to indemnify under this Agreement,
the Party Seeking Indemnification (upon further notice to the Indemnifying
Party) shall have the right to pay, compromise or contest such Asserted
-42-
Liability on behalf of and for the account and risk of the Indemnifying Party.
Anything in this Section 11.5 to the contrary notwithstanding, (i) the Party
Seeking Indemnification shall have the right, at its own cost and for its own
account, to compromise or contest any Asserted Liability, and (ii) the
Indemnifying Party shall not, without the Party Seeking Indemnification's
written consent, settle or compromise any Asserted Liability or consent to entry
of any judgment which does not include an unconditional term releasing the Party
Seeking Indemnification from all Liability in respect of such Asserted
Liability. In any event, the Party Seeking Indemnification and the Indemnifying
Party may participate, at their own expense, in the contest of such Asserted
Liability. Each of SourceOne, the Shareholders, and ePlus shall cooperate fully
with the others as to all Asserted Liabilities, shall make available to the
others as reasonably requested all information, records and documents relating
to all Asserted Liabilities and shall preserve all such information, records and
documents until the termination of any Asserted Liability. To the extent
reasonably practicable, each of SourceOne, the Shareholders and ePlus also shall
make available to the others, as reasonably requested, its personnel, agents,
and other representatives who are responsible for preparing or maintaining
information, records, or other documents or who may have particular Knowledge
with respect to any Asserted Liability.
11.6 Limitations on Indemnification.
(a) The Indemnifying Parties shall have no liability with respect to the
matters described in clauses (a) or (b) of Sections 11.2 or 11.3 of this
Agreement until the total of all Losses with respect thereto exceeds $100,000
(the "Threshold Amount") and then only for the amount by which such Losses
exceed $100,000; provided, however, that this limitation shall not apply to any
Loss due to any inaccuracy of the representation contained in Section 5.21 of
this Agreement or to ePlus' indemnification obligations contained in Section
8.13 of this Agreement. The aggregate liability of all SourceOne Indemnifying
Parties, on the one hand, and all ePlus Indemnifying Parties on the other hand,
with respect to matters described in clauses (a) or (b) of Section 11.2 or 11.3
of this Agreement shall be limited to $1,500,000 each; provided, however, that
this limitation shall not apply to ePlus' indemnification obligations contained
in Section 8.13 of this Agreement.
(b) The limitations set forth in this Section 11.6 shall not apply to any
Losses occasioned by the willful misconduct or fraud of any Indemnifying Party,
and the Indemnifying Party shall be liable for all Losses with respect thereto.
No party otherwise entitled to indemnification under this Agreement shall be
indemnified pursuant to this Agreement to the extent that such party's Losses
are increased or extended by the willful misconduct or fraud of such party.
(c) ePlus shall not proceed against the Shareholders directly until the
earlier of the expiration of the Escrow or the distribution of all amounts in
the Escrow in accordance with the Escrow Agreement; provided, that the
Shareholders do not contest the distribution of the amounts in Escrow when a
claim against such amount is made by ePlus. For the purpose of compensating
ePlus for its Losses pursuant to this Agreement, (i) the Escrowed Cash and
Escrowed Shares shall be distributed to ePlus on a pro rata basis from the
-43-
Escrow and (ii) all Escrowed Shares in the Escrow shall be valued at $8.00 per
share (the "Valuation Price"); provided, that the Valuation Price shall be
adjusted to reflect fully the effect of any stock split, reverse stock split,
stock dividend (including any dividend or general distribution of securities
convertible into or exchangeable or exercisable for ePlus Common Stock),
reclassification, reorganization, recapitalization or other like change with
respect to ePlus Common Stock occurring after the date hereof. After the
expiration of the Escrow, the Shareholders shall have the option, in their sole
discretion, to compensate ePlus for any Losses successfully claimed under this
Agreement using (i) cash or (ii) shares of ePlus Common Stock valued at the
Valuation Price; provided, that the Valuation Price shall be adjusted to reflect
fully the effect of any stock split, reverse stock split, stock dividend
(including any dividend or general distribution of securities convertible into
or exchangeable or exercisable for ePlus Common Stock), reclassification,
reorganization, recapitalization or other like change with respect to ePlus
Common Stock occurring after the date hereof .
