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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
May 31, 1996
Date of Report (Date of earliest event reported)
INTELLIQUEST INFORMATION GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 0-27680 74-2775377
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
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1250 Capital of Texas Highway South
Building Two, Plaza One
Austin, TX 78746
(Address of principal executive offices, including zip code)
(512) 329-0808
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 30, 1996, IntelliQuest Information Group, Inc., a Delaware
corporation (the "Registrant" or "IntelliQuest") entered into a definitive
agreement to acquire Pipeline Communications, Inc., a Georgia corporation
("Pipeline"), by means of a merger (the "Merger") of IntelliQuest Delaware,
Inc., a Delaware corporation and wholly-owned subsidiary of the Registrant
("Sub"), with and into Pipeline pursuant to an Agreement and Plan of
Reorganization, dated as of May 30, 1996 (the "Reorganization Agreement"), by
and among the Registrant, Sub and Pipeline. The Merger was effected on May
31, 1996 (the "Effective Time"). As a result of the Merger, Pipeline became
a wholly-owned subsidiary of the Registrant. Pursuant to the Reorganization
Agreement, upon the Effective Time of the Merger, each of the shares of
Common Stock and Series B Preferred Stock of Pipeline (collectively, the
"Pipeline Capital Stock") issued and outstanding immediately before the
Effective Time was automatically converted into the right to receive a
fraction of a share (the "Applicable Fraction") of the Registrant's Common
Stock ("IntelliQuest Common Stock") equal to (a) 562,500 divided by (b) the
sum of (i) the total number of shares of Pipeline Capital Stock issued and
outstanding at the Effective Time and (ii) the total number of shares of
Pipeline Common Stock issuable upon the exercise of all options and warrants
to purchase Pipeline Common Stock issued and outstanding at the Effective
Time. Such fraction is equal to approximately 0.4318. No fractional share
of IntelliQuest Common Stock will be issued pursuant to the Merger. Instead,
each Pipeline shareholder who would otherwise be entitled to receive a
fraction of a share of IntelliQuest Common Stock in the Merger (after
aggregating all shares of IntelliQuest Common Stock to be received by such
shareholder) will receive from IntelliQuest, promptly after the Effective
Time, a cash payment equal to the fractional share multiplied by $32.00. In
addition, all options and warrants to purchase Pipeline Common Stock then
outstanding (each a "Pipeline Option") under Pipeline's 1994 Incentive Stock
Option Plan were assumed by IntelliQuest. Each Pipeline Option so assumed
(an "Assumed Option") will continue to have, and be subject to, the same
terms and conditions as the corresponding Pipeline Option set forth in the
respective option agreement applicable to such Pipeline Option immediately
prior to the Effective Time except that: (i) it will be exercisable for that
number of whole shares of IntelliQuest Common Stock determined by multiplying
the number of shares of Pipeline Common Stock subject to the Pipeline Option
by the Applicable Fraction and rounding down to the nearest whole number
(with no cash being payable for any fraction of a share that is lost due to
rounding); and (ii) the per-share exercise price for the shares of
IntelliQuest Common Stock issuable upon exercise of an Assumed Option will be
determined by dividing the exercise price of the Pipeline Option by the
Applicable Fraction and rounding the resulting exercise price up to the
nearest whole cent.
In connection with the Merger, 56,250 shares (collectively, the
"Escrow Amount") out of the aggregate merger consideration of 562,500 shares of
IntelliQuest Common Stock were placed into escrow, to be held as security for
any losses incurred by IntelliQuest in the event of certain breaches by Pipeline
of covenants, representations and warranties contained in the Reorganization
Agreement. The Escrow Amount was contributed on behalf of each holder of
Pipeline Capital Stock in proportion to the aggregate consideration otherwise
received by such holder by virtue of the Merger.
The acquisition of Pipeline is intended to be a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and is intended to qualify as a "pooling of interests" for
financial accounting purposes.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. As of the date of filing
this Current Report on Form 8-K, it is impracticable for the Registrant to
provide financial statements required by this Item 7(a). In accordance with
Item 7(a)(4) of Form 8-K, such financial statements shall be filed by amendment
to this Form 8-K no later than 60 days after June 14, 1996.
(b) PRO FORMA FINANCIAL INFORMATION. As of the date of filing of this
Current Report on Form 8-K, it is impracticable for the Registrant to provide
the pro forma financial information required by this Item 7(b). In accordance
with Item 7(b) of Form 8-K, such financial statements shall be filed by
amendment to this Form 8-K no later than 60 days after June 14, 1996.
(c) EXHIBITS. The Exhibits to this Report are listed in the Exhibit
Index set forth elsewhere herein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 14, 1996 INTELLIQUEST INFORMATION GROUP, INC.
By: /s/ James Schellhase
-----------------------------------
James Schellhase
Chief Operating Officer and
Chief Financial Officer
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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
2.1 Agreement and Plan of Reorganization, dated May 30,
1996, by and among IntelliQuest Information Group,
Inc., a Delaware corporation, Pipeline
Communications, Inc., a Georgia corporation, and
IntelliQuest Delaware, Inc., a Delaware corporation.
5
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INTELLIQUEST INFORMATION GROUP, INC.
INTELLIQUEST DELAWARE, INC.
AND
PIPELINE COMMUNICATIONS, INC.
DATED AS OF MAY 30, 1996
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TABLE OF CONTENTS
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ARTICLE I - THE MERGER........................................................ 1
1.1 The Merger......................................................... 1
1.2 Effective Time..................................................... 2
1.3 Effect of the Merger............................................... 2
1.4 Articles of Incorporation; Bylaws.................................. 2
1.5 Directors and Officers............................................. 3
1.6 Maximum Shares to Be Issued; Effect on Capital Stock............... 3
1.7 Dissenting Shares.................................................. 5
1.8 Surrender of Certificates.......................................... 6
1.9 No Further Ownership Rights in Company Common Stock................ 8
1.10 Lost, Stolen or Destroyed Certificates............................. 8
1.11 Tax and Accounting Consequences.................................... 8
1.12 Taking of Necessary Action; Further Action......................... 8
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 8
2.1 Organization of the Company........................................ 9
2.2 Company Capital Structure.......................................... 9
2.3 Subsidiaries....................................................... 10
2.4 Authority.......................................................... 10
2.5 Company Financial Statements....................................... 10
2.6 No Undisclosed Liabilities......................................... 11
2.7 No Changes......................................................... 11
2.8 Tax and Other Returns and Reports.................................. 13
2.9 Restrictions on Business Activities................................ 13
2.10 Title to Properties; Absence of Liens and Encumbrances............. 13
2.11 Intellectual Property.............................................. 14
2.12 Agreements, Contracts and Commitments.............................. 15
2.13 Interested Party Transactions...................................... 17
2.14 Compliance with Laws............................................... 17
2.15 Litigation......................................................... 17
2.16 Insurance.......................................................... 17
2.17 Minute Books....................................................... 18
2.18 Environmental Matters.............................................. 18
2.19 Brokers' and Finders' Fees; Third Party Expenses................... 18
2.20 Employee Matters and Benefit Plans................................. 19
2.21 Representations Complete........................................... 22
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.... 22
3.1 Organization, Standing and Power................................... 22
3.2 Authority.......................................................... 23
3.3 Capital Structure.................................................. 23
3.4 SEC Documents; Parent Financial Statements......................... 24
3.5 No Material Adverse Change......................................... 24
3.6 Litigation......................................................... 24
ARTICLE IV - CONDUCT PRIOR TO THE EFFECTIVE TIME.............................. 25
4.1 Conduct of Business of the Company................................. 25
ARTICLE V - ADDITIONAL AGREEMENTS............................................. 27
5.1 Access to Information.............................................. 27
5.2 Confidentiality.................................................... 27
5.3 Expenses........................................................... 27
5.4 Public Disclosure.................................................. 28
5.5 Consents........................................................... 28
5.6 FIRPTA Compliance.................................................. 28
5.7 Best Efforts....................................................... 28
5.8 Registration Rights Agreement...................................... 28
5.9 Notification of Certain Matters.................................... 29
5.10 Pooling Accounting................................................. 29
5.11 Affiliate Agreements............................................... 29
5.12 Additional Documents and Further Assurances........................ 29
5.13 Form S-8........................................................... 30
5.14 Nasdaq National Market Listing..................................... 30
5.15 Voting Agreements.................................................. 30
5.16 Blue Sky Laws...................................................... 30
5.17 Indemnification.................................................... 30
5.18 Parent Registrations............................................... 30
ARTICLE VI - CONDITIONS TO THE MERGER......................................... 31
6.1 Conditions to Obligations of Each Party to Effect the Merger....... 31
6.2 Additional Conditions to Obligations of the Company................ 31
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.. 32
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ARTICLE VII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW.............. 34
7.1 Survival of Representations and Warranties......................... 34
7.2 Escrow Arrangements................................................ 34
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.............................. 41
8.1 Termination........................................................ 41
8.2 Effect of Termination.............................................. 42
8.3 Amendment.......................................................... 42
8.4 Extension; Waiver.................................................. 42
ARTICLE IX - GENERAL PROVISIONS............................................... 42
9.1 Notices............................................................ 42
9.2 Interpretation..................................................... 44
9.3 Counterparts....................................................... 44
9.4 Entire Agreement; Assignment....................................... 44
9.5 Severability....................................................... 44
9.6 Other Remedies..................................................... 45
9.7 Governing Law...................................................... 45
9.8 Rules of Construction.............................................. 45
9.9 Specific Performance............................................... 45
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of May __, 1996 among IntelliQuest Information Group, Inc., a
Delaware corporation ("Parent"), IntelliQuest Delaware, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
Pipeline Communications, Inc., a Georgia corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding
shares of capital stock of the Company ("Company Capital Stock") and all
outstanding options, warrants and other rights to acquire or receive shares
of Company Capital Stock shall be converted into the right to receive shares
of Common Stock of Parent ("Parent Common Stock").
