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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
APPNET, INC.
APPNET/EDC, INC.
EDGAR DUNN & COMPANY
AND
THE STOCKHOLDERS NAMED THEREIN
MADE EFFECTIVE AS OF MAY 16, 2000
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TABLE OF CONTENTS
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1. PLAN OF REORGANIZATION.............................................................1
1.1 The Merger................................................................1
1.2 Conversion of Securities..................................................2
1.3 Merger Consideration......................................................3
1.4 Post-Closing Adjustment...................................................4
1.5 Exchange of Certificates and Payment of Cash..............................5
1.6 Stockholders' Representative..............................................6
1.7 Accounting Terms..........................................................7
2. CLOSING............................................................................7
2.1 Location and Date.........................................................7
2.2 Effect....................................................................7
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.................7
3.1 Due Organization..........................................................8
3.2 Authorization; Validity...................................................8
3.3 No Conflicts..............................................................9
3.4 Capital Stock of the Company..............................................9
3.5 Transactions in Capital Stock............................................10
3.6 Subsidiaries, Stock, and Notes...........................................10
3.7 Complete Copies of Materials.............................................10
3.8 Absence of Claims Against Company........................................10
3.9 Company Financial Conditions.............................................11
3.10 Financial Statements......................................................11
3.11 Liabilities and Obligations...............................................12
3.12 Books and Records.........................................................13
3.13 Bank Accounts; Powers of Attorney.........................................13
3.14 Accounts Receivable.......................................................13
3.15 Permits...................................................................13
3.16 Property..................................................................14
3.17 Intellectual Property.....................................................14
3.18 Material Contracts........................................................17
3.19 Government Contracts......................................................18
3.20 Insurance.................................................................18
3.21 Environmental and Safety Matters..........................................19
3.22 Employment Matters........................................................20
3.23 Taxes.....................................................................23
3.24 Litigation................................................................25
3.25 Compliance with Laws......................................................26
3.26 Relations with Governments................................................26
3.27 Adverse Changes...........................................................26
3.28 Consultants; Subcontractors...............................................26
3.29 Disclosure................................................................27
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3.30 Accredited Investors; Investment Intent...................................27
3.31 Unaccredited Investors; Investment Intent.................................28
3.32 Predecessor Status; Etc...................................................30
3.33 Continuity of Business Enterprise.........................................30
3.34 Location of Chief Executive Offices.......................................30
3.35 Related Party Transactions................................................30
3.36 Compliance with Immigration Laws..........................................30
4. REPRESENTATIONS OF APPNET AND NEWCO...............................................31
4.1 Due Organization.........................................................31
4.2 Authorization; Validity of Obligations...................................31
4.3 No Conflicts.............................................................31
4.4 Capitalization and Stock Ownership.......................................32
5. COVENANTS.........................................................................32
5.1 Tax Matters..............................................................32
5.2 Accounts Receivable......................................................33
5.3 Employee Benefit Plans...................................................33
5.4 Related Party Agreements.................................................34
5.5 Cooperation..............................................................34
5.6 Access to Information; Confidentiality; Public Disclosure................34
5.7 Conduct of Business Pending Closing......................................35
5.8 Prohibited Activities....................................................36
5.9 Exclusivity..............................................................38
5.10 Notification of Certain Matters...........................................38
5.11 Notice to Bargaining Agents...............................................38
5.12 Sales of AppNet Common Stock..............................................39
5.13 Stock Options.............................................................46
5.14 Change of Control.........................................................46
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF APPNET AND NEWCO...........................46
6.1 Representations and Warranties; Performance of Obligations...............46
6.2 No Litigation............................................................47
6.3 No Material Adverse Change...............................................47
6.4 Consents and Approvals...................................................47
6.5 Opinion of Counsel.......................................................47
6.6 Charter Documents........................................................47
6.7 Lender Approval..........................................................47
6.8 Due Diligence Review.....................................................48
6.9 Delivery of Closing Financial Certificate................................48
6.10 FIRPTA Compliance.........................................................48
6.11 Lock-Up Agreement.........................................................49
6.12 No Dissenting Shares......................................................49
6.13 Unanimous Approval and Execution by Stockholders..........................49
6.14 Pledge Agreement..........................................................49
6.15 Purchaser Representative..................................................49
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY..........49
7.1 Representations and Warranties; Performance of Obligations...............49
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7.2 No Litigation............................................................49
7.3 Consents and Approvals...................................................50
7.4 Pledge Agreement.........................................................50
7.5 Opinion of Counsel.......................................................50
7.6 Authorization of Issuance of Options.....................................50
8. INDEMNIFICATION...................................................................50
8.1 General Indemnification..................................................50
8.2 Limitation and Expiration................................................52
8.3 Indemnification Procedures...............................................52
8.4 Survival of Representations Warranties and Covenants.....................54
8.5 Remedies Cumulative......................................................54
8.6 Right to Set Off.........................................................54
9. EMPLOYMENT, CONFIDENTIALITY, NON-COMPETITION AND NONSOLICITATION..................55
9.1 Employment...............................................................55
9.2 Confidentiality..........................................................55
9.3 Noncompetition and Nonsolicitation.......................................56
9.4 Severability; Reformation................................................58
9.5 Additional Acknowledgements..............................................58
9.6 Independent Covenants....................................................58
9.7 Materiality..............................................................59
10. STOCKHOLDER APPROVAL..............................................................59
11. GENERAL...........................................................................59
11.1 Termination...............................................................59
11.2 Effect of Termination.....................................................60
11.3 Successors and Assigns....................................................60
11.4 Entire Agreement; Amendment; Waiver.......................................60
11.5 Counterparts..............................................................61
11.6 Brokers and Agents........................................................61
11.7 Expenses..................................................................61
11.8 Specific Performance; Remedies............................................61
11.9 Notices...................................................................61
11.10 Governing Law.............................................................62
11.11 Severability..............................................................63
11.12 Absence of Third Party Beneficiary Rights.................................63
11.13 Mutual Drafting; Construction.............................................63
11.14 Further Representations...................................................63
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EXHIBITS
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Exhibit A Form of Pledge Agreement
Exhibit B Form of Shareholder's Questionnaire
Exhibit C Form of Confidential Investor Questionnaire
Exhibit D Form of Lock-Up Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into this 16th day of May, 2000, by and among (i) APPNET, INC., a
Delaware corporation ("AppNet"), (ii) APPNET/EDC, INC., a Delaware corporation
and a newly-formed, wholly-owned subsidiary of AppNet ("Newco"), (iii) EDGAR,
DUNN & COMPANY, a Delaware corporation (the "Company" or "EDC"), and (iv) the
persons whose names are listed under the heading "Stockholders" on the signature
page of this Agreement (each a "Stockholder" and collectively, the
"Stockholders").
BACKGROUND
A. The respective Boards of Directors of Newco and the Company (which
together are sometimes referred to as the "Constituent Corporations") deem it
advisable and in the best interests of the Constituent Corporations and their
respective stockholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware.
B. The Boards of Directors of each of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. PLAN OF REORGANIZATION
1.1. THE MERGER.
(a) THE MERGER. At the Effective Time (as defined in Section 2.2), the
Company shall be merged with and into Newco pursuant to the terms of this
Agreement, and the separate corporate existence of the Company shall cease.
Newco, as it exists from and after the Effective Time, is sometimes referred to
as the "Surviving Corporation."
(b) EFFECTS OF THE MERGER. The Merger shall have the effects provided
therefor under the Delaware General Corporation Law (the "DGCL"). Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time (i) all the rights, privileges, immunities, powers and franchises, of a
public as well as of a private nature, and all property, real, personal and
mixed, and all debts due on whatever account, including without limitation
subscriptions to shares, and all other choses in action, and all and every other
interest of or belonging to or due to the Company or Newco shall be taken and
deemed to be transferred to, and vested in, the Surviving Corporation without
further act or deed; and all property, rights and privileges, immunities, powers
and franchises and all and every other interest shall be thereafter as
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effectually the property of the Surviving Corporation, as they were of the
Company and Newco, and (ii) all debts, liabilities, duties and obligations of
the Company and Newco, subject to the terms hereof, shall become the debts,
liabilities and duties of the Surviving Corporation and the Surviving
Corporation shall thenceforth be responsible and liable for all the debts,
liabilities, duties and obligations of the Company and Newco and neither the
rights of creditors nor any liens upon the property of the Company or Newco
shall be impaired by the Merger, and may be enforced against the Surviving
Corporation.
(c) CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The
Certificate of Incorporation of Newco from and after the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended in accordance with the provisions therein and as provided by the
applicable provisions of the DGCL. The Bylaws of Newco from and after the
Effective Time shall be the Bylaws of the Surviving Corporation as in effect
immediately prior to the Effective Time, continuing until thereafter amended in
accordance with their terms and the Certificate of Incorporation of Newco and as
provided by the DGCL. The initial director of the Surviving Corporation shall be
Ken Bajaj, until his successor is elected and qualified, and the initial
officers of the Surviving Corporation shall be the officers of Newco immediately
prior to the Effective Time.
1.2. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of AppNet, Newco, the Company or any
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) CAPITAL STOCK OF NEWCO. Each issued and outstanding share of
capital stock of Newco shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable common
stock of the Surviving Corporation. Each stock certificate of Newco evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF CAPITAL STOCK OF THE COMPANY.
All shares of capital stock of the Company that are owned directly or indirectly
by the Company shall be canceled and no stock of AppNet or other consideration
shall be delivered in exchange therefor.
(c) CONVERSION OF CAPITAL STOCK OF THE COMPANY. Subject to Sections
1.2(d), 1.3 and 1.4, each issued and outstanding share of common stock of the
Company, $0.01 par value per share ("Company Common Stock") (other than shares
to be canceled pursuant to Section 1.2(b)), that is issued and outstanding
immediately prior to the Effective Time shall automatically be canceled and
extinguished and converted, without any action on the part of the holder
thereof, into the right to receive that share of Cash Consideration and Stock
Consideration (each as defined in Section 1.3) computed by dividing each such
item of the Merger Consideration (as defined in Section 1.3) by the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time. All such shares of Company Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to receive
the ratable share of
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the Merger Consideration (as defined in Section 1.3) upon the surrender of such
certificate in accordance with Section 1.5.
(d) FRACTIONAL SHARES. No fractional shares of AppNet common stock,
$0.0005 par value ("AppNet Common Stock"), shall be issued, but in lieu thereof
each holder of shares of Company Common Stock who would otherwise be entitled to
receive a fraction of a share of AppNet Common Stock shall receive from AppNet
an amount of cash equal to the product obtained by multiplying (i) the greater
of (A) the Guaranteed Share Price (as defined in Section 5.12(c)) or (B) the
Closing Price (as defined in Section 5.12(c) on the last trading day prior to
the Closing Date by (ii) the fraction of a share of AppNet Common Stock to which
such holder would otherwise be entitled. The fractional share interests of each
Stockholder shall be aggregated, so that no Stockholder shall receive cash in an
amount greater than the value of one full share of AppNet Common Stock based on
the Closing Price.
1.3. MERGER CONSIDERATION.
(a) For purposes of this Agreement, the "Merger Consideration" shall
consist of the following categories (as adjusted pursuant to this Sections 1.3
and 1.4): (i) Three Million Dollars ($3,000,000) shall be paid in cash at
Closing in immediately available funds (the "Cash Consideration"); (ii) one
hundred fifty thousand (150,000) shares of AppNet Common Stock (the "Guaranteed
Shares") shall be delivered at the Closing to the Stockholders' Representative
(as defined in Section 1.6), subject to the terms and conditions set forth in
Sections 1.3(c), 1.3(d) and 5.12(c) hereof; (iii) four hundred and thirteen
thousand (413,000) shares of AppNet Common Stock (the "Additional Shares") shall
be delivered at the Closing to the Stockholders' Representative; and (iv)
eighty-seven thousand (87,000) shares of AppNet Common Stock shall be pledged to
and held by AppNet (the "Pledged Shares") pursuant to that certain Pledge
Agreement attached hereto as Exhibit A and made a part hereof (the "Pledge
Agreement"). The Guaranteed Shares, the Additional Shares and the Pledged Shares
are collectively referred to as the "Stock Consideration."
(b) The Merger Consideration has been calculated based upon several
factors including the assumptions that (i) the net worth of the Company,
calculated in accordance with generally accepted accounting principles ("GAAP")
consistently applied, is equal to or greater than One Million Dollars
($1,000,000) (the "Net Worth Target") as of the Closing Date; (ii) the sales of
the Company, net of bad debt expense, for the Company's fiscal year ended
December 31, 1999 shall have been no less than Nine Million Five Hundred
Thousand Dollars ($9,500,000) (the "Sales Target"); (iii) the Company's earnings
before interest and taxes, after adding back any profit sharing and other
compensation expenses, for its fiscal year ended December 31, 1999 shall have
been no less than One Million Six Hundred Thousand Dollars ($1,600,000) (the
"EBIT Target") and (iv) Certified Closing Debt (as defined in Section 6.9(e)) of
zero (subject to adjustment as provided in Section 6.9(e)). The portion of the
Merger Consideration payable to each of the Stockholders is set forth next to
such Stockholder's name as listed in SCHEDULE 1.3(B) attached hereto.
(c) If on the Closing Financial Certificate (as defined in Section
6.9), the Certified Closing Net Worth (as defined in Section 6.9) is less than
the Net Worth Target the
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Merger Consideration to be delivered to the Stockholders may, at AppNet's
election, be reduced either at the Closing, or after completion of the
Post-Closing Review (as defined in Section 1.4), by the difference between the
Net Worth Target and the Certified Closing Net Worth set forth on the Closing
Financial Certificate, which reduction, if taken at the Closing, shall be from
the total number of Guaranteed Shares, based on a deemed value of Forty Dollars
($40) per Guaranteed Share. In addition, if the Certified Closing Debt is not
zero as of the Closing Date and AppNet, in its sole discretion, waives the
condition set forth in Section 6.9(e) and elects to assume, allow the Company to
retain, or pay the Certified Closing Debt, AppNet can reduce the value paid in
Guaranteed Shares, based on a deemed value of Forty Dollars ($40) per Guaranteed
Share, up to the difference between (i) the full amount of the Certified Closing
Debt and (ii) the amount by which the Certified Closing Net Worth exceeds the
Net Worth Target. Notwithstanding anything to the contrary contained in this
Agreement, the adjustments set forth in the previous sentence shall not preclude
AppNet from exercising any and all of its available remedies (judicial or
otherwise) in the event that AppNet incurs liability, loss or damage due to the
Company's failure to meet the Net Worth Target or other financial conditions set
forth in Section 3.9 of this Agreement.
(d) Any costs, expenses and disbursements of the Stockholders pursuant
to Sections 11.6 and 11.7 hereof which remain unpaid at the Closing shall be
paid by AppNet on behalf of the Stockholders, and the aggregate amount of such
costs, expenses and disbursements shall be deducted from the value of the
Guaranteed Shares otherwise payable by AppNet, based on a deemed value of Forty
Dollars ($40) per Guaranteed Share.