11.7 Subrogation Rights. In the event that the Indemnifying Party shall be
obligated to indemnify the Party Seeking Indemnification pursuant to this
Article 11 the Indemnifying Party shall, upon payment of such indemnity in full,
be subrogated to all rights of the Party Seeking Indemnification with respect to
the Loss to which such indemnification relates; provided, however, that the
Indemnifying Party shall only be subrogated to the extent of any amount paid by
it pursuant to this Article 11 in connection with such Loss.
11.8 Insurance and Taxes. The Liability of the Indemnifying Party with
respect to any Loss shall be reduced by (i) any insurance proceeds received and
(ii) any tax benefit received by the Party Seeking Indemnification as a result
of any Losses upon which such indemnification claim is based.
11.9 Indemnification Payments. Subject to the terms hereof and unless
contested in good faith, an Indemnifying Party shall pay to the Party Seeking
Indemnification the full amount of any and all Losses (other than Losses
resulting from an Asserted Liability) under this Article 11 within 30 days of
receipt of the Claims Notice thereof and the full amount of any Loss resulting
from an Asserted Liability within 30 days of the date such Litigation is
terminated or the date a final judgment or award is rendered and no appeal is
taken, and thereafter the amount of such Loss shall bear interest at a rate
equal to 10% per annum.
11.10 Indemnification Exclusive Remedy. If the Effective Time occurs,
except for remedies based upon willful misconduct or fraud, the remedies
provided in this Article 11 and the Escrow Agreement constitute the sole and
exclusive remedies for recovery against a party to this Agreement.
11.11 Arbitration. All disputes arising under this Article 11 (other than
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at issue
and selected by the Indemnifying Party, and the Party Seeking Indemnification
and in accordance with the Commercial Arbitration Rules of the American
-44-
Arbitration Association. The arbitration shall be held in such place in Herndon,
Virginia as may be specified by the arbitrator (or any place agreed to by the
Indemnifying Party, the Party Seeking Indemnification and the arbitrator). The
decision of the arbitrator shall be final and binding as to any matters
submitted under this Article 11; provided, however, if necessary, such decision
and satisfaction procedure may be enforced by either the Indemnifying Party or
the Party Seeking Indemnification or in any court of record having jurisdiction
over the subject matter or over any of the parties to this Agreement. All costs
and expenses incurred in connection with any such arbitration proceeding
(including reasonable attorneys' fees) shall be borne by the party against which
the decision is rendered, or, if no decision is rendered, such costs and
expenses shall be borne equally by the Indemnifying Party as one party and the
Party Seeking Indemnification as the other party. If the arbitrator's decision
is a compromise, the determination of which party or parties bears the costs and
expenses incurred in connection with any such arbitration proceeding shall be
made by the arbitrator on the basis of the arbitrator's assessment of the
relative merits of the parties' positions.
ARTICLE 12
MISCELLANEOUS
12.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or Assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a 10% or more equity
interest in, or 10% or more of the Assets of, such Party or any of its
Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Reorganization,
including the SourceOne Disclosure Memorandum and Exhibits delivered
pursuant hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
-45-
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"CGCL" shall mean the California General Corporation Law, as amended.
"Competitive Services" means any product, service, software, or
technical service provided by or sold by ePlus, SourceOne, or any other
activity that generates material revenues for ePlus or SourceOne or their
Subsidiaries on or prior to the Determination Date.
"Confidential Information" means any confidential or proprietary
information possessed by SourceOne or its affiliated entities or relating
to its or their business, including without limitation, any confidential
"know-how", customer lists, details of client or consultant contracts,
current and anticipated customer requirements, pricing policies price
lists, market studies, business plans, operational methods, marketing plans
or strategies, product development techniques or plans, computer software
programs (including object code and source code), data and documentation,
data base technologies, systems, structures and architectures, inventions
and ideas, past, current and planned research and development,
compilations, devices, methods, techniques, processes, financial
information and data, business acquisition plans, new personnel acquisition
plans and any other information that would constitute a trade secret under
any applicable federal, state or local law.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, or undertaking of any kind or
character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets, or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate , revoke,
or adversely change the current terms of, or renegotiate, or to accelerate,
increase, or impose any Liability under, any Contract, Order, or Permit,
where, in any such event, such Default has or is reasonably likely to have,
individually or in the aggregate, a SourceOne Material Adverse Effect, with
respect to SourceOne or an ePlus Material Adverse Effect, with respect to
ePlus.