C. A portion of the shares of Parent Common Stock otherwise issuable
by Parent in connection with the Merger shall be placed in escrow by Parent,
the release of which amount shall be contingent upon certain events and
conditions, all as set forth in Article VII hereof.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
I.1 THE MERGER. As set forth in the Plan of Merger attached hereto as
Exhibit A, at the Effective Time (as defined in Section 1.2) and subject to
and upon the terms and conditions of this Agreement and the applicable
provisions of the Delaware General Corporation Law ("Delaware Law") and the
Georgia Business Corporations Code ("Georgia Law"), Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation
and as a wholly-owned subsidiary of Parent. The Company as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation".
<PAGE>
I.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than five (5) business days,
following satisfaction or waiver of the conditions set forth in Article VI,
at the offices of Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, California, unless another place or time is agreed to by Parent
and the Company. The date upon which the Closing actually occurs is herein
referred to as the "CLOSING DATE." On the Closing Date, the parties hereto
shall cause the Merger to be consummated by filing a Certificate of Merger
(or like instrument) with the Secretary of State Delaware and the Secretary
of State of Georgia (the "Certificate of Merger"), in accordance with the
relevant provisions of applicable law (the later of the times of acceptance
by the Secretary of State of Delaware and the Secretary of State of Georgia
of such filing being referred to herein as the "EFFECTIVE TIME"). The parties
currently intend that the Closing Date will occur on or prior to May 31, 1996.
I.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law and
Georgia Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
I.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Articles of Incorporation of Pipeline shall
be the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation; provided,
however, that:
Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to read:
"The name of the corporation is IntelliQuest
Communications, Inc."
and Article II of the Articles of Incorporation of the Surviving
Corporation shall be amended to read:
"The Corporation shall have the authority to
issue 1,000 shares of Common Stock. Each share
of Common Stock shall be identical in all
respects and entitled to: one vote in all
proceedings in which action may or is required
to be taken by shareholders of the Corporation;
participate equally in all dividends payable
with respect to Common Stock; and share ratably
in all distributions of assets of the
Corporation in the event of any voluntary or
involuntary liquidation, or winding up of the
affairs of the Corporation."
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(b) The Bylaws of Pipeline, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
I.5 DIRECTORS AND OFFICERS. The director(s) of Merger Sub immediately
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
I.6 MAXIMUM SHARES TO BE ISSUED; EFFECT ON CAPITAL STOCK. The maximum
number of shares of Parent Common Stock to be issued (including Parent Common
Stock to be reserved for issuance upon exercise of any of the Company's
options and warrants to be assumed by Parent) in exchange for the acquisition
by Parent of all outstanding Company Capital Stock and the assumption of all
unexpired and unexercised options and warrants to acquire Company Capital
Stock shall be 562,500 (the "AGGREGATE SHARE NUMBER"). No adjustment shall
be made in the number of shares of Parent Common Stock issued in the Merger
as a result of any cash proceeds received by the Company from the date hereof
to the Closing Date pursuant to the exercise of options or warrants to
acquire Company Capital Stock. Subject to the terms and conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holder of any shares of
the Company Capital Stock, the following shall occur:
(a) CONVERSION OF COMPANY COMMON STOCK AND SERIES B PREFERRED STOCK.
Each share of Common Stock of the Company ("COMPANY COMMON STOCK") and Series B
Preferred Stock of the Company ("SERIES B PREFERRED") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock or Series B Preferred to be canceled pursuant to Section 1.6(b) and any
Dissenting Shares (as defined and to the extent provided in Section 1.7(a)) will
be canceled and extinguished and be converted automatically into the right to
receive that number of shares of Parent Common Stock equal to the Exchange
Ratio (as defined in Section 1.6(g) (iii) below), upon surrender of the
certificate representing such share of Company Common Stock or Series B
Preferred Stock, as applicable, in the manner provided in Section 1.8.
(b) CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. Each
share of Company Capital Stock owned by Merger Sub, Parent, the Company or
any direct or indirect wholly-owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) STOCK OPTIONS. At the Effective Time, all options to purchase
Company Common Stock then outstanding under the Company's 1993 Stock Option
Plan and 1994 Incentive Stock Option Plan (the "OPTION PLANS"), and all other
then outstanding options or warrants to purchase Company Common Stock shall
be assumed by Parent in accordance with provisions described below.
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(i) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock under the Option Plans, and all other
options or warrants to purchase Company Common Stock (each a "COMPANY
OPTION"), whether vested or unvested, shall be, in connection with the
Merger, assumed by Parent. Each Company Option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Option Plans and/or as provided in the respective
option or warrant agreements governing such Company Option immediately prior
to the Effective Time, except that (A) such Company Option shall be
exercisable for that number of whole shares of Parent Common Stock (the
"PARENT OPTION SHARES") equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down (in the case of Company Options granted under the Option Plans)
to the nearest whole number of shares of Parent Common Stock and (B) the per
share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Option shall be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock
at which such Company Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") to the extent the Company Options qualified as incentive
stock options immediately prior to the Effective Time.
(iii) Promptly following the Effective Time, Parent will issue
to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(d) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Capital Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Capital
Stock occurring after the date hereof and prior to the Effective Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall be entitled to receive from Parent
an amount of cash (rounded to the nearest whole cent) equal to (i) such
fraction multiplied by (ii) $32.00.
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(g) DEFINITIONS.
(i) AGGREGATE SHARE NUMBER. The "Aggregate Share Number"
shall be a number of shares of Parent Common Stock equal to 562,500 shares (as
appropriately adjusted to reflect the effect of any stock split, stock dividend,
reorganization, recapitalization or the like with respect to the Parent Common
Stock occurring after the date hereof and prior to the Effective Time).
(ii) ESCROW AMOUNT. The "Escrow Amount" shall be a number of
shares of Parent Common Stock obtained by multiplying the Aggregate Share
Number by 0.10.
(iii) EXCHANGE RATIO. The "Exchange Ratio" shall mean the
quotient obtained by dividing (x) the Aggregate Share Number, by (y) the sum
of (A) the Outstanding Common Amount plus (B) the Outstanding Option Amount.
(iv) OUTSTANDING COMMON AMOUNT. The "Outstanding Company
Capital Stock Amount" shall mean the aggregate number of shares of Company
Common Stock and Series B Preferred outstanding immediately prior to the
Effective Time.
(v) OUTSTANDING OPTION AMOUNT. The "Outstanding Option
Amount" shall mean the aggregate number of shares of Company Common Stock
issuable upon the exercise of all Company Options outstanding immediately
prior to the Effective Time, whether vested or unvested at such time.
I.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has asserted
dissenters' rights for such shares in accordance with Georgia Law and who, as
of the Effective Time, has not effectively withdrawn or lost such dissenters'
rights ("DISSENTING SHARES"), shall not be converted into or represent a right
to receive Parent Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by Georgia Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who asserts dissenters' rights with
respect to such shares under Georgia Law shall effectively withdraw or lose
(through failure to perfect or otherwise) such dissenters' rights, then, as
of the later of the Effective Time and the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive Parent Common Stock and fractional shares as provided in
Section 1.6, without interest thereon, upon surrender of the certificate
representing such shares.
(c) The Company shall give Parent (i) prompt notice of any assertion
of dissenters' rights as to any shares of Company Capital Stock, withdrawals
or losses of such rights and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any assertion of
5
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dissenters' rights under Georgia Law. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment or offer to pay
with respect to any assertion of dissenters' rights as to any shares of
Company Common Stock.
I.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. American Securities Transfer, Incorporated
shall act as exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the aggregate number of shares of Parent
Common Stock issuable pursuant to Section 1.6 in exchange for outstanding
shares of Company Capital Stock; provided that, on behalf of the holders of
Company Capital Stock set forth on Schedule 1.8(b) attached hereto (the "ESCROW
SHAREHOLDERS"), Parent shall deposit into an escrow account a number of shares
of Parent Common Stock equal to the Escrow Amount out of the aggregate number
of shares of Parent Common Stock otherwise issuable pursuant to Section 1.6 to
the Escrow Shareholders. The portion of the Escrow Amount contributed on behalf
of each Escrow Shareholder shall be in proportion to the aggregate number of
shares of Parent Common Stock which such holder would otherwise be entitled to
receive under Section 1.6 by virtue of ownership of outstanding shares of
Company Capital Stock.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately prior to
the Effective Time represented outstanding shares of Company Capital Stock
whose shares were converted into the right to receive shares of Parent Common
Stock pursuant to Section 1.6, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock, if any, to be deposited in the Escrow Fund on
behalf of the Escrow Shareholders pursuant to Article VII hereof), plus cash in
lieu of fractional shares in accordance with Section 1.6, to which such holder
is entitled pursuant to Section 1.6, and the Certificate so surrendered shall
forthwith be canceled. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Article VII hereof, Parent
shall cause to be distributed to the Escrow Agent (as defined in Article VII) a
certificate or certificates representing that number of shares of Parent Common
Stock equal to the Escrow Amount which shall be registered in the name of the
Escrow Agent. Such shares shall be beneficially owned by the holders on whose
behalf such shares were deposited in the Escrow Fund and shall be available to
compensate Parent as provided in Article VII. Until so surrendered, each
outstanding Certificate that, prior to the
6
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Effective Time, represented shares of Company Capital Stock will be deemed
from and after the Effective Time, for all corporate purposes, other than the
payment of dividends, to evidence the ownership of the number of full shares
of Parent Common Stock into which such shares of Company Capital Stock shall
have been so converted and the right to receive an amount in cash in lieu of
the issuance of any fractional shares in accordance with Section 1.6. Each
Certificate representing shares of Parent Common Stock shall bear legend
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT
BE SOLD OR TRANSFERRED OR PLEDGED IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS ISSUER EITHER(A) RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR ISSUER)
REASONABLY ACCEPTABLE TO IT STATING, OR (B) OTHER
EVIDENCE REASONABLY SATISFACTORY TO ISSUER THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN ISSUER AND THE STOCKHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF ISSUER."
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time will be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record
of such Certificate shall surrender such Certificate. Subject to applicable
law, following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name other
than that of the registered holder of the certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to a holder
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of shares of Parent Common Stock or Company Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
I.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Capital Stock, and there shall
be no further registration of transfers on the records of the Surviving
Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
I.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of
that fact by the holder thereof, such shares of Parent Common Stock and cash
for fractional shares, if any, as may be required pursuant to Section 1.6;
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Parent or the
Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
I.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"CODE") and (ii) qualify for accounting treatment as a pooling of interests.