1.4. POST-CLOSING ADJUSTMENT.
(a) The Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 1.4.
(b) Within one hundred twenty (120) days following the Effective Time,
AppNet shall cause Arthur Andersen LLP ("AppNet's Accountant") to review the
Surviving Company's books to determine the accuracy of the information set forth
on the Closing Financial Certificate (the "Post-Closing Review"). The parties
acknowledge and agree that for purposes of determining the net worth of the
Company as of the Closing Date, the value of the assets of the Company shall,
except with the prior written consent of AppNet, be calculated as provided in
the last paragraph of Section 6.9. The Stockholders shall cooperate and shall
use their reasonable efforts to cause the officers and employees of the Company
to cooperate with AppNet and AppNet's Accountant after the Closing Date in
furnishing information, documents, evidence and other assistance to AppNet's
Accountant to facilitate the completion of the Post-Closing Review within the
aforementioned time period. In the event that AppNet's Accountant determines
that the actual net worth of the Company as of the Closing Date (the "Actual Net
Worth") was less than the Certified Closing Net Worth, AppNet shall deliver a
written notice (the "Financial Adjustment Notice") to the Stockholders'
Representative setting forth (i) the determination made by AppNet's Accountant
of the actual Company net worth (the "Actual Company Net Worth"), (ii) the
amount of the Merger Consideration that would have been payable at Closing
pursuant to Section 1.3(c) had the Actual Company Net Worth been reflected on
the Closing Financial Certificate, and (iii) the amount by which the Merger
Consideration would have been reduced at
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Closing had the Actual Company Net Worth been used in the calculations pursuant
to Section 1.3(c) (the "Merger Consideration Adjustment"). The Merger
Consideration Adjustment shall take account of the reduction, if any, to the
Merger Consideration already taken pursuant to Section 1.3(c).
(c) The Stockholders' Representative shall have thirty (30) days from
the receipt of the Financial Adjustment Notice to notify AppNet if the
Stockholders dispute such Financial Adjustment Notice. If AppNet has not
received notice of such a dispute within such 30-day period, AppNet shall be
entitled to receive the Merger Consideration Adjustment from the Stockholders.
If, however, the Stockholders' Representative has delivered notice of such a
dispute to AppNet within such thirty (30) day period, then AppNet's Accountant
shall select an independent accounting firm that has not represented any of the
parties hereto within the preceding two (2) years to review the Surviving
Company's books, Closing Financial Certificate and Financial Adjustment Notice
(and related information) to determine the amount, if any, of the Merger
Consideration Adjustment. Such independent accounting firm shall be confirmed by
the Stockholders' Representative and AppNet within five (5) days of its
selection, unless there is an actual conflict of interest. The independent
accounting firm shall be directed to consider only those agreements, contracts,
commitments or other documents (or summaries thereof) that were either (i)
delivered or made available to AppNet's Accountant in connection with the
transactions contemplated hereby, or (ii) reviewed by AppNet's Accountant during
the course of the Post-Closing Review. The independent accounting firm shall
make its determination of the Merger Consideration Adjustment, if any, within
thirty (30) days of its selection. The determination of the independent
accounting firm shall be final and binding on the parties hereto, and upon such
determination, AppNet shall be entitled to receive from the Stockholders the
Merger Consideration Adjustment determined by such independent accounting firm.
Any amounts payable by the Stockholders pursuant to this Section 1.4 may be
collected by AppNet by offset against the Pledged Shares in the manner specified
in the Pledge Agreement. The costs of the independent accounting firm shall be
borne by the party (either AppNet or the Stockholders as a group) whose
determination of the Company's net worth at Closing was further from the
determination of the independent accounting firm, or equally by AppNet and the
Stockholders in the event that the determination by the independent accounting
firm is equidistant between the Certified Closing Net Worth and the Actual
Company Net Worth.
1.5. EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH.
(a) APPNET TO PROVIDE CASH AND COMMON STOCK. In exchange for the
outstanding shares of capital stock of the Company, AppNet shall cause to be
made available to the Stockholders, the Merger Consideration, as adjusted
pursuant to Section 1.3 and Section 1.4. The certificates evidencing the AppNet
Common Stock comprising the Merger Consideration shall bear appropriate legends
pursuant to the terms of this Agreement and the Lock-Up Agreement (as defined in
Section 6.11), to the extent applicable, and AppNet shall be entitled to issue
appropriate stop transfer instructions to its transfer agent consistent with the
terms of this Agreement and the Lock-Up Agreement to the extent applicable.
(b) CERTIFICATE DELIVERY REQUIREMENTS. At the Effective Time, the
Stockholders shall deliver to AppNet the certificates (the "Certificates")
representing Company
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Common Stock, duly endorsed in blank by the Stockholders, or accompanied by
blank stock powers duly executed by the Stockholders and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders shall promptly cure any deficiencies with
respect to the endorsement of the Certificates or other documents of conveyance
with respect to the stock powers accompanying such Certificates. The
Certificates so delivered shall forthwith be canceled. Until delivered as
contemplated by this Section 1.5(b), each Certificate shall be deemed at any
time after the Effective Time to represent the right to receive upon such
surrender the Merger Consideration as provided by this Section 1.
(c) NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE COMPANY. All
Merger Consideration to be delivered upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms hereof shall be deemed to
have been delivered in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and following the Effective Time, the Certificates
shall have no further rights to, or ownership in, shares of capital stock of the
Company. There shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
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 Section
1.5.
(d) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, AppNet shall cause payment of the Merger Consideration to
be made in exchange for such lost, stolen or destroyed certificates, upon the
making of an affidavit of that fact by the holder thereof; PROVIDED, HOWEVER,
that AppNet may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
execute in favor of AppNet an indemnity against any claim that may be made
against AppNet or the Surviving Corporation with respect to the certificates
alleged to have been lost, stolen or destroyed.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.5, none of the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
1.6. STOCKHOLDERS' REPRESENTATIVE.
(a) Each holder of Company Common Stock, by signing this Agreement,
designates David Poe and in the event that he is unable or unwilling to serve,
Geoffrey Griffin to be the Stockholders' representative (the "Stockholders'
Representative") for purposes of this Agreement. The Stockholders shall be bound
by any and all actions taken by the Stockholders' Representative on their
behalf.
(b) AppNet and Newco shall be entitled to rely upon any communication
or writings given or executed by the Stockholders' Representative. All notices,
communications or writings to be sent to Stockholders pursuant to this Agreement
may be addressed to the
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Stockholders' Representative and any notice, communication or writing so sent
shall be deemed notice to all of the Stockholders hereunder. The Stockholders
hereby consent and agree that the Stockholders' Representative is authorized to
accept deliveries, including any notice, on behalf of the Stockholders pursuant
hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative; and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with this Agreement. This power of attorney and
all authority hereby conferred is granted subject to the interest of the other
Stockholders hereunder and in consideration of the mutual covenants and
agreements made herein, and shall be irrevocable and shall not be terminated by
any act of any Stockholder, by operation of law, whether by such Stockholder's
death or any other event.
1.7. ACCOUNTING TERMS. Except as otherwise expressly provided herein or in
the Schedules, all accounting terms used in this Agreement shall be interpreted,
and all financial statements, Schedules, certificates and reports as to
financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
2. CLOSING
2.1. LOCATION AND DATE. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Venable, Baetjer, Howard, and Civiletti, LLP, 1615 L Street,
N.W., Suite 400, Washington, D.C. 20036, the first business day after all
conditions to Closing shall have been satisfied or waived, or at such other time
and date as AppNet, the Company and the Stockholders' Representative may
mutually agree, which date shall be referred to as the "Closing Date."
2.2. EFFECT. On the Closing Date, the articles of merger, certificate of
merger, or other appropriate documents executed in accordance with the DGCL (the
"Merger Documents"), together with any required officers' certificates, shall be
filed with the Secretary of State of Delaware in accordance with the provisions
of the DGCL. The Merger shall become effective upon such filings or at such
later time as may be specified in such filings (the "Effective Time") and with
respect to the date of the Effective Time, the "Effective Date".
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
To induce AppNet and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Stockholders,
jointly and severally, make such representations and warranties to AppNet and
Newco as are set forth in Sections 3.1 to 3.35 of this Agreement, PROVIDED
HOWEVER, that (i) the Accredited Investors (as
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defined in Section 3.30(e)) do not make the representations and warranties set
forth in Section 3.31, and each Accredited Investor makes the representations
and warranties in 3.30 only as to himself, (ii) the Unaccredited Investors (as
defined in Section 3.31(e)) do not make the representations and warranties set
forth in Section 3.30 and each Unaccredited Investor makes the representations
and warranties in 3.31 only as to himself, and (iii) each Stockholder makes the
representations and warranties in Section 3.4(b) only as to himself. (For
purposes of this Agreement, (i) EDC and its subsidiaries are collectively
referred to as the "Companies", and each as a "Company", (ii) any reference to
"Companies" includes a reference to each Company individually and (iii) the
phrases "knowledge of the Companies" or the "Companies' knowledge," or words of
similar import, mean the knowledge of the Stockholders and the directors and
officers of the Companies, including facts of which the directors and officers,
in the reasonably prudent exercise of their duties, should be aware.) The
representations and warranties contained this Section 3 are made as of the date
of the execution hereof by EDC and, pursuant to the terms of Section 6.1, shall
be reaffirmed by EDC as of the Closing Date. The representations and warranties
of the Stockholders pursuant to this Section 3 are made as of the date of their
execution of the Agreement and as of the Closing Date.
3.1. DUE ORGANIZATION. Each Company is a corporation duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted. SCHEDULE 3.L hereto contains a list of all
jurisdictions in which each Company is authorized or qualified to do business.
Each Company is in good standing as a foreign corporation in each jurisdiction
in which it does business. EDC has delivered to AppNet true, complete and
correct copies of the Certificate of Incorporation (or other charter document if
applicable) and Bylaws of each Company. Such Certificate of Incorporation and
Bylaws are collectively referred to as the "Charter Documents." No Company is in
violation of its Charter Documents. The minute books of such Company have been
made available to AppNet (and have been delivered, along with the Company's
original stock ledger and corporate seal, to AppNet) and are correct and, except
as set forth in SCHEDULE 3.1, complete in all material respects.
3.2. AUTHORIZATION; VALIDITY. EDC has all requisite corporate power and
authority to enter into and perform its obligations pursuant to the terms of
this Agreement. EDC has the full legal right, corporate power and authority to
enter into this Agreement and the transactions contemplated hereby. Each
Stockholder has the full legal right and authority to enter into this Agreement
and the transactions contemplated hereby. As of the date of execution hereof by
EDC, the execution and delivery of this Agreement by EDC and the performance by
EDC of the transactions contemplated herein have been duly and validly
authorized by the Board of Directors of EDC. As of the Closing Date, the
execution and delivery of this Agreement by EDC and the performance by EDC of
the transactions contemplated herein shall have been duly authorized by the
Board of Directors of EDC and the Stockholders and this Agreement will have been
duly and validly authorized by all necessary corporate action. This Agreement is
a legal, valid and binding obligation of EDC and, upon execution by each
Stockholder, each Stockholder, enforceable in accordance with its terms.
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3.3. NO CONFLICTS. Except for the need to obtain the consents of the third
parties ("Third Party Consents") as set forth on SCHEDULE 3.3, the execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated hereby, and the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or both) under, any
document, agreement or other instrument to which the any of the Companies or any
Stockholder is a party or by which any of the Companies or any Stockholder is
bound, or result in the creation or imposition of any lien, charge or
encumbrance on any of the Companies' properties pursuant to (i) any law or
regulation to which any of the Companies or any Stockholder or any of their
respective property is subject, or (ii) any judgment, order or decree to which
any of the Companies or any Stockholder is bound or any of their respective
property is subject;
(c) accelerate or permit the acceleration of the performance on the
part of any of the Companies or Stockholders required by any of the terms of any
agreement to which any of the Companies or Stockholders is a party or which
affects the Companies;
(d) be an event which, after notice or lapse of time or both, will
result in any such violation, breach, conflict, default or acceleration;
(e) result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of the Companies; or
(f) violate any law, order, judgment, rule, regulation, decree or
ordinance to which any of the Companies or any Stockholder is subject or by
which the Companies or any Stockholder is bound including, without limitation,
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
together with all rules and regulations promulgated thereunder.
3.4. CAPITAL STOCK OF THE COMPANY.
(a) The authorized capital stock of each Company is as set forth on
SCHEDULE 3.4. All of the issued and outstanding shares of the capital stock of
each Company have been duly authorized and validly issued, are fully paid and
nonassessable and are owned of record by those persons and in the amounts set
forth in SCHEDULE 3.4. All of the issued and outstanding shares of the capital
stock of each Company were offered, issued, sold and delivered by such Company
in compliance with all applicable state and federal laws concerning the issuance
of securities. Further, no such share was issued in violation of any preemptive
rights. There are no outstanding stock appreciation, phantom stock, profit
participation or other similar rights with respect to any Company. No Company
has granted any proxy or voting rights, or entered into any agreements or
understandings with respect to the voting or the transfer of the capital stock
of any Company, except for those to be terminated prior to the Closing, as
described on SCHEDULE
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3.4. No Company is obligated to redeem or otherwise acquire any of its
outstanding shares of capital stock. All of EDC's subsidiaries are wholly-owned
by the Company.
(b) Each Stockholder is the sole legal and beneficial holder of the
issued and outstanding shares of capital stock of EDC, and each Stockholder owns
such shares as are set forth opposite his name on SCHEDULE 3.4 free and clear of
any Liens (as defined below), and no Stockholder has granted any proxies or
voting rights, or entered into any other agreements or understandings with
respect to the voting or transfer of the capital stock of any Company, except
for those to be terminated prior to the Closing, as described on SCHEDULE 3.4.
For purposes of this Agreement, "Lien" means any mortgage, security interest,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer (other
than restrictions imposed by federal and state securities laws), or preferential
arrangement of any kind or nature whatsoever (including any restriction on the
transfer of any assets, any conditional sale or other title retention agreement,
any financing lease involving substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
3.5. TRANSACTIONS IN CAPITAL STOCK. No option, warrant, call, subscription
right, conversion right or other contract or commitment of any kind exists of
any character, written or oral, which may obligate the Companies to issue, sell
or otherwise become outstanding any shares of capital stock. The Companies have
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. As a result of the Merger, AppNet will
be the record and beneficial owner of all outstanding capital stock of EDC and
rights to acquire capital stock of EDC.
3.6. SUBSIDIARIES, STOCK, AND NOTES. Except as set forth on SCHEDULE 3.6,
the Companies have no debt, equity or other investment or interest in any person
or any strategic alliance with any person. The Companies have no commitments to
contribute to the capital of, make loans to or share losses of, any person.
3.7. COMPLETE COPIES OF MATERIALS. The Companies have delivered to AppNet
and Newco true and complete copies of each agreement, contract, commitment or
other document (or summaries thereof) that is referred to in the Schedules or
that has been requested by AppNet.