-46-
"Determination Date" means the date of termination of employment with
SourceOne of the Executive.
"DGCL" shall mean the Delaware General Corporation Law.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et
seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
6901 et seq., and other Laws relating to emissions, discharges, releases,
or threatened releases of any Hazardous Material, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of any Hazardous Material.
"ePlus Common Stock" shall mean the $.01 par value common stock of
ePlus.
"ePlus Companies" shall mean, collectively, ePlus and all ePlus
Subsidiaries.
"ePlus Financial Statements" shall mean (i) the consolidated
statements of condition balance sheets (including related notes and
schedules, if any) of ePlus as of March 31, 2001 and 2000, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the years ended March
31, 2001, 2000, and 1999 as filed by ePlus in SEC Documents, and (ii) the
consolidated statements of condition of ePlus (including related notes and
schedules, if any) and related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to March 31, 2001.
"ePlus Material Adverse Effect" shall mean an event, change, or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, condition (financial or otherwise) or results of operations of
ePlus and its Subsidiaries, taken as a whole, or (ii) the ability of ePlus
to perform its obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement, provided,
however, that none of the following shall be deemed in and of themselves,
either alone or in combination, to constitute, provided that none of the
following shall be taken into account in determining whether there has been
or will be, an "ePlus Material Adverse Effect": (a) any adverse change,
effect, event, occurrence, state of facts or development attributable to
-47-
conditions generally affecting the industries as a whole in which ePlus
participates, the U.S. economy as a whole or the foreign economies as a
whole in any locations where ePlus has material operations or sales, or
changes in GAAP, (b) any adverse change, effect, event, occurrence, state
of facts or development demonstrably shown to have been proximately caused
by the public announcement of, and the response or reaction of customers,
vendors, licensors, investors, or employees of ePlus to, this Agreement or
any of the transactions contemplated by this Agreement, (c) a failure of
ePlus to meet the revenue or earnings predictions of equity analysts (as
reflected in the First Call consensus estimate), or any other published
revenue or earnings predictions or expectations, for any period ending on
or after the date of this Agreement, in and of itself (d) changes in the
market price or trading volume of ePlus Common Stock, in and of itself or
(e) actions and omissions of any ePlus Company taken with the prior
informed written Consent of SourceOne in contemplation of the transactions
contemplated hereby.
"ePlus Preferred Stock" shall mean the $.01 par value preferred stock
of ePlus.
"ePlus Subsidiaries" shall mean the Subsidiaries of ePlus and any
corporation or other organization acquired as a Subsidiary of ePlus in the
future and owned by ePlus at the Effective Time.
"Equity Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares of
the capital stock of a Person or by which a Person is or may be bound to
issue additional shares of its capital stock or other Equity Right.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Executives" means ▇▇▇▇▇▇ ▇▇▇▇ and R. ▇▇▇▇▇▇ ▇▇▇▇▇.
"Exhibits" 1 through 9, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean United States generally accepted accounting
principles, consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws), and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
-48-
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls) but specifically excluding ordinary office
and cleaning supplies.
"Holder" shall mean any holder of Merger Shares.
"Intellectual Property" shall mean the following items: (i) inventions
(whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto and all patents, patent applications
and patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof;
(ii) trademarks, service marks, trade dress, domain names, maskworks,
logos, trade names and corporate names, including all goodwill associated
therewith and all applications, registrations and renewals in connection
therewith; (iii) copyrightable works, copyrights and all applications,
registrations and renewals in connection therewith; (iv) trade secrets and
confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals); (v) computer software,
together with all translations, adaptations, derivations and combinations
thereof (including data and related documentation); (vi) all other
proprietary rights; and (vii) all copies and tangible embodiments thereof
(in whatever form or medium).