I.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are clearly disclosed in the disclosure letter
supplied by the Company to Parent (the "COMPANY SCHEDULES") and dated as of
the date hereof, as follows:
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II.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Georgia. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified
to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets (including intangible assets),
financial condition or results of operations of the Company (hereinafter
referred to as a "MATERIAL ADVERSE EFFECT"). The Company has delivered a
true and correct copy of its Articles of Incorporation and Bylaws, each as
amended to date, to Parent.
II.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of
5,000,000 shares of authorized Common Stock, of which 913,655 shares are
issued and outstanding and 300,000 shares of authorized Preferred Stock. The
authorized Preferred Stock consists of 300,000 shares of authorized Series B
Preferred Stock, of which 263,158 shares are issued and outstanding. The
Company Capital Stock is held of record by the persons, with the addresses of
record and in the amounts set forth on Schedule 2.2(a). All outstanding
shares of Company Capital Stock are duly authorized, validly issued, fully
paid and non-assessable and not subject to preemptive rights created by
statute, the Articles of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which it is bound.
(b) The Company has reserved 75,000 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plans, of which
67,800 shares are subject to outstanding, unexercised options and 7,200
shares remain available for future grant. The Company has reserved 58,000
shares of Common Stock for issuance upon exercise of outstanding Company
Options granted outside the Option Plans. Schedule 2.2(b) sets forth for
each outstanding Company Option (other than outstanding warrants) the name of
the holder of such option, the domicile address of such holder, the number of
shares of Common Stock subject to such option, the exercise price of such
option and the vesting schedule for such option, including the extent vested
to date and whether the exercisability of such option will be accelerated and
become exercisable by the transactions contemplated by this Agreement. The
Company has reserved 25,000 shares of Common Stock for issuance upon exercise
of outstanding warrants. Schedule 2.2(b) sets forth for each of the warrants
the name of the holder and exercise price of such warrants. Except for the
Company Options described in Schedule 2.2(b), there are no options, warrants,
calls, rights, commitments or agreements of any character, written or oral,
to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
the Company. Except for the Company Options described in Schedule 2.2(b),
there are no options, warrants, calls, rights, commitments or agreements of
any character, written or oral, to which the Company is a party or by which
it is bound obligating the Company to grant, extend, accelerate the vesting
of, change the price of, otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement. The holders of Company
Options have been or will be given, or shall have properly waived, any
required notice prior to the Merger and all such rights will be terminated at
or prior to the Effective Time. As a result of
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the Merger, Parent will be the record and sole beneficial owner of all
Company Capital Stock and rights to acquire or receive Company Capital Stock.
II.3 SUBSIDIARIES. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association,
joint venture or other business entity.
II.4 AUTHORITY. Subject only to the requisite approval of the Plan of
Merger by the Company's shareholders, the Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
shareholders to duly approve the Merger and this Agreement is that number of
shares as would constitute a majority of the outstanding shares of (a) the
Common Stock and Series B Preferred, voting together as a single class, (b)
the Series B Preferred voting separately as a single class (in each case with
each share of Series B Preferred being entitled to a number of votes equal to
the number of whole shares of Common Stock into which such share of Series B
Preferred could be converted on the record date for the vote), and (c) the
Common Stock voting separately as a single class. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of the Company, subject only to the approval of the Merger by the
Company's shareholders. The Company's Board of Directors has unanimously
approved the Plan of Merger. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms. Except as set forth
on Schedule 2.4, subject only to the approval of the Plan of Merger by the
Company's shareholders, the execution and delivery of this Agreement by the
Company does not, and, as of the Effective Time, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of any benefit under (any such event, a "Conflict")
(i) any provision of the Articles of Incorporation or Bylaws of the Company
or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets. No consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other federal, state, county, local or foreign
governmental authority, instrumentality, agency or commission ("GOVERNMENTAL
ENTITY") or any third party (so as not to trigger any Conflict), is required
by or with respect to the Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger
with the Delaware Secretary of State and the Georgia Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
state securities laws and (iii) such other consents, waivers, authorizations,
filings, approvals and registrations which are set forth on Schedule 2.4.
II.5 COMPANY FINANCIAL STATEMENTS. Schedule 2.5 sets forth the
Company's audited balance sheet as of December 31, 1995 and the related
audited statements of operations and cash
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flows for the twelve-month period then ended and the Company's unaudited
balance sheet as of March 31, 1996 (the "BALANCE SHEET") and the related
unaudited statements of operations and cash flows for the three-month period
then ended (collectively, the "COMPANY FINANCIALS"). The Company Financials
are correct in all material respects and have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a basis
consistent throughout the periods indicated and consistent with each other.
The Company Financials present fairly the financial condition and operating
results of the Company as of the dates and during the periods indicated
therein, subject, in the case of the unaudited financial statements, to
normal adjustments, which will not be material in amount or significance.
II.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 2.6,
reflected in the Balance Sheet, or arisen in the ordinary course of the
Company's business since March 31, 1996, consistent with past practices, the
Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), which, in any event, is individually or in the
aggregate material to the Balance Sheet or the business of the Company.
II.7 NO CHANGES. Except as set forth in Schedule 2.7, since March 31,
1996, there has not been, occurred or arisen any:
(a) transaction by the Company except (i) in the ordinary course
of business as conducted on that date and consistent with past practices, or
(ii) transactions which are not, individually or in the aggregate, material
to the Balance Sheet or the business of the Company;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company of $100,000
in any individual case or $250,000 in the aggregate.
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) material labor trouble or claim of wrongful discharge or
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
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(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct
or indirect redemption, purchase or other acquisition by the Company of any
of its capital stock;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement;
(j) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement
or license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
(m) waiver or release of any material right or claim of the
Company, including any write-off or other compromise of any account
receivable of the Company or any material change in the ageing or
collectibility of such accounts receivable;
(n) commencement or notice or written threat of commencement of
any lawsuit or proceeding by or against or investigation of the Company or
its affairs;
(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;
(p) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by the Company
to its customers or licensees or in pricing or royalties set or charged by
persons who have licensed Intellectual Property to the Company;
(r) event or condition of any character that has or reasonably
would be expected to have a Material Adverse Effect on the Company;
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(s) creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset which is likely
to have a Material Adverse Effect on the Company;
(t) transfer or grant of a right under or to any of the Company's
Intellectual Property Rights (as defined in Section 2.11 below), other than
those transferred or granted in the ordinary course of business consistent
with past practice; or
(u) agreement by the Company or any officer or employees thereof
to do any of the things described in the preceding clauses (a) through (t)
(other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
II.8 TAX AND OTHER RETURNS AND REPORTS. Except as set forth in
Schedule 2.8, the Company has filed or obtained filing extensions for all tax
returns (federal, state, county and local) required to be filed by it, and
the Company has paid or established adequate reserves on the Financial
Statements (in accordance with generally accepted accounting principles) for
the payment of all taxes whether or not shown to be due on such returns,
including, without limitation, all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third parties. The
Company has incurred no liability for taxes other than in the ordinary course
of business for periods after December 31, 1995. The federal income tax
returns of the Company have never been audited by the Internal Revenue
Service and no state income or sales tax returns of the Company have been
audited. No deficiency assessment with respect to or proposed adjustment of
the Company's federal, state, county or local taxes is pending or, to the
best of the Company's knowledge, threatened. There is no tax lien, whether
imposed by any federal, state, county or local taxing authority, outstanding
against the assets, properties or business of the Company. Neither the
Company nor, to its knowledge, any of its shareholders has ever filed a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations.
II.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has or
reasonably would be expected to have the effect of prohibiting or impairing
any business practice of the Company, any acquisition of property (tangible
or intangible) by the Company or the conduct of business by the Company, in
any way likely to have a Material Adverse Effect on the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
II.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property
currently leased by the Company, the name of the lessor and the date of the
lease and each amendment thereto. All such current leases are in full force
and effect, are valid and effective in accordance with their respective
terms, and there is not, under
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any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for
use in its business, free and clear of any Liens (as defined in Section
2.8(b)(vii)), except as reflected in the Company Financials or in Schedule
2.10(b) and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby. All of such properties and assets are in good
operating condition (normal wear and tear excepted), are reasonably fit for
the purposes for which such properties and assets are presently used, are
adequate and usable for the continued operation of the business of the
Company as the same is presently conducted, and none of such properties and
assets are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs, the cost of which will not vary materially from
historic patterns.
II.11 INTELLECTUAL PROPERTY.
(a) Except as set forth in Schedule 2.6, the Company owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, net lists, schematics, technology,
know-how, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material that are used in the business of the Company as currently conducted
or as proposed to be conducted by the Company (the "COMPANY INTELLECTUAL
PROPERTY RIGHTS").
(b) Schedule 2.11(a) sets forth a complete list of all patents,
registered and material unregistered trademarks, registered copyrights, trade
names and service marks, and any applications therefor, included in the
Company Intellectual Property Rights, and specifies, where applicable, the
jurisdictions in which each such Company Intellectual Property Right has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Schedule 2.11(b)
sets forth a complete list of all licenses, sublicenses and other agreements
to which the Company is a party and pursuant to which the Company or any
other person is authorized to use any Company Intellectual Property Right or
trade secret of the Company, and includes the identity of all parties
thereto. Except with respect to those agreements listed in Schedule 2.4, the
execution and delivery of this Agreement by the Company, and the consummation
of the transactions contemplated hereby, will neither cause the Company to be
in violation or default under any such license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement. Except as set
forth in Schedules 2.11(a) or 2.11(b), the Company is the sole and exclusive
owner or licensee of, with all right, title and interest in and to (free and
clear of any liens or encumbrances), the Company Intellectual Property
Rights, and has sole and exclusive rights (and is not contractually obligated
to pay any compensation to any third party in
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respect thereof) to the use thereof or the material covered thereby in
connection with the services or products in respect of which the Company
Intellectual Property Rights are being used.