3.8. ABSENCE OF CLAIMS AGAINST COMPANY. No Stockholder has any claims
against the Companies except for claims arising in the ordinary course of the
Company's business for travel and other business expenses, credit card charges
and expatriate indemnification arrangements, all of which (i) are reflected in
the amounts set forth on the face of the Interim Balance Sheet, as defined in
Section 3.10 or (ii) are listed in SCHEDULE 3.8 (the "Ordinary Course Claims").
Other than such Ordinary Course Claims, each Stockholder hereby waives all
claims or causes of action against the Company of any kind or nature whatsoever,
whether known or unknown, including, but not limited to, any claims for
severance pay against the Company. The Stockholders acknowledge that they shall
no longer be entitled to any fringe benefits, such as tax
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returns prepared at the Surviving Corporation's expense, unless such fringe
benefits are made available to all AppNet employees.
3.9. COMPANY FINANCIAL CONDITIONS.
(a) EDC's consolidated net worth (i) as of the end of its most recent
fiscal year was not less than $1,000,000, and (ii) as of the Closing will not be
less than the Net Worth Target.
(b) EDC's consolidated sales for (i) its fiscal year ending December
31, 1999 were not less than $9,500,000, and (ii) the three-month period ending
March, 31, 2000 will not be less than $2,500,000;
(c) EDC's consolidated earnings before interest and taxes for (i) its
fiscal year ending December 31, 1999 were not less than $1,600,000 (after adding
back any profit sharing and other compensation expenses), and (ii) the
three-month period ended March 31, 2000 will not be less than $375,000 (after
adding back any profit sharing and other compensation expenses).
(d) Except as set forth in SCHEDULE 3.9, as of the Closing Date, the
Companies will have no outstanding long-term and short-term indebtedness to
banks, the Stockholders, and other financial institutions and creditors as of
the Closing (in each case including the current portions of such indebtedness,
but excluding trade payables (other than investment banker fees) and other
ordinary course accounts payable).
(e) As of the Closing Date, all notes receivable from the
Stockholders, other affiliates of the Company and employees of the Company shall
have been repaid in full in accordance with their terms.
(f) The Stockholders shall have purchased any personal use assets,
such as automobiles, from the Companies at a purchase price equal to the greater
of the net book value of such assets as of the Closing Date or the outstanding
indebtedness secured by such assets.
(g) On the Closing Date, there shall be no holders of options or other
rights to purchase common stock of any Company.
For purposes of Section 3.9(a) and (c), calculation of amounts as of the Closing
shall be made in accordance with the last paragraph of Section 6.9 .
3.10. FINANCIAL STATEMENTS. SCHEDULE 3.10 includes (a) true, complete and
correct copies of EDC's consolidated reviewed balance sheet as of December 31,
1999 (the end of its most recent completed fiscal year), and income statement
for the year ended December 31, 1999 (collectively, the "Year End Financials")
and (b) true, complete and correct copies of EDC's consolidated, unaudited
balance sheet (the "Interim Balance Sheet") as of March 31, 2000 (the "Balance
Sheet Date") and income statement, for the three-month period then ended
(collectively, the "Interim Financials," and together with the Year End
Financials, the "Company
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Financial Statements"). If the Closing occurs after May 15, 2000, the Interim
Balance Sheet will be as of April 30, 2000, which date shall be the Balance
Sheet Date. Except as noted on the auditors' report accompanying the Year End
Financials, the Company Financial Statements have been prepared in accordance
with GAAP consistently applied, subject, in the case of the Interim Financials,
(i) to normal year-end audit adjustments, which individually or in the aggregate
will not be material, (ii) the exceptions stated on SCHEDULE 3.10, and (iii) to
the omission of footnote information. Each balance sheet included in the Company
Financial Statements presents fairly the financial condition of the Companies as
of the date indicated thereon, and each of the income statements included in the
Company Financial Statements presents fairly the results of its operations for
the periods indicated thereon. Since the dates of the Company Financial
Statements, there have been no material changes in the Companies' accounting
policies other than as requested by AppNet to conform the Companies' accounting
policies to GAAP. There are no material, special or non-recurring items of
income or expense during the periods covered by the Financial Statements except
as set forth on SCHEDULE 3.10 and the balance sheets included in the Financial
Statements do not reflect any write-up or revaluation increasing the book value
of any assets, except as specifically disclosed in the notes thereto.
3.11. LIABILITIES AND OBLIGATIONS.
(a) The Companies are not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Interim Balance Sheet and
not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise;
(iii) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which liabilities
are not, individually or in the aggregate, material; and
(iv) those liabilities set forth on Schedule 3.11(a)(iv).
(b) The Companies have delivered to AppNet, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) SCHEDULE 3.11(C) includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Companies have made any material expenditure in the
two-year period prior to the date of this Agreement, which if pursued by the
Companies or the Surviving Corporation would require additional material
expenditures of capital.
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(d) For purposes of this Section 3.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmature or otherwise and whether known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured.
3.12. BOOKS AND RECORDS. The Companies have made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Companies. The Companies have not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
3.13. BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 3.13 sets forth a
complete and accurate list of:
(a) the name of each financial institution in which the Companies have
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding
a general or special power of attorney from the Companies and a description of
the terms of such power.
3.14. ACCOUNTS RECEIVABLE. The accounts receivable of the Companies arose
in the ordinary course of business from bona fide transactions and are not
subject to any setoff, counterclaim or defense other than as reflected in the
applicable reserves on the Interim Balance Sheet. Subject to such reserves, the
accounts receivable (both billed and unbilled) shall be fully collectible in
accordance with their terms.
3.15. PERMITS. The Companies own or hold all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and the Companies have not received any
notice that any governmental authority intends to modify, cancel, terminate or
fail to renew any Permit. No present or former officer, manager, member or
employee of the Companies or any affiliate thereof, or any other person, firm,
corporation or other entity, owns or has any proprietary, financial or other
interest (direct or indirect) in any Permits. The Companies have conducted and
are conducting their businesses in compliance with the requirements, standards,
criteria and conditions set forth in the Permits and other applicable orders,
approvals, variances, rules and
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regulations and is not in violation of any of the foregoing. The transactions
contemplated by this Agreement will not result in a default under, or a breach
or violation of, or adversely affect the rights and benefits afforded to the
Companies, by any Permit.
3.16. PROPERTY.
(a) The Companies currently do not own any real property. SCHEDULE
3.16(a) sets forth an accurate and complete list of all leases of real property
leased by the Companies (collectively, the "Facilities"). Except as otherwise
disclosed on SCHEDULE 3.16(a), (i) there are no outstanding written or oral
leases, rights to occupancy, or tenancies of any kind (including tenancies by
sufferance and/or holdover tenancies arising under expired written or oral
leases) covering or in any way affecting the Facilities or any part or parts
thereof; (ii) no person other than the Companies have any rights (including
rights arising under an installment contract, option to purchase, easement,
right-of-way, or otherwise) with respect to the Facilities or any part thereof;
and (iii) there have been no improvements to, construction on, work done at,
and/or services or material supplied to, the Facilities or any part or parts
thereof for which payment in full has not been made and which might give rise to
mechanic's liens or other lien rights with respect to the Facilities. All leases
set forth on SCHEDULE 3.16(a) are in full force and effect and constitute valid
and binding agreements of the Companies and, to the knowledge of the Companies
and the Stockholders, the other parties thereto in accordance with their
respective terms.
(b) SCHEDULE 3.16(b) sets forth an accurate list of all personal
property owned or leased by the Companies with a book value in excess of $5,000
(i) as of the Balance Sheet Date, or (ii) acquired since the Balance Sheet Date,
including in each case true, complete and correct copies of leases for equipment
and also including an indication as to which assets are currently owned, or were
formerly owned, by any current or former stockholders of the Companies or
business or personal Affiliates (within the meaning of Rule 145 promulgated
under the 1933 Act) of the Companies or any current or former stockholder of the
Companies. All of the vehicles and other material machinery and equipment listed
on SCHEDULE 3.16(b) are in good working order and condition, ordinary wear and
tear excepted. All fixed assets with a value in excess of $5,000 used by the
Companies that are material to the operation of the business, as it is presently
being conducted, are either owned by the Companies or leased under an agreement
listed on SCHEDULE 3.16(b).
(c) Except as set forth on SCHEDULE 3.16(c), the Companies have good
and marketable title to their owned assets, free and clear of any and all
Encumbrances and defects in title. The Companies' assets, taken together, are
adequate for the operation of the Companies' business as it is presently being
conducted.
3.17. INTELLECTUAL PROPERTY.
(a) The Companies own or possess valid licenses to use all
intellectual property rights that are used in the business of the Companies (the
"Company Intellectual Property Rights"). SCHEDULE 3.17(a) lists all Company
Intellectual Property Rights owned by the Companies. The filings in respect of
all such registrations and applications are in good
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standing, are held solely in the name of the Companies as the exclusive owner of
all rights therein, and all necessary steps have been taken to maintain such
filings and to prosecute the applications in a timely manner as of the date
hereof.
(b) SCHEDULE 3.17(b) lists all licenses, sublicenses and other
agreements to which any of the Companies is a party and pursuant to which any
person or entity is authorized to use any Company Intellectual Property Rights
or any trade secret material to the Companies (and includes the identity of all
parties thereto other than non-exclusive product licenses and sublicenses
granted by the Companies in the ordinary course of business). The Companies hold
valid licenses, sublicenses and other agreements pursuant to which the Companies
are authorized to use any third party patents, trademarks or copyrights
(including software) which are incorporated in, are, or form a part of, the
Companies' products or services, or other trade secrets of a third party in or
as to any product or service (collectively, the "Company Third Party
Intellectual Property Rights"). The Companies are authorized to use, in the
manner used by the Companies, the Company Third Party Intellectual Property
Rights. Except as set forth on SCHEDULE 3.17(b), the Companies are not, nor will
they be as a result of the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any license,
sublicense or agreement described on SCHEDULE 3.17(b) or by which it is
authorized to use Company Third Party Intellectual Property Rights.
(c) Except as set forth on SCHEDULE 3.17(c), no claims with respect to
Company Intellectual Property Rights, any trade secrets of the Companies, or
Company Third Party Intellectual Property Rights to the extent arising out of
any use, reproduction or distribution of such Company Third Party Intellectual
Property Rights by or through a Company, have been asserted or are threatened
(to the actual knowledge of the Companies and the Stockholders) by any person,
nor, except as set out on SCHEDULE 3.17(c), do the Companies or any of the
Stockholders have actual knowledge of any valid grounds for any bona fide
claims: (i) to the effect that the manufacture, sale, licensing or use of any
product or service, as now used, sold or licensed by the Companies infringes any
copyright, patent, trademark, service mark, trade secret or any other
Intellectual Property Right; (ii) against the use by the Companies of any
trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the Companies'
businesses as they are presently being conducted; (iii) challenging the
ownership, validity or effectiveness of any of the Company Intellectual Property
Rights or other trade secrets of the Companies; or (iv) challenging the
Companies' licenses or legally enforceable rights to use, or the validity or
effectiveness of any Company Third Party Intellectual Property Rights.
(d) The Companies have entered into all necessary agreements and
obtained all necessary rights to acquire the Company Third Party Intellectual
Property Rights. All agreements relating to Company Third Party Intellectual
Property Rights are in full force and effect for the term set forth in each such
agreement.
(e) All registered trademarks, service marks and copyrights held by
the Companies are valid and subsisting. To the actual knowledge of the Companies
and the Stockholders, there is no unauthorized use, disclosure, infringement or
misappropriation of any of the Company Intellectual Property Rights, any trade
secrets of the Companies, or any of the Company Third Party Intellectual
Property Rights to the extent licensed by or through the
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Companies, by any third party, including any employee or former employee of the
Companies. Except as set out on SCHEDULE 3.17(e), (i) the Companies have not
been sued or charged in writing as a defendant in any claim, suit, action or
proceeding of which any Company has received notice or has knowledge, which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or violation of any trade secret or other proprietary right of any
third party; and (ii) to the actual knowledge of the Companies and the
Stockholders, there is no basis for any such charge or claim.
(f) No Company Intellectual Property Rights, trade secrets of the
Companies or Company Third Party Intellectual Property Rights are subject to any
outstanding order, judgment, decree, stipulation or agreement restricting in any
manner the licensing thereof by the Companies. Except for contracts licensing
the Companies' products executed in the ordinary course of business and in
accordance with the Companies' past practices (all of which contracts are listed
on SCHEDULE 3.17), the Companies have not entered into any agreement to
indemnify any other person against any charge of infringement of any Company
Intellectual Property Rights. The Companies are not nor ever has been engaged in
any dispute or litigation with an employee or former employee regarding matters
pertaining to Intellectual Property Rights or assignment of inventions.
(g) All domain names of the Companies listed on SCHEDULE 3.17(g) (the
"Domain Names") are operating, accessible domain names. As of the Closing, the
Companies shall have not waived, and to the Companies' knowledge, no prior owner
of any such Domain Name shall have waived with respect to any third parties, any
rights in or to such Domain Names. Further, as of the Closing, the Companies
shall not have forfeited, and, to the Companies' knowledge, each prior owner of
such Domain Names shall not have forfeited with respect to third parties, any
benefits, entitlements or rights of renewal with respect thereto. The Companies
and, to the Companies knowledge, each prior owner of the Domain Names shall have
taken all necessary steps to maintain in force each such Domain Name.
(i) As of Closing Date, the Companies shall own all equitable
and legal title to all Domain Names listed in SCHEDULE
3.17(g).
(ii) There are no Encumbrances on the Domain Names.
(iii) No third party has advised the Stockholders or the Companies
in writing that any of the Domain Names infringe, dilute, or
interfere with the rights of any other party, or may
infringe, dilute or interfere with the rights of any other
party.
(iv) There are no claims pending or, to the actual knowledge of
the Companies, claims which may be validly brought against
the continued use, or attempted or continued registration in
the United States or in any jurisdiction throughout the
world where such Domain Names are currently registered of
any of the Domain Names. Neither the Companies nor the
Stockholders are aware of any facts that would support any
such claims, actual or potential.