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean the actual
personal knowledge of the chairman, president, or chief financial officer
of such Person and, in the case of the SourceOne, shall include each of the
Shareholders.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
-49-
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, security interest, title retention, or other security
arrangement, or any adverse right or interest, charge, or claim of any
nature whatsoever of, on, or with respect to any property or property
interest, other than (i) Liens for Taxes not yet due and payable, (ii)
Liens which do not materially impair the use of or title to the Assets
subject to such Lien, (iii) Liens of mechanics or material men securing
obligations incurred in the ordinary course of business that are not yet
due and payable, (iv) good faith security deposits made in the ordinary
course of business to secure performance under lease agreements, and (v)
Liens permitted by this Agreement.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or written notice by any Person alleging potential
Liability relating to or affecting a Party, its business, its Assets
(including Contracts related to it), or the transactions contemplated by
this Agreement, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"Loss" shall mean any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties,
interest, assessments, actions, causes of action, suits, losses, damages,
liabilities, costs, expenses (including without limitation, (i) interest,
penalties, and reasonable attorneys' fees and expenses, (ii) attorneys'
fees and expenses necessary to enforce rights to indemnification hereunder,
and (iii) consultant's fees and other costs of defense or investigation),
and interest on any amount payable to a third party as a result of the
foregoing, whether accrued, absolute, contingent, known, unknown, or
otherwise as of the Effective Time or thereafter, but excluding punitive,
exemplary, speculative, incidental or consequential damages (including, but
not limited to, lost income and profits and interruptions of business).
"Merger Shares" shall mean (A) the shares of ePlus Common Stock issued
to the Shareholders under this Agreement, and (B) any securities of ePlus
issued as a dividend or other distribution with respect to, or in exchange
for or in replacement of, the shares of ePlus Common Stock referred to in
clause (A); provided, that Merger Shares shall not include (i) securities
with respect to which a registration statement with respect to the sale of
such securities has become effective under the Securities Act and all such
securities have been disposed of in accordance with such registration
statement, (ii) such securities as are actually sold pursuant to Rule 144
(or any successor provision thereto) under the Securities Act, or (iii)
such securities as are acquired by ePlus or any of its Subsidiaries.
"Merger Sub" shall mean the newly-formed, wholly-owned subsidiary of
ePlus to be organized to effect the Merger under the Laws of the State of
California and with the name of SCC Merger Subsidiary, Inc.
-50-
"Merger Sub Common Stock" shall mean the no par value common stock of
Merger Sub.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq NMS" or "Nasdaq National Market" shall mean the National
Market System of The Nasdaq Stock Market.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Operating Properties" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest
(including an interest in a fiduciary capacity).
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Party" shall mean either SourceOne and, the Shareholders, on the one
hand, or ePlus, on the other hand, and "Parties" shall mean all of
SourceOne, the Shareholders and ePlus.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Plan of Merger" shall mean the plan of merger by and between
SourceOne and ePlus Technology, substantially in the form attached hereto
as Exhibit 2.
"Principal or Representative" means a principal, owner, partner,
shareholder, joint venturer, investor, member, trustee, director, officer,
manager, employee, agent, representative or consultant.
-51-
"Protected Clients" any person that (i) obtained Competitive Services
from SourceOne or ePlus within one (1) year prior to the Determination
Date, or (ii) of whom Executive gained knowledge through the use or
disclosure of Confidential Information during Executive's employment with
SourceOne.
"Protected Employees" means employees of SourceOne or ePlus who were
employed by SourceOne or ePlus any time within six (6) months prior to the
Determination Date.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice and all state
regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Restricted Period" means the period beginning on the Effective Date
and (i) ending on the second anniversary of the Determination Date in the
case of any termination of Executive's employment by SourceOne, ePlus or
their respective successors and assigns for Cause ( as defined in
Executive's employment agreement) or by Executive without Good Reason ( as
defined in Executive's employment agreement); (ii) ending on the date of
Executive's last severance payment pursuant to Section 7(a)(iii) of his
employment agreement in the case of any termination of Executive's
employment by Executive for Good Reason (as defined in Executive's
employment agreement) or by SourceOne, ePlus or their respective successors
and assigns for any reason other than for Cause.
"Restricted Territory" means the area which is within a 150 mile
radius of any office of SourceOne in existence as of the Effective Date.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
-52-
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
SourceOne to be held pursuant to Section 8.1 of this Agreement, including
any adjournment or adjournments thereof.
"SourceOne AAA Account" shall mean the accumulated adjustment account
of SourceOne, which is a component of owner's equity.
"SourceOne Common Stock" shall mean the no par value common stock of
SourceOne.