(c) Except as set forth in Schedule 2.6, no claims with respect to
the Company Intellectual Property Rights have been asserted or are, to the
Company's knowledge, threatened by any person, nor are there any valid
grounds for any bona fide claims (i) to the effect that the manufacture,
sale, licensing or use of any of the products of the Company infringes on any
copyright, patent, trade mark, service mark, trade secret or other
proprietary right, (ii) against the use by the Company of any trademarks,
service marks, trade names, trade secrets, copyrights, maskworks, patents,
technology, know-how or computer software programs and applications used in
the Company's business as currently conducted or as proposed to be conducted
by the Company, or (iii) challenging the ownership by the Company, validity
or effectiveness of any of the Company Intellectual Property Rights. All
registered trademarks, service marks and copyrights held by the Company are
valid and subsisting. The business of the Company as currently conducted or
as proposed to be conducted by the Company has not and does not infringe on
any proprietary right of any third party. To the Company's knowledge, there
is no material unauthorized use, infringement or misappropriation of any of
the Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company. No Company Intellectual Property
Right or product of the Company or any of its subsidiaries is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by the Company.
(d) The Company has taken reasonable and practicable steps
designed to safeguard and maintain the secrecy and confidentiality of, and
its proprietary rights in, all material Company Intellectual Property Rights.
To the Company's knowledge, no current or prior officers, employees or
consultants of the Company claim an ownership interest in any Company
Intellectual Property Rights as a result of having been involved in the
development of such property while employed by or consulting to the Company,
or otherwise. All officers, employees and consultants of the Company have
executed and delivered to the Company an agreement regarding the protection
of proprietary information and the assignment to the Company of all
intellectual property developed as an employee or consultant of the Company.
II.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 2.12(a), the Company does not have, is not a party to nor is it
bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance pay
or post-employment liabilities or obligations,
(iii)any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
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(iv) any employment or consulting agreement with an employee or
individual consultant or salesperson, or any consulting or sales agreement
under which a firm or other organization provides services to the Company,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement,
(vi) any agreement of indemnification or guaranty,
(vii)any agreement containing any covenant limiting the freedom of
the Company to engage in any line of business or to compete with any person,
(viii) any agreement relating to capital expenditures and
involving future payments in excess of $100,000,
(ix) any agreement relating to the disposition or acquisition of
assets or any interest in any business enterprise outside the ordinary course
of the Company's business,
(x) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xi) any distribution, joint marketing or development agreement,
(xii)any agreement pursuant to which the Company has granted or may
grant in the future, to any party a source-code license or option or other
right to use or acquire source-code,
(xiii) any other agreement that involves $100,000 or more or is
not cancelable without penalty within thirty (30) days,
(xiv)any voting trust or agreement, stockholder agreement, pledge
agreement, buy-sell agreement, or first refusal or preemptive rights
agreement relating to any securities of the Company, or
(xv) any agreement under which it has granted any person any rights
to register under the Securities Act of 1933, as amended (the "Securities
Act"), any of its currently outstanding securities or any of its securities
which may hereafter be issued.
Except for such alleged breaches, violations and defaults, and events
that would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are all noted in Schedule 2.12(b), the Company
has not breached, violated or defaulted under, or received notice that
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it has breached, violated or defaulted under, any of the terms or conditions
of any agreement, contract or commitment required to be set forth on Schedule
2.12(a) or Schedule 2.11(b) (any such agreement, contract or commitment, a
"CONTRACT"). Each Contract is in full force and effect and, except as
otherwise disclosed in Schedule 2.12(b), is not subject to any default
thereunder of which the Company has knowledge by any party obligated to the
Company pursuant thereto.
II.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule
2.13, to the Company's knowledge, no officer, director or affiliate (as
defined under Regulation C under the Securities Act of 1933, as amended) of
the Company (nor any ancestor, sibling, descendant or spouse of any of such
persons, or any trust, partnership or corporation in which any of such
persons has or has had an economic interest), has or has had, directly or
indirectly, (i) an economic interest in any entity which furnished or sold,
or furnishes or sells, services or products that the Company furnishes or
sells, or proposes to furnish or sell, or (ii) an economic interest in any
entity that purchases from or sells or furnishes to, the Company, any goods
or services or (iii) a beneficial interest in any contract or agreement set
forth in Schedule 2.12(a) or Schedule 2.11(b); provided, that (x) ownership
of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation and no more than ten percent (10%) of the
outstanding equity of any other entity shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13 and (y) this
provision shall only apply if the terms and conditions applicable to the
subject relationship are materially less favorable to the Company than the
terms and conditions that could be obtained in an arms-length relationship.
II.14 COMPLIANCE WITH LAWS. The Company has complied in all material
respects with, is not in material violation of, and has not received any
notices of a material violation with respect to, any foreign, federal, state
or local statute, law or regulation.
II.15 LITIGATION. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to the Company's
knowledge threatened against the Company, its properties or any of its
officers or directors, in their respective capacities as such. Except as set
forth in Schedule 2.15, to the Company's knowledge, there is no investigation
pending or threatened against the Company, its properties or any of its
officers or directors by or before any governmental entity. Schedule 2.15
sets forth, with respect to any pending or threatened action, suit,
proceeding or investigation, the forum, the parties thereto, the subject
matter thereof and the amount of damages claimed or other remedy requested.
No governmental entity has at any time challenged or questioned the legal
right of the Company to manufacture, offer or sell any of its products in the
present manner or style thereof.
II.16 INSURANCE. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have
been paid and the Company is otherwise in material compliance with the terms
of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). The Company has no knowledge of
any threatened termination of, or material premium increase with respect to,
any of such policies.
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II.17 MINUTE BOOKS. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees
thereof) and stockholders or actions by written consent since the time of
incorporation of the Company.
II.18 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity
or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
or defined as a hazardous waste pursuant to the United States Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, (a "HAZARDOUS MATERIAL"), but excluding
office and janitorial supplies properly and safely maintained. No Hazardous
Materials are present, as a result of the deliberate actions of the Company,
or, to the Company's knowledge, as a result of any actions of any third party
or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company has at
any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect
on or before the Closing Date, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all
of the foregoing being collectively referred to as "HAZARDOUS MATERIALS
ACTIVITIES") in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending or, to
the Company's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Company is not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
II.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. The Company has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
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II.20 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall
apply only to this Section 2.20), for purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, written or otherwise,
funded or unfunded and whether or not legally binding, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3)
of ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee" (as defined below);
(iv) "EMPLOYEE" shall mean any current, former, or retired
employee, officer, or director of the Company or any Affiliate;
(v) "EMPLOYEE AGREEMENT" shall refer to each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visa, work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37)
of ERISA; and
(viii) "PENSION PLAN" shall refer to each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.
(b) SCHEDULE. Schedule 2.20(b) contains an accurate and complete
list of each Company Employee Plan and each Employee Agreement, together with
a schedule of all liabilities, whether or not accrued, under each such
Company Employee Plan or Employee Agreement. Except as disclosed on Schedule
2.20(g), the Company does not have any plan or commitment, whether legally
binding or not, to establish any new Company Employee Plan or Employee
Agreement, to modify any Company Employee Plan or Employee Agreement (except
to the extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any
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applicable law, in each case as previously disclosed to Parent in writing, or
as required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) DOCUMENTS. The Company has provided to Parent (i) correct and
complete copies of all documents embodying or relating to each Company
Employee Plan and each Employee Agreement including all amendments thereto
and written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the three
most recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company Employee
Plan or related trust; (iv) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets; (v)
the most recent summary plan description together with the most recent
summary of material modifications, if any, required under ERISA with respect
to each Company Employee Plan; (vi) all IRS determination letters and rulings
relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any Company Employee Plan; (vii) all material agreements and
contracts relating to each Company Employee Plan, including but not limited
to, administration service agreements, group annuity contracts and group
insurance contracts; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments
or vesting schedules or other events which would result in any material
liability to the Company; and (ix) all registration statements and
prospectuses prepared in connection with each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all
obligations required to be performed by it under, is not inn default or
violation of, and has no knowledge of any default or violation by any other
party to each Company Employee Plan and each Company Employee Plan has been
established and maintained in all material respects in accordance with its
terms and in compliance with all applicable laws, statutes, orders, rules and
regulations (including any applicable exemptions thereto), including but not
limited to ERISA or the Code; (ii) each Company Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable
determination letter with respect to each such Plan from the IRS or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination; (iii) no
"prohibited transaction", within the meaning of Section 4975 of the Code or
Sections 406 or 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, or Section 4975 of the Code has occurred with respect to any Company
Employee Plan; (iv) there are no actions, suits or claims pending, or, to the
knowledge of the Company, threatened or anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the assets
of any Company Employee Plan; and (v) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, Parent or any of
its Affiliates (other than ordinary administration expenses typically
incurred in a termination event); (vi) there are no inquiries or proceedings
pending or, to the
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knowledge of the Company or any affiliates, threatened by the IRS or DOL with
respect to any Company Employee Plan; and (vii) neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company
Employee Plan under Section 402(i) of ERISA or Section 4975 through 4980 of
the Code.
(e) PENSION PLANS. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has the Company contributed
to or been requested to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee welfare benefits to any
Employee upon his or her retirement or termination of employment for any
reason, except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") or other applicable statute, and the
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a
group) that such Employee(s) would be provided with life insurance, medical
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by statute.
(h) NO COBRA VIOLATION. Neither the Company nor any Affiliate
has, prior to the Effective Time and in any material respect, violated any of
the health care continuation requirements of COBRA or any similar provisions
of state law applicable to its employees.
(i) EFFECT OF TRANSACTION.
(i) Except as set forth on Schedule 2.20(i)(i), the execution
of this Agreement and the consummation of the transactions contemplated
hereby will not (either alone or together with the occurrence of any
additional or subsequent events contemplated by this Agreement or the
Registration Rights Agreement) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.20(i)(ii), no payment
or benefit which will or may be made by the Company or Parent or any of their
respective affiliates with respect to any Employee as a result of the
transactions contemplated by this Agreement will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
(j) EMPLOYMENT MATTERS. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in
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each case, with respect to Employees; (ii) has withheld all amounts required
by law or by agreement to be withheld from the wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(k) LABOR. No work stoppage or labor strike against the Company
is pending or, to the best knowledge of the Company, threatened. Except as
set forth in Schedule 2.20(k), the Company is not involved in or, to the
knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in liability to the Company.