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3.18. MATERIAL CONTRACTS. SCHEDULE 3.18 constitutes an accurate and
complete list of each contract of the following type (collectively referred to
as "Material Contracts") to which any of the Companies is a party, which are
currently in effect, and which relate to the operation of the Companies'
business: (a) collective bargaining agreement or contract with any labor union;
(b) bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (c) hospitalization insurance or other welfare benefit plan
or practice, whether formal or informal; (d) stock purchase or stock option
plan; (e) contract for the employment of any officer, individual employee or
other person on a full-time or consulting basis or relating to severance pay for
any such person; (f) confidentiality agreement; (g) contract, agreement or
understanding relating to the voting of Common Stock or the election of
directors of the Companies; (h) agreement or indenture relating to the borrowing
of money or to mortgaging, pledging or otherwise placing a lien on any of the
assets of the Companies; (i) guaranty of any obligation for borrowed money or
otherwise; (j) lease or agreement under which any of the Companies is lessee of,
or holds or operates any property, real or personal, owned by any other party,
for which the annual rental exceeds Ten Thousand Dollars ($10,000); (k) lease or
agreement under which any of the Companies is lessor of, or permits any third
party to hold or operate, any property, real or personal, for which the annual
rental exceeds Ten Thousand Dollars ($10,000); (l) contract or group of related
contracts with the same party for the purchase of products or services under
which the undelivered balance of such products or services is in excess of Ten
Thousand Dollars ($10,000); (m) contract or group of related contracts with the
same party for the sale of products or services under which the undelivered
balance of such products or services has a sales price in excess of Ten Thousand
Dollars ($10,000); (n) contract or group of related contracts with the same
party (other than any contract or group of related contracts for the purchase or
sale of products or services) continuing over a period of more than six (6)
months from the date or dates thereof, not terminable by it on thirty (30) days'
or less notice without penalty and involving more than Ten Thousand Dollars
($10,000) annually in the aggregate; (o) contract which prohibits the Companies
from freely engaging in business anywhere in the world; (p) contract for the
distribution of the Companies' products or services through agents, brokers,
third party vendors or through the Internet; (q) franchise agreements; (r)
license agreement or agreement providing for the payment or receipt of royalties
or other compensation by the Companies in connection with the Company
Intellectual Property Rights listed in SCHEDULE 3.17(a); (s) contract or
commitment for capital expenditures in excess of Ten Thousand Dollars ($10,000);
(t) agreement for the sale of any capital asset; (u) contract with any Affiliate
which in any way relates to the Companies (other than for employment on
customary terms); or (v) other agreement which is either material to the
Companies' businesses or was not entered into in the ordinary course of
business.
Except as set forth on SCHEDULE 3.18, each Material Contract is in full
force and effect, is a valid, binding and enforceable obligation by or against a
Company, and the other parties thereto, and except for the need to obtain the
Third Party Consents, to the knowledge of the Companies and the Stockholders, no
event has occurred which constitutes or, with the giving of notice or passage of
time, or both, would constitute, a default or breach by a Company thereunder.
Prior to the Closing Date, the Companies will deliver or will cause to be
delivered or will make available to AppNet correct and complete copies of each
Material Contract and all amendments thereto. Except as set forth on SCHEDULE
3.18, there exist no restrictive covenants of any nature whatsoever in any of
the Material Contracts.
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3.19. GOVERNMENT CONTRACTS.
(a) Except as set forth on SCHEDULE 3.19, none of the Companies are a
party to any government contracts.
(b) The Companies have not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government, any state or local government, or any foreign government, nor, to
the knowledge of the Companies, have any suspension or debarment action been
threatened or commenced. There is no valid basis for the Companies' suspension
or debarment from bidding on contracts or subcontracts for any agency of the
United States Government, any state or local government, or any foreign
government.
(c) Except as set forth in SCHEDULE 3.19, the Companies have not been,
nor are they now being, audited, or investigated by any government agency, or
the inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Companies, has such audit or
investigation been threatened.
(d) The Companies have no dispute pending before a contracting office
of, nor any current claim (other than the Accounts Receivable) pending against,
any agency or instrumentality of the United States Government, any state or
local government, or any foreign government, relating to a contract.
(e) The Companies have not, with respect to any government contract,
received a cure notice advising the Companies that they are or were in default
or would, if they failed to take remedial action, be in default under such
contract.
(f) The Companies have not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government, any state or local government, or foreign
government.
(g) No employee, agent, consultant, representative, or Affiliate of
the Companies are in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Companies'
businesses under circumstances where there is reason to believe that such
receipt or possession is unlawful or unauthorized.
(h) Each of the Companies' government contracts has been issued,
awarded or novated to the Companies in the Companies' respective names.
3.20. INSURANCE. SCHEDULE 3.20 sets forth a complete and accurate list of
all insurance policies carried by the Companies and all insurance loss runs or
workmen's compensation claims received for the past two (2) policy years. The
Companies have made available to AppNet true, complete and correct copies of all
material insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Companies are
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otherwise in full compliance with the terms of such policies. Such policies of
insurance are of the type and in amounts customarily carried by persons
conducting businesses similar to that of the Companies. To the knowledge of the
Companies, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
3.21. ENVIRONMENTAL AND SAFETY MATTERS.
(a) For purposes of this Agreement, the term "Environmental and Safety
Requirements" shall mean all applicable federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law, in each case concerning public
health and safety (including, without limitation, all of those relating to the
sale, manufacture, distribution, packaging and marketing of vitamins and health
supplement products), worker health and safety and pollution or protection of
the environment (including, without limitation, all those relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, Release,
threatened Release, control or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation); "Release" shall have
the meaning set forth in CERCLA (as defined below); and "Environmental Lien"
shall mean any lien, whether recorded or unrecorded, in favor of any court,
tribunal, arbitrator, authority (including quasi-governmental authority),
agency, commission, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, country, city or other
political subdivision ("Governmental or Regulatory Authority"), relating to any
liability of the Companies arising under any Environmental and Safety
Requirements.
(b) Except as set forth on SCHEDULE 3.21:
(i) To the knowledge of the Companies and the Stockholders, the
Companies have complied with and are currently in compliance with all
Environmental and Safety Requirements, and to the actual knowledge of the
Companies and the Stockholders, the Companies have not received any written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to any of the Companies or any of their respective
properties or facilities.
(ii) Without limiting the generality of the foregoing, to the
actual knowledge of the Companies and the Stockholders, the Companies have
obtained and complied with, and are currently in compliance with, all permits,
licenses and other authorizations that may be required pursuant to any
Environmental and Safety Requirements for the occupancy of their properties or
facilities or the operation of their businesses as they are presently being
conducted and as they have been conducted in the past. A list of all such
permits, licenses and other authorizations which are material to the Companies
is set forth on SCHEDULE 3.21 attached hereto.
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(iii) To the actual knowledge of the Companies and the
Stockholders, neither this Agreement nor the consummation of the transactions
contemplated by this Agreement shall impose any obligations on the Companies or
otherwise for site investigation or cleanup, or notification to or consent of
any governmental or regulatory authorities or third parties under any
Environmental and Safety Requirements (including, without limitation, any so
called "transaction-triggered" or "responsible property transfer" laws and
regulations).
(iv) To the actual knowledge of the Companies and the
Stockholders, the Companies have not treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled or Released any substance
(including, without limitation, any hazardous substance), or owned, occupied or
operated any facility or property, so as to give rise to Liabilities of any of
the Companies for response costs, natural resource damages or attorneys' fees
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), or any other Environmental and Safety
Requirements.
(v) Without limiting the generality of the foregoing, to the
actual knowledge of the Companies and the Stockholders, no facts, events or
conditions relating to the past or present properties, facilities or operations
of any of the Companies prevent, hinder or limit continued compliance with
Environmental and Safety Requirements, give rise to any corrective,
investigatory or remedial obligations pursuant to Environmental and Safety
Requirements or give rise to any other Liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements (including, without limitation, those Liabilities relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage).
(vi) To the knowledge of the Companies and the Stockholders, the
Companies have not, either expressly or by operation of law, assumed or
undertaken any material Liability or corrective, investigatory or remedial
obligation of any other person relating to any Environmental and Safety
Requirements.
(vii) No Environmental Lien has attached to any property leased
or operated by any of the Companies.
3.22. EMPLOYMENT MATTERS.
(a) All employee benefit plans, programs, policies and arrangements
(whether formal or informal, written or unwritten, and whether maintained for
the benefit of a single individual or more than one individual) that are
maintained or contributed to by the Companies for the benefit of any current or
former employee of the Companies or in which such employees are entitled to
participate are listed in SCHEDULE 3.22(a). With respect to the employee benefit
plans, programs, policies and arrangements (whether formal or informal, written
or unwritten, and whether maintained for the benefit of a single individual or
more than one individual) that are, or that have been in the last five (5)
years, maintained or contributed to by the Companies for the benefit of any
current or former employee of the Companies or in which such employees are
entitled to participate (the "Benefit Plans"), true, correct and complete copies
of all of the following documents, if applicable, will be delivered or made
available to AppNet prior to the
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Closing Date: (i) all plan documents and amendments thereto; (ii) all written
descriptions of any oral plans or policies; (iii) all trust agreements; (iv) all
annuity contracts, insurance policies or contracts and service agreements; (v)
the three (3) most recent Forms 5500 and any financial statements attached
thereto; (vi) the most recent actuarial and valuation report; (vii) the most
recent IRS determination letter; (viii) the most recent summary plan
description; and (ix) copies of all nondiscrimination testing for the last three
(3) years. Except as set forth on SCHEDULE 3.22(a), the Benefit Plan and the
administration thereof complies, and has at all times complied, with the terms
of such Benefit Plan and with the requirements of all applicable law, including,
without limitation, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code. Except as set forth on SCHEDULE 3.22(a), each
Benefit Plan that is currently maintained by each of the Companies that is
intended to qualify under Section 401(a) of the Code so qualifies, and each
trust which forms a part of each such Benefit Plan is exempt from taxation under
Section 501(a) of the Code. The Benefit Plan that was previously maintained by
each of the Companies that was intended to qualify under Section 401(a) of the
Code was so qualified, and each trust that formed a part of each such Benefit
Plan was exempt from taxation under Section 501(a) of the Code. No Benefit Plan
subject to Part 3 of Title I of ERISA has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code. No Liability has been incurred or is expected to be incurred under Title
IV of ERISA by any party with respect to any Benefit Plan, or any other plan
presently or heretofore maintained or contributed to by the Companies, any
predecessor to the Companies, or any entity that is or at any time was a member
of a controlled group, as defined in Section 412(n)(6)(B) of the Code, which
includes or included the Companies ("Controlled Group Member"). Neither any of
the Companies, nor any Controlled Group Member has incurred any Liability for
any tax imposed under Sections 4971 through 4980B of the Code or civil Liability
under Sections 502(i) or (l) of ERISA. The "amount of unfunded benefit
liabilities" within the meaning of Section 4001(a)(18) of ERISA does not exceed
zero with respect to any Benefit Plan subject to Title IV of ERISA. No Benefit
Plan is a "multiemployer plan" within the meaning of Section 3(37) of ERISA. No
Benefit Plan provides health or death benefit coverage to any employee or his
spouse or dependents beyond the termination of an employee's employment. No
"reportable event" (within the meaning of Section 4043 of ERISA) has occurred
with respect to any Benefit Plan or any plan maintained by a Controlled Group
Member since the effective date of said Section 4043. The Companies have no
liability (whether actual, contingent or otherwise) with respect to any employee
benefit plan or arrangement sponsored or maintained by a Controlled Group
Member. No suit, actions or other litigation (excluding claims for benefits
incurred in the ordinary course of plan activities) have been brought against or
with respect to any Benefit Plan, and, to the knowledge of the Companies and the
Stockholders, no suit, action, or other litigation is threatened by, against, or
relating to any Benefit Plan and neither the Stockholders nor the Companies have
any knowledge of any fact that could form the basis for any such suit, action or
litigation. No "prohibited transaction" within the meaning of Sections 406 or
407 of ERISA or Section 4975 of the Code has occurred with respect to any
Benefit Plan. No Benefit Plan is presently under audit or examination by the
IRS, the Department of Labor, or any other Governmental or Regulatory Authority,
and no matters are pending with respect to any Benefit Plan under the IRS
Voluntary Compliance Resolution program, its Closing Agreement Program, or any
other similar program. All contributions to Benefit Plans that were required to
be made under such Benefit Plans, either pursuant to the terms of such Benefit
Plans or provisions to the requirement of applicable law, will have been made as
of the Balance Sheet
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Date, and all benefits accrued under any unfunded Benefit Plan will have been
paid, accrued or otherwise adequately reserved in accordance with GAAP as of
such date, and the Companies will have performed by the Closing Date any
obligations required to be performed as of such date under all Benefit Plans. No
Benefit Plan contains any term or provision or is subject to any law that would
prohibit the transactions contemplated by this Agreement, or that would give
rise to the vesting of benefits, payments, or liabilities as a result of the
transactions contemplated by this Agreement, except to the extent that full
vesting is required under any tax-qualified Benefit Plan under Section 411 of
the Code. In the case of any of the Companies which are not incorporated in the
United States, the warranties contained in this Section 3.22 shall be
interpreted so as to apply to comparable provisions of the laws of any foreign
jurisdictions which apply to any such Company.
(b) EDC has previously provided AppNet with SCHEDULE 3.22(b) (in a
form reasonably satisfactory to AppNet), which contains a complete and correct
list of all employees of the Companies as of the date hereof and the
compensation rate payable to each such employee on the date indicated thereon.
Except as set forth in SCHEDULE 3.22(b), (i) the terms of employment or
engagement of all directors, officers, employees, agents, consultants and
professional advisers of the Companies are such that their employment or
engagement may be terminated upon not more than two weeks' notice given at any
time and without liability for payment of compensation or damages, (ii) there
are no severance payments which are or could become payable by any of the
Companies to any director, officer or other employee of the Companies under the
terms of any oral or written agreement or commitment or any law, custom, trade
or practice, and (iii) there are no agreements, contracts or commitments, oral
or written, between any of the Companies and any employee, consultant or
independent contractor.
(c) Except as set forth on SCHEDULE 3.22(c), the Companies are not
bound by or subject to (and none of its assets or properties are bound by or
subject to) any arrangement with any labor union. Except as set forth on
SCHEDULE 3.22(c), no employees of the Companies are or ever have been
represented by any labor union or covered by any collective bargaining agreement
while employed by the Companies, and no campaign to establish such
representation is in progress. There is no pending or threatened (to the
knowledge of the Companies and the Stockholders) labor dispute involving the
Companies and any group of its employees nor have the Companies experienced any
labor interruptions. The Companies are and have been in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, including without limitation any
such laws regarding employment documentation, minimum wage and hours, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and the Companies have not
engaged in any unfair labor practice. All persons treated by the Companies as
independent contractors for any purpose do satisfy and have satisfied the
requirements of law to be so treated, and the Companies have fully and
accurately reported the amounts paid by the Companies to or on behalf of such
persons on IRS Forms 1099 when required to do so. No individual who has
performed services for or on behalf of the Companies, and who has been treated
by the Companies as an independent contractor, is classifiable as a "leased
employee," within the meaning of Section 414(n)(2) of the Code, with respect to
any of the Companies or with respect to any customer of the Companies.
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3.23. TAXES. Except as provided in SCHEDULE 3.23:
(a) The Companies have filed or caused to be timely filed with the
appropriate Governmental or Regulatory Authority any and all Tax Returns (as
defined below) required to be filed by it, or requests for extensions to file
Tax Returns which have been filed have been timely filed or granted and have not
expired, and all such Tax Returns are true, complete and accurate in all
material respects, except to the extent that such failures to file have
extensions granted that remain in effect or be complete and accurate in all
respects, as applicable, individually or in the aggregate, would not have a
material adverse effect on the Companies.