"SourceOne Disclosure Memorandum" shall mean the written information
entitled "SourceOne Disclosure Memorandum" delivered prior to the date of
this Agreement to ePlus describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section or subsection of this Agreement under
which such disclosure is being made. SourceOne shall use reasonable efforts
to specifically include cross-references in such Disclosure Memorandum when
information disclosed with respect to one Section or subsection shall also
be disclosed under another Section or subsection of the Agreement; provided
that if an item or information is disclosed in a certain Section or
subsection in such a way as to make its relevance to the disclosure
required by another Section or subsection reasonably apparent, the matter
shall be deemed to have been disclosed in such other Section or subsection,
notwithstanding the omission of a specific cross-reference to such other
Section or subsection. The inclusion of any matter in this document shall
not be deemed an admission or otherwise to imply that any such matter is
material for purposes of this Agreement.
"SourceOne Financial Statements" shall mean the consolidated balance
sheets (including related notes and schedules, if any) of SourceOne, and
the related statements of operations, shareholders' equity, and cash flows
(including related notes and schedules, if any) for (i) the period
beginning January 1, 2001 and ending the last day of the whole month that
immediately precedes the Effective Time, and (ii) each of the three fiscal
years ended December 31, 2000, 1999, and 1998, all prepared in accordance
with GAAP.
"SourceOne Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, condition (financial or otherwise) or results of operations of
SourceOne, taken as a whole, or (ii) the ability of SourceOne or any
-53-
Shareholder to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this
Agreement, ; provided, however, that none of the following shall be deemed
in and of themselves, either alone or in combination, to constitute,
provided that none of the following shall be taken into account in
determining whether there has been or will be, a "SourceOne Material
Adverse Effect" : (a) any adverse change, effect, event, occurrence, state
of facts or development attributable to conditions generally affecting the
industries as a whole in which SourceOne participates, the U.S. economy as
a whole or the foreign economies as a whole in any locations where
SourceOne has material operations or sales, or changes in GAAP, (b)
demonstrably shown to have been proximately caused by the public
announcement of, and the response or reaction of customers, vendors,
licensors, investors, or employees of SourceOne to, this Agreement or any
of the transactions contemplated by this Agreement, (c) the failure to meet
internal forecasts or projections in and of itself; or (d) actions and
omissions of SourceOne taken with the prior informed written Consent of
ePlus in contemplation of the transactions contemplated hereby.
"SourceOne Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of SourceOne.
"Subsidiaries" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii)
in the case of partnerships, serves as a general partner, (iii) in the case
of a limited liability company, serves as a managing member, or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof.
"Surviving Corporation" shall mean SourceOne as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, or foreign government or subdivision or agency thereof,
including any interest, penalties, or additions thereto.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
-54-
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"Taxable Period" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
Asserted Liability.....................................Section 11.4
Claims Letters.........................................Section 8.12(d)
Claims Notice..........................................Section 11.4
Closing................................................Section 1.2
Closing Date...........................................Section 1.2
Contest Notice.........................................Section 11.5
Effective Time.........................................Section 1.3
ePlus SEC Reports......................................Section 6.4(a)
Escrow Agent...........................................Section 4.3
Escrow Agreement.......................................Section 4.3
Escrowed Cash..........................................Section 4.3
Escrowed Shares........................................Section 4.3
Follow-On Merger.......................................Section 1.4
General Claim..........................................Section 11.1(a)(1)
Indemnified Party......................................Section 8.12(b)
Indemnifying Party.....................................Section 11.4
Merger.................................................Section 1.1
Mergers................................................Section 1.4
Party Seeking Indemnification..........................Section 11.4
Per Share Merger Consideration.........................Section 3.1(c)
Personal Guarantees....................................Section 8.13
Restrictive Covenants..................................Section 8.14(c)(i)
Rule 501...............................................Section 5.19(e)
SourceOne Benefit Plans................................Section 5.13(a)
SourceOne Contracts....................................Section 5.14
SourceOne ERISA Affiliate..............................Section 5.13(e)
SourceOne ERISA Plan...................................Section 5.13(a)
SourceOne Pension Plan.................................Section 5.13(a)
Stock Exchange Ratio...................................Section 3.1(c)
Takeover Laws..........................................Section 8.10
Tax Claim..............................................Section 11.1(a)(2)
Threshold Amount.......................................Section 11.6(a)
Valuation Price........................................Section 11.6(c)
-55-
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
12.2 Expenses.
(a) Except as otherwise provided in this Section 12.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder including, but not
limited to, printing fees, and fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel; provided, however
that such costs and expenses of the Shareholders shall be paid by SourceOne.