Neither the Company nor any of its subsidiaries has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act which
would, individually or in the aggregate, directly or indirectly result in a
liability to the Company. Except as set forth in Schedule 2.20(k), the
Company is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by the
Company.
II.21 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor
any statement made in any Schedule or certificate furnished by the Company
pursuant to this Agreement, or furnished in or in connection with documents
mailed or delivered to the shareholders of the Company in connection with
soliciting their consent to the Plan of Merger (other than in documents
furnished by Parent for such mailings or deliveries), contains or will
contain at the Effective Time, any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company and the
Company Shareholders as follows:
III.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of Parent
and Merger Sub has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified to do business and
is in good standing in each
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jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets (including intangible assets),
financial condition or results of operations of the Parent and Merger Sub.
III.2 AUTHORITY. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement, the Indemnity in favor of
Charles A. Johnson, dated as of May 24, 1996 (the "Johnson Indemnity"), the
Non-Competition Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement, the Johnson Indemnity, the Non-Competition
Agreement and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub. This
Agreement, the Johnson Indemnity, the Non-Competition Agreement and the
Registration Rights Agreement have been duly executed and delivered by Parent
and Merger Sub and constitute the valid and binding obligations of Parent and
Merger Sub, enforceable in accordance with their respective terms. The
execution and delivery of this Agreement by Parent and Merger Sub does not,
and, as of the Effective Time, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (any such event, a "Conflict") (i)
any provision of the respective Certificates of Incorporation or Bylaws of
Parent or Merger Sub or (ii) any mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Merger Sub or their properties or assets. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, county, local or foreign governmental authority, instrumentality,
agency or commission ("GOVERNMENTAL ENTITY") or any third party (so as not to
trigger any Conflict), is required by or with respect to Parent or Merger Sub
in connection with the execution and delivery of this Agreement, the Johnson
Indemnity, the Non-Competition Agreement and the Registration Rights
Agreement or the consummation of the transactions contemplated hereby and
thereby, except for (i) the filing of the Certificate of Merger with the
Delaware Secretary of State and the Georgia Secretary of State, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
state securities laws and (iii) such other consents, waivers, authorizations,
filings, approvals and registrations which are set forth on Schedule 3.2.
III.3 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 30,000,000 shares
of Common Stock, of which 6,489,557 shares were issued and outstanding as of
April 30, 1996, and 5,000,000 shares of Preferred Stock, none of which is
issued or outstanding. The authorized capital stock of Merger Sub consists
of 1,000 shares of Common Stock, 1,000 shares of which, as of the date
hereof, are issued and outstanding and are held by Parent. All such shares
have been duly authorized, and all such issued and outstanding shares have
been validly issued, are fully paid and nonassessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof.
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(b) Parent has reserved for issuance pursuant to the Merger a
number of shares of Parent Common Stock equal to the Aggregate Share Number.
Parent has reserved for issuance upon the exercise of Company Options to be
assumed pursuant to the Merger a number of shares of Parent Common Stock
equal to the Outstanding Option Amount multiplied by the Exchange Ratio. The
shares of Parent Common Stock to be issued at the Effective Time pursuant to
the Merger will be duly authorized, and, immediately after the Effective
Time, will be validly issued, fully paid and non-assessable and the shares of
Parent Common Stock to be issued upon the exercise of the Company Options to
be assumed pursuant to the Merger will be duly authorized and, when issued,
will be validly issued, fully paid and non-assessable.
(c) The Parent stockholders identified in the Registration Rights
Agreement are the only persons with rights to require Parent to include their
Parent Securities in any registration effected under the Securities Act of 1933,
as amended.
III.4 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has
furnished or made available to the Company true and complete copies of all
reports or registration statements filed by it with the U.S. Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "SECURITIES ACT") and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") for all periods subsequent to January 1, 1996, all in
the form so filed (all of the foregoing being collectively referred to as the
"SEC DOCUMENTS"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading, except to the
extent corrected by a subsequently filed SEC Document. The financial statements
of Parent, including the notes thereto, included in the SEC Documents (the
"PARENT FINANCIAL STATEMENTS") comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles consistently applied (except as
may be indicated in the notes thereto) and present fairly the consolidated
financial position of Parent and its subsidiaries at the dates thereof and of
its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal audit adjustments). There has been no
change in Parent accounting policies except as described in the notes to the
Parent Financial Statements.
III.5 NO MATERIAL ADVERSE CHANGE. Since the date of the balance
sheet included in the Parent's quarterly report on Form 10-Q for the quarter
ended March 31, 1996, Parent has conducted its business in the ordinary
course and there has not occurred: (a) any material adverse change in the
financial condition, liabilities, assets or business of Parent; (b) any
amendment or change in the Certificate of Incorporation or Bylaws of Parent;
or (c) any damage to, destruction or loss of any assets of the Parent,
(whether or not covered by insurance) that materially and adversely affects
the financial condition or business of Parent.
III.6 LITIGATION . There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent has received any
notice of assertion against Parent which in any
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manner challenges or seeks to prevent, enjoin, alter or materially delay any
of the transactions contemplated by this Agreement.
3.7 COMPLIANCE WITH LAWS. Parent and Merger Sub have complied in all
material respects with, are not in material violation of, and have not received
any notices of a material violation with respect to, any foreign, federal,
state or local statute, law or regulation.
3.8 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Parent and
Merger Sub have not incurred, nor will they incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
IV.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement and the Effective Time, the Company agrees (except to the
extent that Parent shall otherwise consent in writing, such consent not to be
unreasonably withheld) to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to
pay its debts and Taxes when due, to pay or perform other obligations when
due, and, to the extent consistent with such business, to use all reasonable
efforts consistent with past practice and policies to preserve intact its
present business organization, keep available the services of its present
officers and key employees and preserve their relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired its goodwill and
ongoing businesses at the Effective Time. The Company shall promptly notify
Parent of any materially negative event related to the Company or its
business. Except as expressly contemplated by this Agreement or disclosed in
Schedule 4.1, prior to the Effective Time the Company shall not, without the
prior written consent of Parent, such consent not to be unreasonably withheld:
(a) Enter into any commitment or transaction not in the ordinary
course of business;
(b) Transfer to any person or entity any rights to the Company
Intellectual Property Rights (other than in the ordinary course of business);
(c) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of the Company;
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(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements
set forth or described in the Company Schedules;
(e) Commence any litigation;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor);
(g) Except for the issuance of shares of Company Capital Stock upon
exercise or conversion of presently outstanding Company Options or Series B
Preferred, or the grant of stock options to new employees pursuant to
outstanding written offers of employment, issue, grant, deliver or sell or
authorize or propose the issuance, grant, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire,
or other agreements or commitments of any character obligating it to issue
any such shares or other convertible securities;
(h) Cause or permit any amendments to its Articles of Incorporation
or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
Company;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(k) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to
standard written agreements outstanding on the date hereof;
(m) Adopt or amend any employee benefit plan, or enter into any
employment contract, extend employment offers, pay or agree to pay any
special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates of its employees, except as consistent
with the ordinary course of the Company consistent with past practice
(provided that the price per share of any equity participation in the Company
shall be agreed in advance by Parent);
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(n) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(o) Pay, discharge or satisfy, in an amount in excess of $50,000
(in any one case) or $150,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Company Financial
Statements (or the notes thereto) or that arose in the ordinary course of
business subsequent to March 31, 1996 or expenses consistent with the provisions
of this Agreement incurred in connection with any transaction contemplated
hereby;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes; or
(q) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (p) above, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
V.1 ACCESS TO INFORMATION. Subject to any applicable contractual
confidentiality obligations (which the Company shall use its best efforts to
cause to be waived) each party shall afford the others and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (a) all of its
properties, books, contracts, agreements and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request. No information or knowledge obtained in any investigation pursuant
to this Section 5.1 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties
to consummate the Merger.
V.2 CONFIDENTIALITY. Each of the parties hereto hereby agrees to and
reaffirms the terms and provisions of the mutual nondisclosure letter agreement
between Parent and the Company dated as of May 16, 1996.
V.3 EXPENSES. If the Merger is not consummated, all fees and expenses
incurred in connection with the Merger including, without limitation, all
legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby, shall be the
obligation of the respective party
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incurring such fees and expenses. If the Merger is consummated, Parent will
assume as part of the Merger the actual, reasonable fees and expenses of KPMG
Peat Marwick LLP and Nelson, Mullins, Riley & Scarborough, L.L.P. incurred in
connection with the Merger, subject in all cases to receipt, examination and
approval (not to be unreasonably withheld) of detailed invoices reflecting
such charges. Parent will not assume and Parent shall not be obligated to
pay any unreasonable amounts or any amounts in excess of the standard rates
of such firms multiplied by the hours actually and reasonably spent on the
Merger (i.e., no premium or other similar type of charge shall be payable by
Parent), and any such amounts shall entirely be the responsibility of the
holders of Company Capital Stock.
V.4 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, securities laws) or, as to Parent, by the rules and
regulations of the National Association of Securities Dealers, Inc., prior to
the Effective Time, no disclosure (whether or not in response to an inquiry)
of the subject matter of this Agreement shall be made by any party hereto
unless approved by Parent and the Company prior to release, provided that
such approval shall not be unreasonably withheld.
V.5 CONSENTS. The Company shall use its reasonable efforts to obtain
the consents, waivers and approvals under any of the Contracts as may be
required in connection with the Merger (all of such consents, waivers and
approvals are set forth in Company Schedules) so as to preserve all rights
of, and benefits to the Company thereunder.
V.6 FIRPTA COMPLIANCE. On the Closing Date, the Company shall deliver
to Parent a properly executed statement in a form reasonably acceptable to
Parent for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
V.7 BEST EFFORTS. Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use its best efforts to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect
all necessary registrations and filings and to remove any injunctions or
other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the
purpose of securing to the parties hereto the benefits contemplated by this
Agreement; provided that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property
of Parent or its subsidiaries or affiliates or the Company or its affiliates,
or the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
V.8 REGISTRATION RIGHTS AGREEMENT. Prior to the Effective Time,
Parent, the Company and certain shareholders of the Company who will receive
Parent Common Stock in the Merger shall enter into a Registration Rights
Agreement substantially in the form of Exhibit B hereto. After the
consummation of the Merger, Parent shall make available to all former
shareholders of the Company, and all persons who receive shares of Parent
Common Stock upon the exercise of assumed Company
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Options (other than shares covered by the Form S-8 referenced in Section 5.13
hereof), the opportunity to execute the Registration Rights Agreement and
receive the benefits thereof.