(b) The Companies have paid all Taxes (as defined below) shown as due,
on all Tax Returns filed by the Companies, or accruable or properly owed with
respect to periods through the Closing Date except for such Taxes as (i) are
fully reserved for in the Interim Balance Sheet, or (ii) were incurred after the
Balance Sheet Date in the ordinary course of business and are not yet due and
required to have been paid.
(c) No deficiencies for any Taxes have been proposed by any
Governmental or Regulatory Authority against any of the Companies that are not
adequately reserved for in the Interim Balance Sheet of the Company.
(d) No requests for waivers or comparable consents with respect to the
time to assess any Taxes against the Companies are pending or have been granted
for the benefit of any Governmental or Regulatory Authority and are still
effective, except for requests with respect to such Taxes that have been
adequately reserved for in the Interim Balance Sheet.
(e) The Companies have complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441
and 1442 of the Code or similar provisions under any foreign laws and
withholding with respect to employee wages) and have, within the time and manner
prescribed by law, withheld and paid over to the proper Governmental or
Regulatory Authority all amounts required to have been withheld or paid over
under all applicable laws as of the date hereof.
(f) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings ("Audits") exist or have been initiated (to the
knowledge of the Companies or the Stockholders) with regard to any Taxes or Tax
Returns of the Companies, and neither the Companies nor the Stockholders has
received any notice that such an Audit is pending or threatened with respect to
any Taxes due from or with respect to the Companies (including Taxes imposed on
Stockholders with respect to income of the Companies) or any Tax Return filed or
required to have been filed by or with respect to the Companies.
(g) The Companies have delivered to AppNet complete and accurate
copies of all filed federal income Tax Returns of the Companies relating to
taxable years beginning within the two years prior to the date hereof, and all
examination reports and statements of assessment or deficiency issued relating
to such Tax Returns, and has delivered or made available to AppNet complete and
accurate copies of all other filed Tax Returns of the Companies, together with
all
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related examination reports and statements of assessment or deficiency for
all periods beginning within the two years prior to the date hereof.
(h) All elections with respect to Taxes which would be binding on the
Companies for taxable years beginning on or after the Closing Date are set forth
in the SCHEDULE 3.23.
(i) The Companies and the Stockholders have not received written
notice from, and to the best of their knowledge are not aware that, any
Governmental or Regulatory Authority that such authority believes that the
Companies were required to file any Tax Return that has not been filed.
(j) The Companies have not filed an election, consent or agreement
under Section 341(f) of the Code, and none of the assets of the Companies is
subject to an election under Section 341(f) of the Code.
(k) The Companies have no liability for the Taxes of any other person
either (i) as a transferee under Section 6901 of the Code, or any similar
provision of state, local or foreign law, (ii) as a successor, (iii) by contract
or (iv) otherwise. The Companies are not a party to, bound by, or have any
obligation under, any tax sharing agreement, tax indemnification agreement or
similar contract or arrangement relating to Taxes.
(l) Neither the Companies nor any predecessors of the Companies has
ever been included or required to be included, on any affiliated, consolidated,
combined or unitary Tax Return.
(m) The Companies will not be required to include any amounts in
income for taxable years ending on or after the Closing Date pursuant to Section
481(a) of the Code or any similar provision of state or local law by reason of a
change in accounting method occurring in a taxable year ending on or before the
Closing Date, and neither of the Companies nor the Stockholders has any
knowledge that any Governmental or Regulatory Authority has proposed any change
in method of accounting that would require inclusion of such amounts.
(n) The Companies have not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(o) None of the assets of the Companies is property which the
Companies are required to treat as being owned by any other persons pursuant to
the so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Code.
(p) None of the assets of the Companies directly or indirectly secures
any debt the interest on which is tax exempt under Section 103(a) of the Code.
(q) None of the assets of the Companies is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
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(r) The Companies have not participated in an international boycott
within the meaning of Section 999 of the Code.
(s) The Companies are not a party to any joint venture, partnership,
or other arrangement or contract which is, or is required to be, treated as a
partnership for federal income tax purposes.
(t) The Companies have not received any written ruling related to
Taxes or entered into any written and legally binding agreement with any
regulatory or governmental authority related to Taxes.
(u) The Companies are not a party to any contract, agreement, plan or
arrangement requiring payments to any person by reason a change in ownership or
effective control of the Companies the deduction of which would be prohibited by
Section 280G of the Code.
(v) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental
charge, impost or levy (including without limitation income taxes, franchise
taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts taxes,
value added taxes, employment taxes, excise taxes, ad valorem taxes, property
taxes, withholding taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or interest imposed
by the United States or any state, county, local or foreign government or
subdivision or agency thereof;
(ii) the term "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice, form, estimate, or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax; and
(iii) In the case of any of the Companies which are not
incorporated in the United States, the warranties contained in this Section 3.23
shall be interpreted so as to apply to comparable provisions of the laws of any
foreign jurisdictions which apply to any such Company.
3.24. LITIGATION. Except as set forth in SCHEDULE 3.24, there is no
litigation, suit, proceeding, action, claim, demand or investigation, at law or
in equity, pending or to the actual knowledge of the Companies and the
Stockholders threatened against or affecting the Companies before any court,
agency, authority or arbitration tribunal, including, without limitation, any
product liability, workers' compensation or wrongful dismissal claims, or
claims, actions, suits, demands or proceedings relating to toxic materials,
hazardous substances, pollution or the environment as of the date hereof. The
Companies are not subject to or in default with respect to any notice, order,
writ, injunction or decree of any court, agency, authority or arbitration
tribunal.
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To the knowledge of the Companies and the Stockholders, no basis for any claim
required to be disclosed on SCHEDULE 3.24 exists.
3.25. COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 3.25, the
Companies have complied and are currently in compliance with all laws,
regulations, rules, orders, permits, judgments, decrees and other requirements
and policies, including, but not limited to, the California General Corporation
Law and the Delaware General Corporation Law, imposed by any Governmental or
Regulatory Authority applicable to them, their properties or the operation of
their business. The Companies have not received any written notice or citation
for material noncompliance with any of the foregoing, and, to the actual
knowledge of the Companies and the Stockholders, there exists no condition,
situation or circumstance, nor has there existed such a condition, situation or
circumstance, which, after notice or lapse of time, or both, would constitute
noncompliance with or give rise to future Liability with regard to any of the
foregoing.
3.26. RELATIONS WITH GOVERNMENTS. Neither the Companies, the Stockholders
nor the Companies' representatives or agents has made, offered or agreed to
offer anything of value to any governmental official, political party or
candidate for government office, nor has it otherwise taken any action that
would cause the Companies to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any law of similar effect.
3.27. ADVERSE CHANGES. Except as set forth in SCHEDULE 3.27, from December
31, 1999: (i) there has been no adverse change in the condition (financial or
otherwise), business, net worth, assets, properties, liabilities or obligations
(fixed, contingent, known, unknown or otherwise) of the Companies; and (ii) the
Companies have complied with all of the covenants set forth in Section 5.7, to
the same extent as if this Agreement had been executed on December 31, 1999.
3.28. CUSTOMERS; SUBCONTRACTORS.
(a) Except as set forth in SCHEDULE 3.28(a)(i), no single customer
accounted for more than five percent (5%) of the Companies' revenues for the
fiscal years ended December 31, 1998 or December 31, 1999. Except as set forth
on SCHEDULE 3.28(a)(ii), no customer listed on SCHEDULE 3.28(a)(i) (a
"Significant Customer") has canceled or otherwise terminated or threatened (to
the knowledge of the Companies and the Stockholders) to cancel or otherwise
terminate his or its relationship with the Companies, or during such periods has
materially decreased its usage or purchase of the Companies' services or
products. To the knowledge of the Companies and the Stockholders, no Significant
Customer has any plan or intention to terminate, cancel or otherwise materially
modify his or its relationship with the Company or materially decrease or limit
its usage, purchase or distribution of the services or products of the
Companies.
(b) The relationships of the Companies with their outside consultants
and subcontractors are satisfactory commercial working relationships and, except
as set forth on SCHEDULE 3.28(b), no outside consultant or subcontractor has
during the last twelve months terminated or threatened (to the actual knowledge
of the Companies and the Stockholders) to terminate, his or its relationship
with a Companies or has during the last twelve (12) months substantially
decreased or limited or threatened (to the actual knowledge of the Companies and
the Stockholders) to substantially decrease or limit, his or its services,
supplies or materials any
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of the Companies. No outside consultant or subcontractor is a sole source of
supply of any good or service to a Company. Neither the Companies nor the
Stockholders has any knowledge that any of outside consultant or subcontractor
intends to terminate or otherwise modify adversely to the Companies its
relationship with the Companies or to substantially decrease or limit its
services, supplies or materials to the Companies.
3.29. DISCLOSURE. All written agreements, lists, schedules, instruments,
exhibits, documents, certificates, reports, statements and other writings
furnished to AppNet pursuant hereto or in connection with this Agreement or the
transactions contemplated hereby, are and will be complete and accurate in all
material respects. No representation or warranty by the Stockholders or the
Companies contained in this Agreement, in the Schedules attached hereto or in
any certificate furnished or to be furnished by the Stockholders or the
Companies to AppNet in connection herewith or pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary in order to make any statement contained herein or
therein not misleading. There is no fact known to any Stockholder that has
specific application to such Stockholder or the Companies (other than general
economic or industry conditions) and that materially adversely affects or, as
far as such Stockholder can reasonably foresee, materially threatens, the
assets, business, prospects, financial condition, or results of operations of
the Companies that have not been set forth in this Agreement or any Schedule
hereto.
3.30. ACCREDITED INVESTORS; INVESTMENT INTENT.
(a) Each Accredited Investor (as defined in Section 3.30(e)) has
received and reviewed the Private Placement Materials (as defined in Section
3.31(a)) sent by AppNet and evaluated the risks of investing in the AppNet
Common Stock, and has determined that the AppNet Common Stock is a suitable
investment for such Accredited Investor. EACH ACCREDITED INVESTOR HAS DETERMINED
THAT SUCH ACCREDITED INVESTOR CAN BEAR THE ECONOMIC RISK OF THIS INVESTMENT AND
CAN AFFORD A COMPLETE LOSS OF SUCH ACCREDITED INVESTOR'S INVESTMENT. In
evaluating the suitability of an investment in the AppNet Common Stock, each
Accredited Investor acknowledges that AppNet has, in addition to the Private
Placement Materials, made available to him, during the course of this
transaction and prior to the delivery of the AppNet Common Stock, the
opportunity to ask questions of and receive answers from any of the officers of
AppNet concerning the terms and conditions of the AppNet Common Stock, and to
obtain any documents or additional information necessary to verify the
information provided to each Accredited Investor or otherwise relative to the
financial data and business of AppNet, to the extent that AppNet possessed such
information or could acquire it without unreasonable effort or expense, and all
such questions, if asked, have been answered satisfactorily and all such
documents, if examined, have been found to be fully satisfactory. Each
Accredited Investor has delivered to AppNet an executed Shareholder's
Questionnaire, in the form attached hereto as Exhibit B (the "Shareholder's
Questionnaire").
(b) Each Accredited Investor understands and acknowledges that (i)
such Accredited Investor must bear the economic risk of such Accredited
Investor's investment in the AppNet Common Stock; (ii) the shares of AppNet
Common Stock being delivered hereunder have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), any state securities laws
or the laws of any foreign jurisdiction and are being offered and sold in
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reliance solely upon exemptions provided in the 1933 Act and state securities
laws for transactions not involving any public offering and, therefore, cannot
be resold or transferred unless they are subsequently registered under the 1933
Act and applicable state laws or unless an exemption from such registration is
available; (iii) such Accredited Investor is purchasing the AppNet Common Stock
for investment purposes only for such Accredited Investor's own account and not
with any view toward a distribution thereof; and (iv) no Accredited Investor has
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else any of the AppNet Common Stock
which such Accredited Investor hereby subscribes to purchase or any part
thereof, and no Accredited Investor has any present plans to enter into any such
contract, undertaking, agreement or arrangement.
(c) Each Accredited Investor is knowledgeable and experienced in
evaluating investments and experienced in financial and business matters, and is
capable of evaluating the merits and risks of investing in the AppNet Common
Stock. The aggregate amount of the investments of each Accredited Investor in,
and each Accredited Investor's commitments to, all similar investments that are
illiquid is reasonable in relation to such Accredited Investor's net worth.
(d) Each Accredited Investor hereby represents that such Accredited
Investor is a resident of the jurisdiction next to his or her name on SCHEDULE
3.30. Each foreign Accredited Investor is either resident of or domiciled in the
jurisdiction next to his or her name on SCHEDULE 3.30. No Accredited Investor
has any present intention of becoming a resident of any other state or
jurisdiction.
(e) EDC has previously provided AppNet with SCHEDULE 3.30(e) (in a
form reasonably satisfactory to AppNet) containing the name of each Stockholder
who is an "Accredited Investor" as such term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act in order to qualify for the purchase
of the AppNet Common Stock (individually an "Accredited Investor," and
collectively, the "Accredited Investors"). Any information which each Accredited
Investor has heretofore furnished to AppNet with respect to such Accredited
Investor is correct and complete as of the date of this Agreement.
3.31. UNACCREDITED INVESTORS; INVESTMENT INTENT.
(a) Each Unaccredited Investor (as defined in Section 3.31(e)) or his
Purchaser Representative (as defined in Rule 501(h) of Regulation D promulgated
under the 1933 Act) has received and reviewed the documents delivered pursuant
to Rule 506 and 502 of Regulation D of the 1933 Act and accompanying materials
sent by AppNet (the "Private Placement Materials") and evaluated the risks of
investing in the AppNet Common Stock, and has determined that the AppNet Common
Stock is a suitable investment for such Unaccredited Investor. EACH UNACCREDITED
INVESTOR, EITHER ALONE OR THROUGH HIS PURCHASER REPRESENTATIVE, HAS DETERMINED
THAT SUCH UNACCREDITED INVESTOR CAN BEAR THE ECONOMIC RISK OF THIS INVESTMENT
AND CAN AFFORD A COMPLETE LOSS OF SUCH UNACCREDITED INVESTOR'S INVESTMENT. In
evaluating the suitability of an investment in the AppNet Common Stock, each
Unaccredited Investor acknowledges that AppNet has, in addition to the Private
Placement Materials, made available to him, during the course of this
transaction and prior to the delivery of the AppNet Common
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Stock, the opportunity to ask questions of and receive answers from any of the
officers of AppNet concerning the terms and conditions of the AppNet Common
Stock, and to obtain any documents or additional information necessary to verify
the information provided to each Unaccredited Investor or otherwise relative to
the financial data and business of AppNet, to the extent that AppNet possessed
such information or could acquire it without unreasonable effort or expense, and
all such questions, if asked, have been answered satisfactorily and all such
documents, if examined, have been found to be fully satisfactory. Each
Unaccredited Investor has delivered to AppNet an executed Shareholder's
Questionnaire as well as a Confidential Investor Questionnaire in the form
attached hereto as Exhibit C.