Notwithstanding the foregoing, if SourceOne shall terminate the Agreement
pursuant to Section 10.1 (b), (c) or (e), or if ePlus shall terminate the
Agreement for reasons other than those stated in Sections 10.1 (a), (b), (c),
(d) or (e) and (1) SourceOne has delivered the SourceOne Financial Statements as
required herein and all representations and warranties concerning such SourceOne
Financial Statements and any other financial information provided to ePlus are
accurate, correct and complete in all material respects as of the termination
date and (2) SourceOne has not declared bankruptcy as of the date of such
termination, then ePlus shall reimburse SourceOne for the cost and expenses
associated with the auditing of the SourceOne Financial Statements up to a
maximum amount of $50,000.
(b) Nothing contained in this Section 12.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
12.3 Brokers and Finders. Each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon his, her, or
its representing or being retained by or allegedly representing or being
retained by SourceOne or ePlus, each of SourceOne and ePlus, as the case may be,
agrees to indemnify and hold the other Party harmless of and from any Liability
in respect of any such claim.
12.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other than (i) Sections 7,
10 and 12 of the Letter of Intent, dated January 19, 2001, by and among
SourceOne, ePlus and the Shareholders which shall remain in effect and (ii) the
representations and agreements contained in the letter agreement between
-56-
SourceOne and ePlus, dated October 2, 2001. Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, other than as provided in Section 8.12 of
this Agreement.
12.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
stockholder approval of this Agreement has been obtained; provided, that the
provisions of this Agreement relating to the manner or basis in which shares of
SourceOne Common Stock will be exchanged for ePlus Common Stock and/or the right
to receive cash consideration shall not be amended after the approval of the
Shareholders (whether by solicitation or at the Shareholders' Meeting) without
the requisite approval of the holders of the issued and outstanding shares of
SourceOne Common Stock entitled to vote thereon.
12.6 Waivers.
(a) Prior to or at the Effective Time, ePlus, acting through its Board of
Directors, chief executive officer, chief financial officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by SourceOne, to waive or extend the time for the
compliance or fulfillment by SourceOne of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of ePlus under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of ePlus except
that any unfulfilled conditions shall be deemed to have been waived at the
Effective Time.
(b) Prior to or at the Effective Time, SourceOne, acting through its Board
of Directors shall have the right to waive any Default in the performance of any
term of this Agreement by ePlus, to waive or extend the time for the compliance
or fulfillment by ePlus of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
SourceOne under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of SourceOne except that
any unfulfilled conditions shall be deemed to have been waived at the Effective
Time.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
12.7 Assignment. Except as expressly contemplated hereby, neither this
-57-
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
12.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
SourceOne: SOURCEONE COMPUTER CORPORATION
c/o ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Copy to Counsel: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Copy to Counsel: TERRA LAW LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
ePlus: EPLUS, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Senior VP, Secretary
and Treasurer
Copy to Counsel: ▇▇▇▇▇▇ & BIRD LLP
North Building, 11th Floor
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-58-
12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the Commonwealth of Virginia, without regard to any
applicable conflicts of Laws, except to the extent that the Laws of the State of
California relate to the consummation of the Merger.
12.10 Counterparts; Delivery By Facsimile. This Agreement may be executed
in two or more counterparts and delivered by facsimile, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
12.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
12.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of the
Parties.
12.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
12.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
[Signatures Follow on Next Page]
-59-
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
SOURCEONE COMPUTER CORPORATION
By: /s/ R. ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------
R. ▇▇▇▇▇▇ ▇▇▇▇▇
President
ATTEST:
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇▇▇▇
Secretary
[CORPORATE SEAL]
SHAREHOLDERS
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------
▇▇▇▇▇ ▇▇▇▇
By: /s/ R. ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------
R. ▇▇▇▇▇▇ ▇▇▇▇▇
-60-
EPLUS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Board,
President and Chief
Executive Officer
ATTEST:
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Secretary
[CORPORATE SEAL]
EPLUS, TECHNOLOGY, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman and Chief
Operating Officer
ATTEST:
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Secretary
[CORPORATE SEAL]
-61-