V.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
the Company and Parent or Merger Sub, respectively, contained in this Agreement
to be untrue or inaccurate in any material respect at or prior to the Effective
Time except as contemplated by their Agreement (including the Company Schedules)
and (ii) any failure of the Company or Parent, as the case may be, to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.9 shall not limit or otherwise
affect any remedies available to the party receiving such notice.
V.10 POOLING ACCOUNTING. Parent and the Company shall each use its
reasonable efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests. Each of Parent and the
Company shall use its reasonable efforts to cause its respective employees,
directors, stockholders and affiliates not to take any action that would
adversely affect the ability of Parent to account for the business combination
to be effected by the Merger as a pooling of interests. Neither Parent nor the
Company shall take any action, including the acceleration of vesting of any
options, warrants, restricted stock or other rights to acquire shares of the
capital stock of the Company, which reasonably would be expected to (i)
interfere with Parent's ability to account for the Merger as a pooling of
interests or (ii) jeopardize the tax-free nature of the reorganization
hereunder. As used in this Section 5.10, "reasonable efforts" shall not be
construed to require the Company to take any action that would materially
decrease the rights of the Company or its shareholders hereunder or materially
increase their obligations hereunder.
V.11 AFFILIATE AGREEMENTS. Schedule 5.11 sets forth those persons who,
in the Company's reasonable judgment, are "affiliates" of the Company within
the meaning of Rule 145 (each such person an "Affiliate") promulgated under
the Securities Act ("Rule 145"). The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes of
reviewing such list. Each of Parent and the Company has delivered or shall
cause to be delivered to the other, concurrently with the execution of this
Agreement, from each of their respective Affiliates, an executed Affiliate
Agreement in the form attached hereto as EXHIBIT C or EXHIBIT D. Parent and
Merger Sub shall be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by Affiliates of the
Company pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Parent Common Stock,
consistent with the terms of such Affiliate Agreements.
V.12 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the reasonable request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
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V.13 FORM S-8. Parent shall file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to assumed Company
Options no later than the second business day after the date that Parent
publicly announces financial results covering at least 30 days of combined
operations of Parent and Company.
V.14 NASDAQ NATIONAL MARKET LISTING. Parent shall authorize for listing
on the Nasdaq National Market the shares of Parent Common Stock issuable, and
those required to be reserved for issuance, in connection with the Merger, upon
official notice of issuance.
V.15 VOTING AGREEMENTS. Concurrently with the execution of this
Agreement, the Company will cause the persons and entities listed in the
preamble to EXHIBIT E hereto to execute Voting Agreements in the form attached
hereto as EXHIBIT E (the "VOTING AGREEMENTS"), agreeing, among other things,
to vote in favor of the Merger and against any competing proposals.
V.16 BLUE SKY LAWS. Parent shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which
are applicable to the issuance of the Parent Common Stock pursuant hereto.
The Company shall use its best efforts to assist Parent as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which
are applicable in connection with the issuance of Parent Common Stock
pursuant hereto.
V.17 INDEMNIFICATION. Parent shall either (i) cause the Company to
continue to indemnify or (ii) directly indemnify the persons who are currently
officers and directors of the Company substantially in accordance with the
Bylaws of the Company as they are currently in effect for action or inaction by
such person prior to the Merger.
V.18 PARENT REGISTRATIONS. Parent will not file a registration
statement with the SEC covering the issuance of any new shares of the capital
stock of Parent until Parent has publicly announced financial results covering
a period of combined operations of Parent and the Company of at least thirty
(30) days, provided, however, that the foregoing restriction shall not apply
to (i) registrations covering any employee benefit plans and (ii) any
registrations which the Company is required to file pursuant to any demand
registration rights or other contractual rights (a "Required Registration"),
and provided further that with respect to such Required Registrations, Parent
shall be permitted to include in any such Required Registration statement
enough primary issue shares to cover the expenses of the Required Registration
and to allow the registration expenses to be capitalized on its balance sheet
rather than expensed on its profit and loss statement.
V.19 SEC FILINGS AFTER MERGER. If Parent is required to file this
Agreement with the SEC or any other regulatory authority, Parent shall use
its reasonable efforts to have treated confidentially, and not publicly
disclosed, any information in any Schedule concerning the compensation of any
Pipeline employee.
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ARTICLE VI
CONDITIONS TO THE MERGER
VI.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) SHAREHOLDER APPROVAL. The Plan of Merger shall have been
approved and adopted by the shareholders of the Company by the requisite vote
under applicable law and the Company's Articles of Incorporation.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition preventing the consummation of the Merger shall be in effect.
(c) OPINION OF ACCOUNTANTS. Each of Parent and the Company shall
have received letters from Price Waterhouse LLP and KPMG Peat Marwick LLP,
respectively, reaffirming those firms' written concurrence, delivered
concurrently with the execution of this Agreement, with Parent management's and
the Company management's conclusions, respectively, as to the appropriateness
of pooling of interests accounting for the Merger under Accounting Principles
Board Opinion No. 16, if consummated in accordance with this Agreement.
(d) NASDAQ LISTING. The shares of Parent Common Stock issuable to
stockholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the Nasdaq National Market upon official
notice of issuance.
(e) AFFILIATE AGREEMENTS. Each of the parties identified by the
Company or Parent as being one of their respective Affiliates shall have
delivered an executed Affiliate Agreement which shall be in full force and
effect.
(f) WAIVER OF CERTAIN COVENANTS. The Company shall have obtained
from all Investors, as such term is defined in the Series B Convertible
Preferred Stock and Warrant Purchase Agreement, dated as of November 8, 1994,
by and among the Company, Patrick J. Dane, A. Matthews Thompson, 77 Capital
Partners, L.P. and Noro-Moseley Partners III, L.P. (the "Series B Agreement"),
executed waivers of any and all covenants contained in Article 5 of the Series B
Agreement required to be complied with by the Company in connection with the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
VI.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing, except for
changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which
shall remain true and correct as of such date), with the same force and
effect as if made on and as of the Effective Time, except, in all such cases,
for such breaches, inaccuracies or omissions of such representations and
warranties which have neither had nor reasonably would be expected to have a
Material Adverse Effect on Parent; and the Company shall have received a
certificate to such effect signed on behalf of Parent by a duly authorized
officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to cure as provided in Section 8.1(e) below)
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate to such
effect signed by a duly authorized officer of Parent.
(c) THIRD PARTY CONSENTS. The Company shall have been furnished
with evidence satisfactory to it that Parent has obtained the consents,
approvals and waivers set forth in Schedule 6.2(c).
(d) LEGAL OPINION. The Company shall have received a legal
opinion from Wilson, Sonsini, Goodrich & Rosati, Professional Corporation,
counsel to Parent, in substantially the form attached hereto as Exhibit F.
(e) MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, assets (including intangible assets),
financial condition or results of operations of Parent since March 31, 1996.
For purposes of this condition, a reduction in the trading price of Parent's
Common Stock, whether occurring at any time or from time to time, as reported
by Nasdaq or any other automated quotation system or exchange shall not
constitute a material adverse change.
VI.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time, except for
changes contemplated by this Agreement (including the Company Schedules) and
except for those representations and warranties which address matters only as
of a particular date (which shall remain true and correct as of such date),
with the same force and effect as if made on and as of the Effective Time,
except, in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a Material Adverse Effect on the Company or Parent;
and Parent and Merger Sub
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shall have received a certificate to such effect signed on behalf of the
Company by a duly authorized officer of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 8.1(d) below) in all material respects
with all agreements and covenants required by this Agreement to be performed
or complied with by it on or prior to the Effective Time, and Parent and
Merger Sub shall have received a certificate to such effect signed by a duly
authorized officer of the Company;
(c) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
(d) LEGAL OPINION. Parent shall have received a legal opinion
from Nelson, Mullins, Riley & Scarborough, legal counsel to the Company, in
substantially the form attached hereto as Exhibit G.
(e) MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, assets (including intangible assets)
financial condition or results of operations of the Company since March 31,
1996. For purposes of this condition, none of the following, individually or
in the aggregate, shall be deemed to constitute such a material adverse change:
(i) any failure of the Company to record revenue or deferred revenue at any
particular level subsequent to March 31, 1996; (ii) the lack of success of
the Company in hiring new employees; or (iii) the lack of success of the
Company in retaining existing employees, other than those employees who in
the aggregate are material to the Company's ability to commercialize its
technology.
(f) NON-COMPETITION AGREEMENTS. Each person listed in the preamble
to Exhibit H shall have executed and delivered to Parent a Non-competition
Agreement in substantially the form of Exhibit H and all of the Non-competition
Agreements shall be in full force and effect.
(g) DISSENTERS' RIGHTS. Holders of more than 5% of the outstanding
shares of Company Capital Stock shall not have asserted, nor shall they have
any continued right to assert dissenters' rights under Georgia Law with respect
to their shares by virtue of the Merger.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
VII.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
Company's representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement (each as modified by the
Company Schedules) shall survive the Merger and continue until 5:00 p.m.,
Central time, on the earlier of (i) the date which is the date of the
auditor's report for the first audit of Parent's
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financial statements after the Closing Date or (ii) the date which is one year
following the Closing Date (the "EXPIRATION DATE"). Parent's representations
and warranties in Article III shall survive until the first anniversary of the
date hereof.
VII.2 ESCROW ARRANGEMENTS.