(b) Each Unaccredited Investor understands, either alone or through
his Purchaser Representative, and acknowledges that (i) such Unaccredited
Investor must bear the economic risk of such Unaccredited Investor's investment
in the AppNet Common Stock; (ii) the shares of AppNet Common Stock being
delivered hereunder have not been registered under the 1933 Act, any state
securities laws or the laws of any foreign jurisdiction and are being offered
and sold in reliance upon exemptions provided in the 1933 Act and state
securities laws for transactions not involving any public offering and,
therefore, cannot be resold or transferred unless they are subsequently
registered under the 1933 Act and applicable state laws or unless an exemption
from such registration is available; (iii) such Unaccredited Investor is
purchasing the AppNet Common Stock for investment purposes only for such
Unaccredited Investor's own account and not with any view toward a distribution
thereof; and (iv) no Unaccredited Investor has any contract, undertaking,
agreement or arrangement with any person to sell, transfer or pledge to such
person or anyone else any of the AppNet Common Stock which such Unaccredited
Investor hereby subscribes to purchase or any part thereof, and no Unaccredited
Investor has any present plans to enter into any such contract, undertaking,
agreement or arrangement.
(c) Each Unaccredited Investor, either alone or with his Purchaser
Representative, is knowledgeable and experienced in evaluating investments and
experienced in financial and business matters, and is capable, either alone or
with his Purchaser Representative, of evaluating the merits and risks of
investing in the AppNet Common Stock. The aggregate amount of the investments of
each Unaccredited Investor in, and each Unaccredited Investor's commitments to,
all similar investments that are illiquid is reasonable in relation to such
Unaccredited Investor's net worth.
(d) Each Unaccredited Investor hereby represents that such
Unaccredited Investor is a resident of the jurisdiction next to his or her name
on SCHEDULE 3.31. Each foreign Unaccredited Investor is either resident of or
domiciled in the jurisdiction next to his or her name on SCHEDULE 3.31. No
Unaccredited Investor has any present intention of becoming a resident of any
other state or jurisdiction.
(e) EDC has previously provided AppNet with SCHEDULE 3.31(e) (in a
form reasonably satisfactory to AppNet) containing the name of each Stockholder
(individually an "Unaccredited Investor," and collectively, the "Unaccredited
Investors") who is NOT an "Accredited Investor" as such term is defined in Rule
501 of Regulation D promulgated under the 1933 Act for the purposes of
purchasing the AppNet Common Stock. Any information
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which each Unaccredited Investor has heretofore furnished to AppNet with respect
to such Unaccredited Investor is correct and complete as of the date of this
Agreement.
3.32. PREDECESSOR STATUS; ETC. SCHEDULE 3.32 sets forth a listing of all
legal names, trade names, fictitious names or other names (including, without
limitation, any names of divisions or operations) of the Companies and all of
its predecessor companies during the five-year period immediately preceding the
Closing, including without limitation the names of any entities from whom the
Companies have acquired material assets. During the five-year period immediately
preceding the Closing, the Companies have operated only under the names set
forth on SCHEDULE 3.32 in the jurisdiction or jurisdictions set forth on
SCHEDULE 3.32 and has not been a subsidiary or division of another corporation
or a part of an acquisition which was later rescinded.
3.33. CONTINUITY OF BUSINESS ENTERPRISE. The Company holds substantially
all (within the meaning of Section 368(a)(2)(D) of the Code) of its assets, so
that as a result of the Merger (without regard to an events occurring after the
Merger), Newco will be treated as having acquired substantially all of the
Company's assets. For this purpose, assets of the Company which have been used
to pay reorganization expenses and paid by the Company to shareholders who
receive property other than AppNet Common Stock in the Merger, and all assets
transferred by the Company as distributions and in redemptions prior to the
Merger, but in connection therewith, shall be included as assets of the Company
but treated as not having been acquired by Newco. Except as set forth in
SCHEDULE 3.33, the Company has not made and does not intend to make any such
distributions of its assets to persons other than Newco, or redemptions of its
stock, incident to the plan of reorganization of which the Merger is a part.
3.34. LOCATION OF CHIEF EXECUTIVE OFFICES. SCHEDULE 3.34 sets forth the
location of the Company's chief executive offices.
3.35. RELATED PARTY TRANSACTIONS. SCHEDULE 3.35 sets forth all
arrangements, Liabilities, agreements and contracts in effect as of the date
hereof among the Companies and (i) any person or entity who is an officer,
director or Affiliate of the Companies, any relative of any of the foregoing or
any entity of which any of the foregoing is an Affiliate, or (ii) any person or
entity who acquired Company Stock in a private placement.
3.36. COMPLIANCE WITH IMMIGRATION LAWS. The Companies are in compliance
with all applicable local, state, federal and foreign immigration laws (the
"Immigration Laws") with regard to the immigration status of each of their
employees, and each employee has (either directly or through the Companies)
obtained any visas or permits required by such Immigration Laws (individually a
"Foreign Visa" and collectively, "Foreign Visas"). All such Foreign Visas are in
full force and effect. SCHEDULE 3.36 sets forth the names of all employees who
hold such Foreign Visas, as well as the name of the Foreign Visa which each such
employee holds.
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4. REPRESENTATIONS OF APPNET AND NEWCO
To induce the Company and the Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, each of AppNet and Newco
represents and warrants to the Company and the Stockholders as follows:
4.1. DUE ORGANIZATION. Each of AppNet and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted. Copies of the Certificate of Incorporation and the Bylaws, each as
amended, of AppNet and Newco (collectively, the "AppNet Charter Documents") have
been made available to the Company. Neither AppNet nor Newco is in violation of
any AppNet Charter Document.
4.2. AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of AppNet
and Newco executing this Agreement have all requisite corporate power and
authority to enter into and bind AppNet and Newco to the terms of this
Agreement. AppNet and Newco have the full legal right, power and corporate
authority to enter into this Agreement and the transactions contemplated hereby.
As of the Closing Date, the execution and delivery of this Agreement by AppNet
and Newco and the performance by each of AppNet and Newco of the transactions
contemplated herein have been duly and validly authorized by the respective
Boards of Directors of AppNet and Newco, and this Agreement has been duly and
validly authorized by all necessary corporate action. This Agreement is a legal,
valid and binding obligation of each of AppNet and Newco enforceable in
accordance with its terms.
4.3. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the AppNet
Charter Documents;
(b) subject to compliance with any agreements between AppNet and its
lenders, conflict with, or result in a default (or would constitute a default
but for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which either AppNet or Newco is a party, or
result in the creation or imposition of any lien, charge or encumbrance on any
of AppNet's or Newco's properties pursuant to (i) any law or regulation to which
either AppNet or Newco or any of their respective property is subject, or (ii)
any judgment, order or decree to which AppNet or Newco is bound or any of their
respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of AppNet or Newco;
or
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(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which AppNet or Newco is subject, or by which AppNet or Newco is
bound, (including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
4.4. CAPITALIZATION AND STOCK OWNERSHIP . The authorized capital stock of
AppNet consists of 75,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. 33,934,000 shares of AppNet Common Stock and no shares of
Preferred Stock were outstanding on February 29, 2000. The authorized capital
stock of Newco consists of 1,000 shares of Common Stock, of which 1,000 shares
are outstanding. All of the issued and outstanding shares of Newco are owned
beneficially, and of record by AppNet. All of the shares of AppNet Common Stock
to be issued to the Stockholders in accordance herewith will be offered, issued,
sold and delivered by AppNet in compliance with all applicable state and federal
laws concerning the issuance of securities and none of such shares was or will
be issued in violation of the preemptive rights of any stockholder of AppNet.
5. COVENANTS
5.1. TAX MATTERS.
(a) The following provisions shall govern the allocation of
responsibility as between the Company, on the one hand, and the Stockholders, on
the other, for certain tax matters following the Closing Date:
(i) The Stockholders shall prepare or cause to be prepared and
file or cause to be filed, within the time and in the manner provided by law,
all Tax Returns of the Company for all periods ending on or before the Closing
Date that are due after the Closing Date. The Stockholders shall pay to the
Surviving Corporation on or before the due date of such Tax Returns the amount
of all Taxes shown as due on such Tax Returns to the extent that such Taxes are
not reflected in the current liability accruals for Taxes (excluding reserves
for deferred Taxes) shown on the Company's books and records as of the Closing
Date. Such Tax Returns shall be prepared and filed in accordance with applicable
law and in a manner consistent with past practices and shall be subject to
review and approval by AppNet. To the extent reasonably requested by the
Stockholders or required by law, AppNet and the Surviving Corporation shall
participate in the filing of any Tax Returns filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date. The Stockholders
shall pay to the Surviving Corporation within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Company's books and records as of the Closing Date. For purposes of this
Section 5.1, in the case of any Taxes that are imposed on a periodic basis and
are payable for a taxable period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such taxable
period ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or
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related to income or receipts, be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire taxable period, and (y)
in the case of any Tax based upon or related to income or receipts, be deemed
equal to the amount which would be payable if the relevant taxable period ended
on the Closing Date. Any credits relating to a taxable period that begins before
and ends after the Closing Date shall be taken into account as though the
relevant taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Surviving Corporation.
(iii) AppNet and the Surviving Corporation, on one hand, and the
Stockholders, on the other hand, shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns pursuant
to this Section 5.1 and any audit, litigation or other proceeding with respect
to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating to Tax matters pertinent to
the Company that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof.
(iv) The Stockholders shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from or
relating to the transactions contemplated by this Agreement, and the
Stockholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
AppNet and the Surviving Corporation will join in the execution of any such Tax
Returns and other documentation.
(b) The Company shall, prior to the Closing, maintain its status as a
C Corporation for federal and state income tax purposes.
5.2. ACCOUNTS RECEIVABLE. In the event that all Accounts Receivable, as of
the Effective Date (whether billed or unbilled), are not collected in full (net
of reserves specified in Section 3.14) within one hundred twenty (120) days
after the Closing then, at the request of the Surviving Corporation, the
Stockholders shall pay (based on their percentage ownership of the Company
immediately prior to the Effective Time) the Surviving Corporation an amount
equal to the Accounts Receivable not so collected, and upon receipt of such
payment the Surviving Corporation shall assign to the Stockholders making the
payment all of their rights with respect to the uncollected Accounts Receivable
giving rise to the payment and shall also thereafter promptly remit any excess
collections received by it with respect to such assigned Accounts Receivable.
Upon the written request of the Surviving Corporation, the Stockholders shall
provide it with a status report concerning the collection of assigned Accounts
Receivable.
5.3. EMPLOYEE BENEFIT PLANS. If reasonably requested by AppNet, the Company
shall terminate any Benefit Plan substantially contemporaneously with the
Closing.
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5.4. RELATED PARTY AGREEMENTS. The Company and/or the Stockholders, as the
case may be, shall terminate any Related Party Agreements which AppNet requests
the Company or Stockholders to terminate. Notwithstanding the foregoing, with
respect to any Benefit Plan that is not terminated or merged into an existing
AppNet plan or benefit arrangement substantially contemporaneously with the
Closing, the Stockholders shall cooperate (and shall use their reasonable
efforts to cause the officers and employees of the Company that are responsible
for administering any such Benefit Plan to cooperate) with AppNet on and after
the Closing Date in continuing to administer and maintain such Benefit Plan in
accordance with its constituent documents and with all applicable provisions of
the Code, ERISA and other laws, including applicable federal and state
securities laws, until such time as such Benefit Plan is terminated or merged
into an AppNet plan or benefit arrangement.
5.5. COOPERATION.
(a) The Company, the Stockholders, AppNet and Newco shall each deliver
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such instruments as the other
may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by AppNet's
independent public accountants (in connection with such accountant's audit of
the Company) or the Nasdaq National Market.
(b) The Stockholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with AppNet on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby.
(d) The Company, the Stockholders and AppNet shall file all notices
and other information and documents required under the HSR Act (as defined in
Section 3.3) as promptly as practicable after the date hereof.
5.6. ACCESS TO INFORMATION; CONFIDENTIALITY; PUBLIC DISCLOSURE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AppNet
access to (i) all of the sites, properties, books and records of the Company and
(ii) such additional financial and operating data and other information as to
the business and properties of the Company as AppNet may from time to time
reasonably request, including without limitation, access upon reasonable request
to the Company's employees, customers, vendors, suppliers and creditors for due
diligence inquiry. No information or knowledge obtained in any investigation
pursuant to this
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Section 5.6 shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
(b) Each of AppNet and Newco, on the one hand, and the Companies and
the Stockholders, on the other hand, recognizes and acknowledges that it had in
the past, currently has, and in the future may possibly have, access to certain
confidential information of each other, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the each other's businesses. Each of AppNet and Newco, on the one
hand, and the Companies and the Stockholders, on the other hand, agree that,
unless there is a Closing, they will not disclose confidential information with
respect to each other to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to authorized
representatives of the other party and to counsel and other advisers, PROVIDED
that such advisers (other than counsel) agree to the confidentiality provisions
of this Section 5.6(b), unless (i) such information becomes known to the public
generally through no fault of the other party, (ii) disclosure is required by
law or the order of any governmental authority under color of law, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, PROVIDED,
that prior to disclosing any information pursuant to clause (i), (ii) or (iii)
above, the party threatening to disclose any information shall give prior
written notice thereof to the other party and provide the other party with the
opportunity to contest such disclosure and shall cooperate with efforts to
prevent such disclosure.
(c) Prior to the Effective Time, neither the Company nor any
Stockholder shall make any disclosure (whether or not in response to an
inquiry), directly or indirectly, of the subject matter of this Agreement unless
previously approved by AppNet in writing. AppNet agrees to keep the Company and
the Stockholders apprised in advance of any disclosure of the subject matter of
this Agreement by AppNet prior to the Effective Time.
(d) After the Effective Time, neither the Company nor any Stockholder
shall make any disclosure, directly or indirectly (whether or not in response to
an inquiry), of the subject matter of this Agreement unless such disclosure is
previously approved by AppNet in writing.
5.7. CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and the
Effective Time, each Company will (except as requested or agreed by AppNet):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
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(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and key employees
and maintain its relationships with any and all suppliers, vendors, customers,
creditors, parents and subsidiaries and others having business relations with
it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments; and
(h) maintain present salaries, commissions and compensation levels for
all officers, directors, employees, agents, representatives and independent
contractors, except for ordinary and customary bonuses and salary increases for
employees (other than employees who are also Stockholders) in accordance with
past practice.