(a) INDEMNITY AND ESCROW. As security for the indemnity
provided for in Section 7.2 hereof (and as partial security for any breach of
a representation or warranty referenced in the last sentence of Section
7.2(l) below) and by virtue of this Agreement, all of the Company's
shareholders will be deemed to have received and deposited with the Escrow
Agent (as defined below) the Escrow Amount (plus any additional shares as may
be issued upon any stock split, stock dividend or recapitalization effected
by Parent after the Effective Time) without any act of any Company
shareholder. As soon as practicable after the Effective Time, the Escrow
Amount, without any act of any shareholder, will be deposited with First
Trust of California, N.A. (or other institution acceptable to Parent and the
Securityholder Agent (as defined in Section 7.2(g) below)) as Escrow Agent
(the "ESCROW AGENT"), such deposit to constitute an escrow fund (the "ESCROW
FUND") to be governed by the terms set forth herein and at Parent's cost and
expense. The portion of the Escrow Amount contributed on behalf of each
shareholder of the Company shall be in proportion to the aggregate Parent
Common Stock which such holder would otherwise be entitled under Section
1.6(a). No portion of the Escrow Amount shall be contributed in respect of
any Company Options. Upon execution of this Agreement by the Securityholder
Agent, each shareholder of the Company, severally but not jointly, and
subject to Section 7.2(1) hereby agrees to indemnify and hold Parent and its
officers, directors and affiliates (individually each an "INDEMNIFIED
PERSON" and collectively, the "INDEMNIFIED PERSONS") harmless against all
claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses of investigation
(hereinafter individually a "LOSS" and collectively "LOSSES") incurred by
Indemnified Persons (including the Surviving Corporation) directly or
indirectly as a result of (i) any inaccuracy or breach of a representation or
warranty of the Company contained in Article II herein (as modified by the
Company Schedules) or (ii) any failure by the Company to perform or comply
with any covenant contained herein. Parent and the Company each acknowledge
that such Losses, if any, would relate to unresolved contingencies existing
at the Effective Time, which if resolved at the Effective Time would have led
to a reduction in the aggregate Merger consideration.
(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW
PERIODS. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at
5:00 p.m., Central time, on the Expiration Date (the "ESCROW PERIOD");
provided that the Escrow Period shall not terminate with respect to such
amount (or some portion thereof) that, together with the aggregate amount
remaining in the Escrow Fund, is necessary in the reasonable judgment of
Parent, subject to the objection of the Securityholder Agent and the
subsequent arbitration of the matter in the manner provided in Section 7.2(f)
hereof, to satisfy any unsatisfied claims concerning facts and circumstances
existing prior to the termination of such Escrow Period specified in any
Officer's Certificate delivered to the Escrow Agent prior to termination of
such Escrow Period. As soon as all such claims have been resolved, the
Escrow Agent shall deliver to the shareholders of the Company the remaining
portion of the Escrow Fund and not required to
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satisfy such claims. Deliveries of Escrow Amounts to the shareholders of the
Company pursuant to this Section 7.2(b) shall be made in proportion to their
respective original contributions to the Escrow Fund.
(c) PROTECTION OF ESCROW FUND.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a
stock split) ("NEW SHARES") in respect of Parent Common Stock in the Escrow
Fund which have not been released from the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. New Shares issued in respect of
shares of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the
recordholders thereof. Cash dividends on Parent Common Stock shall not be
added to the Escrow Fund but shall be distributed to the recordholders
thereof.
(iii) Each shareholder shall have voting rights with respect
to the shares of Parent Common Stock contributed to the Escrow Fund by such
shareholder (and on any voting securities added to the Escrow Fund in respect
of such shares of Parent Common Stock).
(d) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Escrow Agent at any time on or before
the last day of the Escrow Period of a certificate signed by any officer of
Parent (an "OFFICER'S CERTIFICATE"): (A) stating that an Indemnified Person
has paid or properly accrued or reasonably anticipates that it will have to
pay or accrue Losses, and (B) specifying in reasonable detail the individual
items of Losses included in the amount so stated, the date each such item was
paid or properly accrued, or the basis for such anticipated liability, and
the nature of the misrepresentation, breach of warranty or covenant to which
such item is related, the Escrow Agent shall, subject to the provisions of
Section 7.2(e) hereof, deliver to Parent out of the Escrow Fund, as promptly
as practicable, shares of Parent Common Stock held in the Escrow Fund in an
amount equal to such Losses.
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant
to Section 7.2(d)(i) hereof, the shares of Parent Common Stock shall be
valued at the average of the closing prices of Parent's Common Stock on the
Nasdaq National Market, as reported in THE WALL STREET JOURNAL for the five
(5) consecutive trading days ending on the date that is two (2) trading days
prior to the Closing Date. Parent and the Securityholder Agent shall certify
such fair market value in a certificate signed by both Parent and the
Securityholder Agent, and shall deliver such certificate to the Escrow Agent.
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(e) OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such
certificate shall be delivered to the Securityholder Agent and for a period
of thirty (30) days after such delivery, the Escrow Agent shall make no
delivery to Parent of any Escrow Amounts pursuant to Section 7.2(d) hereof
unless the Escrow Agent shall have received written authorization from the
Securityholder Agent to make such delivery. After the expiration of such
thirty (30) day period, the Escrow Agent shall make delivery of shares of
Parent Common Stock from the Escrow Fund in accordance with Section 7.2(d)
hereof, provided that no such payment or delivery may be made if the
Securityholder Agent shall object in a written statement to the claim made in
the Officer's Certificate, and such statement shall have been delivered to
the Escrow Agent prior to the expiration of such thirty (30) day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and distribute shares of Parent Common Stock from the
Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Securityholder Agent may demand arbitration
of the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by three arbitrators. Parent and the Securityholder
Agent shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator, each of which arbitrators shall be
independent and have at least ten years relevant experience. The arbitrators
shall set a limited time period and establish procedures designed to reduce
the cost and time for discovery while allowing the parties an opportunity,
adequate in the sole judgment of the arbitrators, to discover relevant
information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including
attorneys fees and costs, to the extent as a court of competent law or
equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to
without substantial justification. The decision of a majority of the three
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this
Agreement, and notwithstanding anything in Section 7.2(e) hereof, the Escrow
Agent shall be entitled to act in accordance with such decision and make or
withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact
and conclusions which shall set forth the award, judgment, decree or order
awarded by the arbitrators.
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(iii) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be
held in Travis County, Texas under the Commercial Arbitration Rules then in
effect of the American Arbitration Association. Each party to an arbitration
shall pay its own expenses, including attorneys' fees, and one-half of the
fees of each arbitrator and the administrative costs of the arbitration.
(g) SECURITYHOLDER AGENT OF THE SHAREHOLDERS; POWER OF ATTORNEY.
(i) In the event that the Plan of Merger is approved,
effective upon such vote, and without further act of any shareholder, A.
Matthews Thompson shall be appointed as agent and attorney-in-fact (the
"SECURITYHOLDER AGENT") for each shareholder of the Company (except such
shareholders, if any, as shall have perfected their dissenters' rights under
Georgia Law), for and on behalf of shareholders of the Company, to give and
receive notices and communications, to authorize delivery to Parent of shares
of Parent Common Stock from the Escrow Fund in satisfaction of claims by
Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders
of courts and awards of arbitrators with respect to such claims, and to take
all actions necessary or appropriate in the judgment of Securityholder Agent
for the accomplishment of the foregoing. Such agency may be changed by the
shareholders of the Company from time to time upon not less than thirty (30)
days prior written notice to Parent; provided that the Securityholder Agent
may not be removed unless holders of a two-thirds interest of the Escrow Fund
agree to such removal and to the identity of the substituted agent. Any
vacancy in the position of Securityholder Agent may be filled by approval of
the holders of a majority in interest of the Escrow Fund. No bond shall be
required of the Securityholder Agent, and the Securityholder Agent shall not
receive compensation for his or her services. Notices or communications to
or from the Securityholder Agent shall constitute notice to or from each of
the shareholders of the Company.
(ii) The Securityholder Agent shall not be liable for any act
done or omitted hereunder as Securityholder Agent while acting in good faith and
in the exercise of reasonable judgment. The shareholders of the Company on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall severally
indemnify the Securityholder Agent and hold the Securityholder Agent harmless
against any loss, liability or expense incurred without negligence or bad faith
on the part of the Securityholder Agent and arising out of or in connection with
the acceptance or administration of the Securityholder Agent's duties hereunder,
including the reasonable fees and expenses of any legal counsel retained by the
Securityholder Agent.
(h) ACTIONS OF THE SECURITYHOLDER AGENT. A decision, act, consent
or instruction of the Securityholder Agent shall constitute a decision of all
the shareholders for whom a portion of the Escrow Amount otherwise issuable
to them are deposited in the Escrow Fund and shall be final, binding and
conclusive upon each of such shareholders, and the Escrow Agent and Parent
may rely upon any such decision, act, consent or instruction of the
Securityholder Agent as being the decision, act, consent or instruction of
each every such shareholder of the Company. The Escrow Agent and Parent are
hereby relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the
Securityholder Agent.
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(i) THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and
the Securityholder Agent, as representative for the shareholders of the
Company, shall be entitled, at their expense, to participate in any defense
of such claim. Parent shall have the right in its sole discretion to settle
any such claim; provided, however, that except with the consent of the
Securityholder Agent, no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of any claim against the
Escrow Fund. In the event that the Securityholder Agent has consented to any
such settlement and acknowledged that the claim is a valid claim against the
Escrow Fund, the Securityholder Agent shall have no power or authority to
object under any provision of this Article VII to the amount of any claim by
Parent against the Escrow Fund with respect to such settlement.
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent
may receive after the date of this Agreement which are signed by an officer
of Parent and the Securityholder Agent, and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed to
be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall not be liable for any act done or omitted hereunder as
Escrow Agent while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any
of the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration
of any rights under any statute of limitations with respect to this Agreement
or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for
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(A) any act or failure to act made or omitted in good faith, or (B) any action
taken or omitted in reliance upon any instrument, including any written
statement of affidavit provided for in this Agreement that the Escrow Agent
shall in good faith believe to be genuine, nor will the Escrow Agent be liable
or responsible for forgeries, fraud, impersonations, or determining the scope
of any representative authority. In addition, the Escrow Agent may consult with
the legal counsel in connection with Escrow Agent's duties under this Agreement
and shall be fully protected in any act taken, suffered, or permitted by him/her
in good faith in accordance with the advice of counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any person acting or
purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow
Agent may hold all documents and shares of Parent Common Stock and may wait
for settlement of any such controversy by final appropriate legal proceedings
or other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage.