5.8. PROHIBITED ACTIVITIES. Between the date hereof and the Effective Time,
no Company will, without the prior written consent of AppNet:
(a) make any change in its Charter Documents, or authorize or propose
the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities;
(c) declare or pay any dividend, or make any distribution (whether in
cash, stock or property) in respect of its stock whether now or hereafter
outstanding, 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 its capital stock, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice and
then, not in an amount in excess of $10,000, including contracts to provide
services to customers;
(e) make any loans or advances to any officer, director, Stockholder,
employee, agent, representative or independent contractor;
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(f) create or assume any mortgage, pledge or other lien or encumbrance
upon any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to such
Company;
(i) merge or consolidate or agree to merge or consolidate with or into
any other corporation or acquire all or substantially all of the stock of the
business or assets of any other person, corporation, or business organization;
(j) waive any material rights or claims of such Company, provided that
such Company may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material agreement,
lease, permit, license or other right;
(l) enter into any transaction, including the transfer of any assets
or sums of the Company (i) that is not negotiated at arm's length with a third
party not affiliated with such Company or any officer, director, stockholder,
parent or subsidiary of such Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(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 consistent with past practice;
(o) effect any additions to its property or any purchases of machinery
or equipment, except for normal maintenance and replacements;
(p) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated Tax Returns, payroll Tax Returns or sales Tax
Returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of AppNet;
(q) except in the ordinary course of business, make any significant
changes in personnel;
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(r) enter into any contract, agreement, binding obligation or
commitments which, by its terms, may not be fully performed within a period of
twelve (12) months from the execution thereof;
(s) adopt or amend any Benefit Plan, or the grant any severance or
termination pay;
(t) waive any rights of substantial value without adequate
consideration; or
(u) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 5.8(a) through (t) above, or any action which
would make any of the representations and warranties of the Company and the
Stockholders contained in this Agreement untrue or result in any of the
conditions set forth in Sections 6 and 7 not being satisfied.
5.9. EXCLUSIVITY. None of the Stockholders, the Company, or any agent,
officer, director or any representative of the Company or any Stockholder will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing or the termination of this Agreement in
accordance with its terms, directly or indirectly: (a) solicit, encourage or
initiate the submission of proposals or offers from any person for, (b)
participate in any discussions pertaining to, or (c) furnish any information to
any person other than AppNet relating to, any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, any of the
Companies or a merger, consolidation or business combination of any of the
Companies. In addition to the foregoing, if the Companies or any Stockholder
receives any unsolicited offer or proposal, or has actual knowledge of any
unsolicited offer or proposal, relating to any of the above, the Companies or
such Stockholder shall immediately notify AppNet thereof, including the identity
of the party making such offer or proposal and the specific terms of such offer
or proposal.
5.10. NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give prompt
notice to the other parties hereto of (a) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of it contained herein to be untrue or inaccurate in
any material respect at or prior to the Closing and (b) any material failure of
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such party hereunder. The delivery of any notice
pursuant to this Section 5.10 shall not, without the express written consent of
the other parties be deemed to (x) modify the representations or warranties
hereunder of the party delivering such notice, (y) modify the conditions set
forth in Sections 6 and 7, or (z) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.11. NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by AppNet, and shall provide AppNet with proof that any required notice has been
sent.
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5.12. SALES OF APPNET COMMON STOCK.
(a) ALLOCATION OF APPNET COMMON STOCK. The Stock Consideration payable
to the Stockholders pursuant to this Agreement shall be divided into four (4)
categories consisting of: (i) the Guaranteed Shares and two hundred thousand
(200,000) of the Additional Shares (together, "Registration Shares"), (ii) one
hundred fifty thousand (150,000) of the Additional Shares (the "One Year
Shares"), (iii) sixty-three thousand (63,000) of the Additional Shares (the "Two
Year Shares") and (iv) the Pledged Shares.
(b) (i) OBLIGATION TO FILE REGISTRATION STATEMENT. No later than
ninety (90) calendar days following the Closing Date, AppNet shall prepare and
file with the Securities and Exchange Commission (the "SEC") a registration
statement under the 1933 Act (the "Registration Statement") covering all of the
Registration Shares. The Registration Statement shall be on Form S-3 (except
that if AppNet is not then eligible to register for resale the Registration
Shares on Form S-3, the Registration Statement shall be on Form S-1 or another
appropriate form in accordance herewith selected by AppNet). AppNet shall use
its commercially reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, PROVIDED, HOWEVER, that AppNet will use its commercially
reasonable efforts to ensure that the date of effectiveness is not during a
period in which AppNet and its affiliates are prohibited from trading their
AppNet Common Stock under AppNet's current insider trading policy. Subject to
Section 5.12(b)(ii), AppNet shall use its commercially reasonable efforts to
keep such Registration Statement continuously effective under the Securities Act
until the earliest of (i) the date which is one hundred eighty (180) days after
the date that such Registration Statement is declared effective by the SEC, (ii)
the date when all Registration Shares have been sold or (iii) the consummation
of a Change of Control (as defined in Section 5.14). AppNet will promptly notify
the Stockholders' Representative of the effectiveness of the Registration
Statement. AppNet, may, at its option, register additional shares of AppNet
Common Stock on the Registration Statement on behalf of other shareholders of
AppNet.
(ii) EFFECTIVENESS OF REGISTRATION STATEMENT. Notwithstanding,
Section 5.12(b)(i) above, if at any time or from time to time after the SEC
declares the Registration Statement effective, the Board of Directors of AppNet,
in its good faith judgment, determines that any registration of the Registration
Shares should not be continued because it could adversely effect (including
requiring earlier disclosure of such event) any underwritten offering by AppNet,
any merger, acquisition or similar business combination, or any other
significant corporate event to which AppNet may be a party (a "Valid Business
Reason"), AppNet may cause the Registration Statement to be withdrawn and its
effectiveness terminated, or may postpone amending or supplementing the
Registration Statement, until such valid Business Reason no longer exists, but
in no event (unless due to circumstances beyond its control) may AppNet do so
for more than a total of sixty (60) days in the aggregate during the time as the
Registration Statement is to remain effective pursuant to Section 5.12(b)(i)
above. AppNet shall give written notice to the Stockholders' Representative of
its determination to postpone or withdraw the Registration Statement pursuant to
this Section 5.12(b)(ii) promptly after its determination.
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(iii) Each Stockholder agrees that, upon receipt of any notice by
the Stockholders' Representative from AppNet that AppNet has determined to
withdraw or postpone amending or supplementing the Registration Statement
pursuant to Section 5.12(b)(ii) above, such Stockholder will discontinue any
disposition of his Registration Shares pursuant to the Registration Statement as
of the date set forth in such notice. If so directed by AppNet, the
Stockholders' will deliver to the Stockholders' Representative, and the
Stockholders' Representative will deliver to AppNet all copies then in each
Stockholder's possession of the prospectus covering such Registration Shares
that was in effect at the time of receipt of such notice.
(c) GUARANTEED SHARES. In the event that the Closing Price per share
of the Guaranteed Shares on the date that the Registration Statement is first
declared effective by the SEC ("Registration Price Per Share") is less than
Twenty-Three Dollars ($23) (the "Guaranteed Share Price"), AppNet shall deliver
certified funds to the Stockholders' Representative, within three (3) business
days after the date that the Registration Statement is declared effective by the
SEC, in an amount equal to the difference between the Guaranteed Share Price and
the Registration Price Per Share, multiplied by the number of Guaranteed Shares
actually delivered at Closing. In the event that the Registration Price Per
Share is equal to or greater than the Guaranteed Share Price, AppNet shall not
be required to deliver any such additional amounts. For purposes of this
Agreement, "Closing Price" shall mean the closing sale price of a share of
AppNet Common Stock as reported on the Nasdaq National Market (as reported in
The Wall Street Journal or, if not reported thereby, another authoritative
source as chosen by AppNet).
(d) REGISTRATION EXPENSES. AppNet shall pay all Registration Expenses
(as hereafter defined) in connection with the Registration Statement, and each
Stockholder shall pay all Selling Expenses (as hereafter defined) and other
expenses that are not Registration Expenses relating to the Registration Shares
resold by him or her. For purposes of this Section 5.12(d), "Registration
Expenses" shall mean all expenses, except as otherwise stated below, incurred by
AppNet in complying with Section 5.12(b), including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for AppNet, blue sky fees and expenses and the
expense of any special audits required in connection with the Registration
Statement. For purposes of this Section 5.12(d), "Selling Expenses" shall mean
all selling discounts, commissions and stock transfer or other taxes applicable
to the Registration Shares, all fees and disbursements of counsel for any
Stockholder, all fees and disbursements of any other experts retained by any
Stockholder in connection with the Registration Statement and all out-of-pocket
costs and expenses of any Stockholder in connection with the Registration
Statement.
(e) INFORMATION BY STOCKHOLDERS. Each Stockholder shall furnish to
AppNet such information regarding such Stockholder and the distribution proposed
thereby as AppNet may reasonably request in connection with any registration,
qualification or compliance referred to in this Section 5.12, in order to
facilitate compliance, by AppNet, with its obligations under all applicable
securities and other laws and to ensure that the Registration Statement conforms
to the applicable requirements of the 1933 Act and the rules and regulations
thereunder. Each Stockholder covenants that it will promptly notify AppNet of
any changes in the information set forth in the Registration Statement or
otherwise provided by such Stockholder to AppNet
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regarding such Stockholder or such Stockholder's plan of distribution as a
result of which the Registration Statement or any prospectus relating to the
Registration Shares contains or would contain an untrue statement of a material
fact regarding such Stockholder or its intended method of distribution of such
Registration Shares or omits to state any material fact regarding such
Stockholder or its intended method of distribution of such Registration Shares
required to be stated therein or necessary to make the statements therein, not
misleading.
(f) INDEMNIFICATION AND CONTRIBUTION.
(i) AppNet agrees to indemnify and hold harmless each Stockholder
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which such Stockholder may become subject
(under the 1933 Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement, alleged untrue statement, omission or alleged
omission of a material fact in the Registration Statement, any prospectus
included in the Registration Statement, or any amendment or supplement to the
Registration Statement or any such prospectus, or any violation or alleged
violation by AppNet of the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), any state law, rule or regulation promulgated
thereunder, and AppNet will reimburse such Stockholder for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; PROVIDED, HOWEVER, that the indemnity
contained in this Section 5.12(f)(i) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of AppNet (which consent shall not be
unreasonably withheld), and that AppNet shall not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of, or is based
upon (A) an untrue statement or alleged untrue statement made in such
Registration Statement in reliance upon and in conformity with written
information furnished to AppNet by such Stockholder for use in preparation of
the Registration Statement, (B) the failure of such Stockholder to comply with
any of the covenants and agreements contained in this Section 5.12, or (C) any
untrue statement in any prospectus that is corrected in any subsequent
prospectus that was delivered to the Stockholder prior to the pertinent sale or
sales by the Stockholder.
(ii) Each Stockholder, severally and not jointly, agrees to
indemnify and hold harmless AppNet from and against any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) to which AppNet
may become subject (under the 1933 Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon (A) an untrue statement, alleged untrue
statement, omission or alleged omission of a material fact in the Registration
Statement, any prospectus included in the Registration Statement, or any
amendment or supplement to the Registration Statement or any such prospectus in
reliance upon and in conformity with written information furnished to AppNet by
such Stockholder for use in preparation of the Registration Statement, or any
violation or alleged violation by Stockholder of the 1933 Act, the 1934 Act, any
state law, rule or regulation promulgated thereunder and each Stockholder,
severally and not jointly, will reimburse AppNet for any legal and other
expenses incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; PROVIDED, HOWEVER, the indemnity contained in this
Section 5.12(f)(ii) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of
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Stockholder (which consent shall not be unreasonably withheld), and FURTHER
PROVIDED that no Stockholder shall be liable in any such case (A) for any untrue
statement included in any prospectus which statement has been corrected in a
writing delivered to AppNet at least four (4) business days before the sale from
which such loss arose or (B) the failure of AppNet to comply with any of the
covenants and agreements contained in Section 5.12.
(iii) Promptly after receipt by any indemnified person under
subsections (i) or (ii) above of a notice of a claim or the beginning of any
action in respect of which indemnity is to be sought against an indemnifying
person pursuant to this Section 5.12(f), such indemnified person shall notify
the indemnifying person in writing of such claim or of the commencement of such
action (provided, however, that no failure to provide such notice shall relieve
any indemnifying person of any liability hereunder except to the extent that
such indemnifying person is prejudiced thereby) and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; PROVIDED,
HOWEVER, that, if the indemnifying person shall propose that the same counsel
represent it and the indemnified person, and if counsel for the indemnified
person shall reasonably have concluded that there is an actual conflict of
interest posed by the representation proposed by the indemnifying person, the
indemnified person shall be entitled to retain its own counsel reasonably
satisfactory to the indemnifying person at the expense of such indemnifying
person; PROVIDED FURTHER, HOWEVER, that if more than one indemnified person
makes a claim against an indemnifying person based on substantially similar
facts, the indemnifying person shall not be responsible for the fees of more
than one counsel for all indemnified persons whose claims are based on
substantially similar facts.
(iv) If the indemnification provided for in this Section 5.12(f)
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (i) or (ii) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof), in such proportion as is
appropriate to reflect the relative fault of each such party, as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by AppNet on the one hand or a
Stockholder on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
AppNet and the Stockholders agree that it would not be just and equitable if
contribution pursuant to this Section 5.12(f) were determined by any method of
allocation which does not take account of the equitable considerations referred
to above in this Section 5.12(f)(iv). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, or liabilities (or
actions in respect thereof) referred to above in this Section 5.12(f)(iv) shall
be deemed to include any legal or other expenses reasonably incurred by
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such indemnified party in connection with investigating or defending any such
action, proceeding or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(v) The obligations of AppNet and the Stockholders under this
Section 5.12(f) shall be in addition to any liability which AppNet and the
respective Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each director and officer of AppNet or any Stockholder, and
to each person, if any, who controls AppNet or any Stockholder within the
meaning of the 1933 Act or the 1934 Act.
(g) RESTRICTIONS ON TRANSFER OF REGISTRATION SHARES. No Stockholder
shall, directly or indirectly, offer, sell, contract to sell, pledge, assign or
otherwise transfer or dispose of any of the Registration Shares issued to such
Stockholder in the Merger except (i) pursuant to the Registration Statement (or
another effective registration statement covering the Registration Shares), (ii)
pursuant to Rule 145(d) or Rule 144 under the 1933 Act, as applicable, or (iii)
pursuant to another exemption from registration under the 1933 Act, the
availability of which exemption shall be evidenced by an opinion of counsel, in
form and content satisfactory to AppNet, to the effect that an exemption from
registration is available. Each certificate representing Registration Shares
shall bear substantially the following legend (in addition to any legends
required under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), APPLIES AND WHICH WAS NOT REGISTERED
UNDER THE ACT OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SHARES
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AND UNLESS (1) COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (2) IN ACCORDANCE WITH
(i) RULE 145(d) UNDER THE ACT (IN THE CASE OF SHARES ISSUED TO AN
INDIVIDUAL WHO IS NOT AN AFFILIATE OF THE ISSUER) OR (ii) RULE 144
UNDER THE ACT (IN THE CASE OF AN INDIVIDUAL WHO IS AN AFFILIATE OF THE
ISSUER) OR (3) IN ACCORDANCE WITH A LEGAL OPINION SATISFACTORY TO THE
ISSUER THAT SUCH TRANSFER OR SALE IS OTHERWISE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
The legend contained in this Section 5.12(g) shall be removed from a certificate
representing Registration Shares in connection with any sale in compliance with
the terms of this Agreement and pursuant to the Registration Statement (or
another registration statement covering the Registration Shares) or pursuant to
Rule 145(d) or Rule 144, or another exemption from registration under the 1933
Act, if accompanied by a legal opinion as contemplated by such legend, but shall
not be removed in any other circumstance without AppNet's prior written
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consent (which consent shall not be unreasonably withheld and shall be granted
if such legend is no longer appropriate).