Furthermore, the Escrow Agent may at its option, file an
action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to
deposit with the clerk of the court all documents and shares of Parent Common
Stock held in escrow, except all cost, expenses, charges and reasonable
attorney fees incurred by the Escrow Agent due to the interpleader action and
which the parties jointly and severally agree to pay. Upon initiating such
action, the Escrow Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold Escrow Agent harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, and disbursements that may
be imposed on Escrow Agent or incurred by Escrow Agent in connection with the
performance of his/her duties under this Agreement, including but not limited
to any litigation arising from this Agreement or involving its subject matter.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; provided, however, that
no such resignation shall become effective until the appointment of a
successor escrow agent which shall be accomplished as follows: the parties
shall use their best efforts to mutually agree on a successor escrow agent
within thirty (30) days after receiving such notice. If the parties fail to
agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business
in the state of Georgia. The successor escrow agent shall execute and
deliver an instrument accepting such appointment and it shall, without
further acts, be vested with all the estates, properties, rights, powers, and
duties of the predecessor escrow agent as if originally named as escrow
agent. The Escrow Agent shall be discharged from any further duties and
liability under this Agreement.
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(ix) Any company into which the Escrow Agent merges or with
which it consolidates, or any company to whom the Escrow Agent transfers a
substantial amount of its Global Escrow business, shall be successor to the
Escrow Agent without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
(k) FEES. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be
considered compensation for ordinary services as contemplated by this
Agreement. In the event that the conditions of this Agreement are not
promptly fulfilled, or if the Escrow Agent renders any service not provided
for in this Agreement, or if the parties request a substantial modification
of its terms, or if any controversy arises, or if the Escrow Agent is made a
party to, or intervenes in, any litigation pertaining to this escrow or its
subject matter, the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs, attorney's fees, and
expenses occasioned by such default, delay, controversy or litigation.
Parent promises to pay these sums upon demand.
(l) EXCLUSIVE REMEDY. The indemnity set forth in this Article VII
and the Escrow Fund provided for herein shall apply only to breaches by the
Company of any representation, warranty, covenant or agreement of the Company
contained herein, by reason of any misrepresentation by the Company made in
or pursuant to Article II of this Agreement, and, except as provided below in
the last sentence of this Section 7.2(l), resort to the Escrow Fund shall be
the exclusive right and remedy of the Indemnified Persons for such breaches
(the "Cap"). The indemnity provided for in this Article VII shall not apply
unless and until the aggregate Losses for which one or more Indemnified
Persons seeks indemnification under this Article VII, exclusive of legal
fees, exceeds $180,000 (the "BASKET"), in which event the indemnification
shall only be for such amount of Losses exceeding the Basket. In addition,
the Basket shall include, and indemnification for Losses in excess of the
Basket shall be for, only those Losses that, individually and exclusive of
legal fees, exceed $3,000. Parent will use commercially reasonable efforts
to obtain recoveries under all applicable insurance policies for all Losses.
Notwithstanding the foregoing, the existence of this Article VII and of the
rights and restrictions set forth herein do not limit any other potential
remedies of the Indemnified Persons with respect to any knowing and
intentional or fraudulent breaches of the representations and warranties or
covenants of the Company contained in this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
VIII.1 TERMINATION. Except as provided in Section 8.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual consent of the Company and Parent;
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(b) by Parent or the Company if: (i) the Effective Time has not
occurred by June 30, 1996 (provided that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party
whose willful failure to fulfill any obligation hereunder has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before
such date); (ii) there shall be a final nonappealable order of a federal or
state court in effect preventing consummation of the Merger; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or
issued or deemed applicable to the Merger by any governmental entity that
would make consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable
to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of any portion of the
business of the Company or (ii) compel Parent or the Company to dispose of or
hold separate, as a result of the Merger, any portion of the business or
assets of the Company or Parent; in either case, the unavailability of which
assets or business would have a Material Adverse Effect on Parent or would
reasonably be expected to have a Material Adverse Effect on Parent's ability
to realize the benefits expected from the Merger;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
the Company and as a result of such breach the conditions set forth in
Section 6.3(a) or 6.3(b), as the case may be, would not then be satisfied;
provided, however, that if such breach is curable by the Company within
thirty (30) days through the exercise of its reasonable best efforts, then
for so long as the Company continues to exercise such reasonable best efforts
Parent may not terminate this Agreement under this Section 8.1(d) unless such
breach is not cured within thirty (30) days (but no cure period shall be
required for a breach which by its nature cannot be cured); and
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of Parent or Merger Sub and as a result of such breach the
conditions set forth in Section 6.2(a) or 6.2(b), as the case may be, would
not then be satisfied; provided, however, that if such breach is curable by
Parent or Merger Sub within thirty (30) days through the exercise of its
reasonable efforts, then for so long as Parent or Merger Sub continues to
exercise such reasonable efforts the Company may not terminate this Agreement
under this Section 8.1(e) unless such breach is not cured within thirty (30)
days (but no cure period shall be required for a breach which by its nature
cannot be cured).
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
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VIII.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent,
Merger Sub or the Company, or their respective officers, directors or
stockholders, provided that each party shall remain liable for any breaches
of this Agreement prior to its termination; and provided further that, the
provisions of Sections 5.3 and 5.4 and Article IX of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.
VIII.3 AMENDMENT. Except as is otherwise required by applicable law
after the stockholders of the Company approve this Agreement, this Agreement
may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
VIII.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
Parent and Merger Sub, on the one hand, and the Company, on the other, may,
to the extent legally allowed, (i) extend the time for the performance of any
of the obligations of the other party hereto, (ii) waive any inaccuracies in
the representations and warranties made to such party contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with any
of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
IX.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
IntelliQuest Information Group
1250 Capital of Texas Highway South
Building Two, Plaza One
Austin, TX 78746
Attention: Chief Financial Officer
Telephone No.: (512) 329-0808
Facsimile No.: (512) 314-2195
with a copy to:
Wilson Sonsini Goodrich & Rosati
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650 Page Mill Road
Palo Alto, California 94304
Attention: Allen L. Morgan, Esq.
Telephone No.: (415) 493-9300
Facsimile No.: (415) 493-6811
(b) if to the Company, to:
Pipeline Communications, Inc.
380 Interstate N. Parkway
Suite 310
Atlanta, GA 30339
Attention: Chief Executive Officer
Telephone No.: (770) 612-8008
Facsimile No.: (770) 916-0997
with a copy to:
Nelson, Mullins, Riley & Scarborough
400 Colony Square
1201 Peachtree St., Suite 2200
Atlanta, GA 30361
Attention: Philip H. Moise, Esq.
Telephone No.: (404) 817-6141
Facsimile No.: (404) 817-6522
(c) if to the Securityholder Agent:
A. Matthews Thompson
Pipeline Communications, Inc.
380 Interstate N. Parkway
Suite 310
Atlanta, GA 30339
Telephone No.: (770) 612-8008
Facsimile No.: (770) 916-0997
(d) if to the Escrow Agent:
First Trust of California, N.A.
Global Escrow Depository Services
One California Street, 4th Floor
San Francisco, CA 94111
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IX.2 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The word "agreement" when used herein shall be deemed
in each case to mean any contract, commitment or other agreement, whether
oral or written, that is legally binding. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
IX.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
IX.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; (b) are not intended to confer
upon any other person any rights or remedies hereunder, except as otherwise
specifically provided herein or therein; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided,
except that Parent and Merger Sub may assign their respective rights and
delegate their respective obligations hereunder to their respective
affiliates.
IX.5 SEVERABILITY. In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
IX.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will
not preclude the exercise of any other remedy.
IX.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto agrees that process may be served upon
them in any manner authorized by the laws of the State of Texas for such
persons and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction and such process.
IX.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application
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of any law, regulation, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
IX.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of 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.
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company the Securityholder
Agent (as to Article VII only) and the Escrow Agent (as to matters set forth
in Article VII only) have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
PIPELINE COMMUNICATIONS, INC. INTELLIQUEST INFORMATION
GROUP, INC.
By: /s/ A. Matthews Thompson By: /s/ James Schellhase
------------------------------ -------------------------------
Name: A. Matthews Thompson Name: James Schellhase
--------------------------- ------------------------------
Title: Chief Executive Officer Title: Chief Operating Officer
--------------------------- -----------------------------
SECURITYHOLDER AGENT INTELLIQUEST DELAWARE, INC.
By: /s/ A. Matthews Thompson By: /s/ James Schellhase
------------------------------ --------------------------------
Name: A. Matthews Thompson Name: James Schellhase
---------------------------- ------------------------------
Title: Director
-----------------------------
ESCROW AGENT
By: /s/ Ann Gadsby
-------------------------------
Name: Ann Gadsby
-------------------------------
Title: Assistant Vice President
-------------------------------
<PAGE>
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
Exhibit A Plan of Merger
Exhibit B Registration Rights Agreement
Exhibit C Form of Company Affiliate Agreement
Exhibit D Form of Parent Affiliate Agreement
Exhibit E Form of Voting Agreement
Exhibit F Form of Legal Opinion of Counsel to Parent
Exhibit G Form of Legal Opinion of Counsel to the Company
Exhibit H Form of Noncompetition Agreement
<PAGE>
INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
- -------- -----------
1.8(b) Escrow Shareholders
2.2(a) Shareholder List
2.2(b) Company Option List
2.4 Company Governmental and Third Party Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Returns and Audits
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(a) Intellectual Property
2.11(b) Intellectual Property Licenses
2.12(a) Agreements, Contracts and Commitments
2.12(b) Breaches
2.13 Interested Party Transactions
2.15 Litigation
2.20(b) Employee Benefit Plans and Employees
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Obligations
2.20(i)(i) Effect of Transaction
2.20(i)(ii) Excess Parachute Payments
2.20(k) Labor
3.2 Parent and Merger Sub Governmental and Third Party Consents
4.1 Conduct of the Business
5.11 Company Affiliate List
6.2(c) Third Party Consents Required of Parent
6.3(c) Third Party Consents Required of Company
7.2(l) Indemnity Shareholders