(h) RESTRICTIONS ON TRANSFER OF ONE YEAR SHARES. Subject to Section
5.14, during the period commencing on the Closing Date and ending on date that
is three hundred sixty-four (364) days after the Closing Date, no Stockholder
shall, directly or indirectly, offer, sell, pledge, assign or otherwise transfer
or dispose of any of the One Year Shares issued to such Stockholder in the
Merger. After the date that is three hundred sixty-four days (364) after of the
Closing Date, any Stockholder may dispose of all or any portion of the One Year
Shares issued thereto pursuant to (i) an effective registration statement
covering the One Year Shares, (ii) Rule 145(d) or Rule 144 under the 1933 Act,
as applicable, or (iii) another exemption from registration under the 1933 Act,
the availability of which exemption shall be evidenced by an opinion of counsel,
in form and content satisfactory to AppNet, to the effect that an exemption from
registration is available.
Each certificate representing One Year Shares shall bear substantially the
legend set out in Section 5.12(g) above and, in addition, shall bear the
following legend (in addition to any legends required under applicable
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CONTRACTUAL HOLDING PERIOD AND MAY NOT BE SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED OR DISPOSED OF DURING THE PERIOD COMMENCING ON
THE CLOSING OF THE TRANSACTIONS CONTEMPLATED IN THAT CERTAIN AGREEMENT
AND PLAN OF REORGANIZATION, DATED AS OF MAY 16, 2000, AMONG THE ISSUER
AND THE STOCKHOLDERS OF EDGAR DUNN & COMPANY, A DELAWARE CORPORATION,
AND ENDING ON THE DATE THAT IS THREE HUNDRED SIXTY-FOUR (364) DAYS
AFTER THE CLOSING OF SUCH TRANSACTION. PRIOR TO THE EXPIRATION OF SUCH
THREE HUNDRED SIXTY-FOUR (364) DAY HOLDING PERIOD, THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, PLEDGE,
ASSIGNMENT OR OTHER TRANSFER OR DISPOSITION OF ANY OF THE SHARES
REPRESENTED HEREBY. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING PERIOD
HAS EXPIRED.
The legend contained in this Section 5.12(h) shall be removed from a certificate
representing One Year Shares in connection with any sale in compliance with the
terms of this Agreement and pursuant an effective registration statement
covering the One Year Shares, Rule 145(d) or Rule 144, or another exemption from
registration under the 1933 Act, if accompanied by a legal opinion as
contemplated by the legend set out in Section 5.12(g), and upon the written
request of the holder of the certificate upon expiration of the three hundred
sixty-four (364) day holding period, but shall not be removed in any other
circumstance without AppNet's prior written
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consent (which consent shall not be unreasonably withheld and shall be granted
if such legend is no longer appropriate).
(i) RESTRICTIONS ON TRANSFER OF TWO YEAR SHARES AND PLEDGED
SHARES. Subject to Section 5.14 and except as required pursuant to the Pledge
Agreement, during the period commencing on the Closing Date and ending on the
date that is seven hundred twenty-nine (729) days after the Closing Date, no
Stockholder shall, directly or indirectly, offer, sell, pledge, assign or
otherwise transfer or dispose of any of the Two Year Shares or the Pledged
Shares issued to such Stockholder in the Merger. After the date which is seven
hundred twenty-nine (729) days after the Closing Date, any Stockholder may
dispose of all or any portion of the Two Year Shares or the Pledged Shares
pursuant to (i) an effective registration statement covering the Two Year Shares
or the Pledged Shares, as the case may be, (ii) Rule 145(d) or Rule 144 under
the 1933 Act, as applicable, or (iii) another exemption from registration under
the 1933 Act, the availability of which exemption shall be evidenced by an
opinion of counsel, in form and content satisfactory to AppNet, to the effect
that an exemption from registration is available.
Each certificate representing Two Year Shares or Pledged Shares shall bear
substantially the legend set out in Section 5.12(g) above and, in addition,
shall bear the following legend (in addition to any legends required under
applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CONTRACTUAL HOLDING PERIOD AND MAY NOT BE SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED OR DISPOSED OF DURING THE PERIOD COMMENCING ON
THE CLOSING OF THE TRANSACTIONS CONTEMPLATED IN THAT CERTAIN AGREEMENT
AND PLAN OF REORGANIZATION, DATED AS OF MAY 16, 2000, AMONG THE ISSUER
AND THE STOCKHOLDERS OF EDGAR DUNN & COMPANY, A DELAWARE CORPORATION,
AND ENDING ON THE DATE THAT IS SEVEN HUNDRED TWENTY-NINE (729) DAYS
AFTER THE CLOSING OF SUCH TRANSACTION. PRIOR TO THE EXPIRATION OF SUCH
SEVEN HUNDRED TWENTY-NINE (729) DAY HOLDING PERIOD, THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, PLEDGE,
ASSIGNMENT OR OTHER TRANSFER OR DISPOSITION OF ANY OF THE SHARES
REPRESENTED HEREBY. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING PERIOD
HAS EXPIRED.
The legend contained in this Section 5.12(i) shall be removed from a certificate
representing Two Year Shares or Pledged Shares in connection with any sale in
compliance with the terms of this Agreement and pursuant an effective
Registration Statement covering the Two Year Shares or Pledged Shares, as the
case may be, Rule 145(d) or Rule 144, or another exemption from registration
under the 1933 Act, if accompanied by a legal opinion as contemplated by the
legend set out in 5.12(g), and upon the written request of the holder of the
certificate upon expiration of
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the seven hundred twenty-nine day holding period, but shall not be removed in
any other circumstance without AppNet's prior written consent (which consent
shall not be unreasonably withheld and shall be granted if such legend is no
longer appropriate).
5.13. STOCK OPTIONS. Within thirty (30) days after the Closing Date, AppNet
shall issue three hundred seven thousand five hundred (307,500) incentive stock
options (the "Options") to EDC's employees and shall work with EDC's Managing
Director to determine a mutually agreeable allocation of such Options to such
employees in accordance with AppNet's policies, authorized and issued under the
terms of AppNet's 1999 Stock Incentive Plan. The Options shall be granted at the
Closing Price on the date of grant of such Options. Notwithstanding anything
contained in this Section 5.13 to the contrary, to the extent that any of the
Options would be allocated to foreign employees of EDC, AppNet may provide such
employees with comparable equity or other incentive compensation in lieu of the
Options, and, in such event, the total number of Options to be issued pursuant
to this Section 5.13 shall be reduced by the amount of Options that would
otherwise have been allocated to such foreign employees.
5.14. CHANGE OF CONTROL. In addition to the rights provided under Sections
5.12(h) and 5.12(i), if there is a Change of Control prior to the date that is
seven hundred twenty-nine (729) days after the Closing Date, subject to
compliance with applicable federal and state securities laws and the Pledge
Agreement, any Stockholder may dispose of his One Year Shares, Two Year Shares
and Pledged Shares in such Change of Control on the same terms and conditions as
any other holder of AppNet Common Stock, PROVIDED, HOWEVER, that if the Change
of Control is structured as (i) an AppNet Merger (as defined below), each
Stockholder shall waive any dissenters rights, appraisal rights or similar
rights in connection with such AppNet Merger and shall vote in favor of such
AppNet Merger and shall take all actions necessary to consummate such AppNet
Merger, or (ii) a sale of assets, each Stockholder shall waive any dissenters
rights, appraisal rights or similar rights in connection with such sale of
assets and shall vote in favor or such sale and any subsequent liquidation of
AppNet or other distribution of the proceeds therefrom. For purposes of this
Agreement, a "Change of Control" shall mean: (i) a merger, consolidation or
reorganization of AppNet (each of which is referred to as an "AppNet Merger"),
whereby the stockholders of record of AppNet, immediately prior to the AppNet
Merger, will, immediately after such AppNet Merger, hold, directly or
indirectly, less than fifty percent (50%) (calculated in terms of value) of the
surviving or acquiring entity; (ii) any other purchase or acquisition of more
than fifty percent (50%) of the outstanding shares of the common stock
(calculated in terms of value) of AppNet; (iii) a sale or exchange of all, or
substantially all, of the assets of AppNet; or (iv) a complete liquidation or
dissolution of AppNet.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF APPNET AND NEWCO
The obligation of AppNet and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
6.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true, correct and complete on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date; all of the terms, covenants, agreements and conditions
of this Agreement to be complied with, performed
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or satisfied by the Company and the Stockholders on or before the Closing Date
shall have been duly complied with, performed or satisfied; and a certificate to
the foregoing effects dated the Closing Date and signed on behalf of the Company
and by each of the Stockholders shall have been delivered to AppNet.
6.2. NO LITIGATION. 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 provision challenging
AppNet's proposed acquisition of the Companies, or limiting or restricting
AppNet's conduct or operation of the business of the Companies (or their own
businesses) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened against AppNet, Newco or the Companies, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the Companies.
6.3. NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes (or adverse development or threat of which the Companies have received
notice) with respect to a prospective material adverse change, event or
occurrence) in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company, taken as a whole, since December 31, 1999; and
AppNet shall have received a certificate signed by each Stockholder dated the
Closing Date to such effect.
6.4. CONSENTS AND APPROVALS. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholders of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated, and no action by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
6.5. OPINION OF COUNSEL. AppNet shall have received an opinion from counsel
to the Company and the Stockholders, dated the Closing Date, in a form
reasonably satisfactory to AppNet.
6.6. CHARTER DOCUMENTS. AppNet shall have received (a) a copy of the
Certificate of Incorporation (or similar charter documents) of the Companies
certified by an appropriate authority in the state of its incorporation and (b)
a copy of the Bylaws of each of the Companies certified by the Secretary of each
Company, and such documents shall be in form and substance reasonably acceptable
to AppNet.
6.7. LENDER APPROVAL. The Merger shall have been approved by AppNet's
lenders.
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6.8. DUE DILIGENCE REVIEW. The Company shall have made such deliveries as
are called for by this Agreement. AppNet shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
6.9. DELIVERY OF CLOSING FINANCIAL CERTIFICATE. AppNet shall have received
a certificate (the "Closing Financial Certificate"), dated as of the Closing
Date, signed on behalf of the Company and by each of the Stockholders, setting
forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the
"Certified Closing Net Worth");
(c) the sales of the Company for the most recent fiscal year preceding
the Closing Date (the "Certified Year-End Sales");
(d) the earnings of the Company before interest and taxes for the most
recent fiscal year preceding the Closing Date and as a percent of sales (the
"Certified Year-End Profits");
(e) a statement that the Company's total outstanding long-term and
short-term indebtedness to banks, the Stockholders, and other financial
institutions and creditors (in each case including the current portions of such
indebtedness, but excluding trade payables and other ordinary course accounts
payable) as of the Closing Date is zero (the "Certified Closing Debt");
PROVIDED, HOWEVER, that if the Certified Closing Net Worth exceeds One Million
Dollars ($1,000,000), the Company may have outstanding debt of like amount
without any reduction to the Merger Consideration; and
(f) a statement that all of the Company financial conditions set forth
in Section 3.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth and the Certified Year-End Profits, the Company shall not take
account of any increase in intangible assets (including, without limitation,
goodwill, franchises and intellectual property) accounted for after December 31,
1999, unless AppNet and the Company otherwise mutually agree.
6.10. FIRPTA COMPLIANCE. Each of the Stockholders shall have delivered to
AppNet a properly executed statement in a form reasonably acceptable to AppNet
for purposes of satisfying AppNet's obligations under Treas. Reg. Section
1.1445-2(b).
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6.11. LOCK-UP AGREEMENT. Each Stockholder shall have entered into a Lock-Up
Agreement in substantially the form attached hereto as Exhibit D (the "Lock-Up
Agreement).
6.12. NO DISSENTING SHARES. There shall be no holders of shares of the
Company who exercise appraisal rights under the DGCL with respect to such shares
(the "Dissenting Shares").
6.13. UNANIMOUS APPROVAL AND EXECUTION BY STOCKHOLDERS. Each Stockholder
shall have executed this Agreement and thus agreed to be bound by all of its
terms, including, but not limited to, all representations, warranties,
indemnification obligations, covenants and all conditions relating to
employment, confidentiality, noncompetition and nonsolicitation set forth
herein.
6.14. PLEDGE AGREEMENT. Each Stockholder and the Stockholders'
Representative shall have executed and delivered to AppNet a Pledge Agreement.
6.15. PURCHASER REPRESENTATIVE. If requested by AppNet, the Company shall
provide a Purchaser Representative, reasonably satisfactory to AppNet, to
represent the Unaccredited Investors and the Company and the Unaccredited
Investors shall have executed such documents and/or certificates reasonably
satisfactory to AppNet to reflect the appointment of such Purchaser
Representative.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY
The obligation of the Stockholders and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
7.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of the
representations and warranties of AppNet and Newco contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the same
effect as though such representations and warranties had been made as of such
date; all of the terms, covenants, agreements and conditions of this Agreement
to be complied with, performed or satisfied by AppNet and Newco on or before the
Closing Date shall have been duly complied with, performed or satisfied; and a
certificate to the foregoing effects dated the Closing Date and signed by the
President or any Vice President of AppNet shall have been delivered to the
Company and the Stockholders.
7.2. NO LITIGATION. 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 provision challenging
AppNet's proposed acquisition of the Company, or limiting or restricting
AppNet's conduct or operation of the business of the Companies (or their own
businesses) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened, against AppNet, Newco or the
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Company, their respective properties or any of their officers or directors, that
could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the AppNet and its
subsidiaries taken as a whole.
7.3. CONSENTS AND APPROVALS. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by AppNet and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action by
the Department of Justice or Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby shall be
pending.
7.4. PLEDGE AGREEMENT. AppNet shall have executed and delivered the Pledge
Agreement.
7.5. OPINION OF COUNSEL. EDC shall have received an opinion from counsel to
the AppNet, dated the Closing Date, in a form reasonably satisfactory to EDC.
7.6. AUTHORIZATION OF ISSUANCE OF OPTIONS. AppNet shall have delivered to
EDC reasonable evidence of authorization by AppNet of the Options to be issued
to EDC's employees under Section 5.13 hereof.
8. INDEMNIFICATION
8.1. GENERAL INDEMNIFICATION.
(a) Each Stockholder, jointly and severally, covenants and agrees to
indemnify, defend, protect and hold harmless AppNet, Newco and the Surviving
Corporation and their respective officers, directors, employees, stockholders,
assigns, successors and affiliates (individually an "AppNet Indemnified Party"
and collectively, "AppNet Indemnified Parties") from, against and in respect of:
(i) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the AppNet Indemnified Parties in connection
with, resulting from or arising out of, directly or indirectly:
(1) any breach of any representation or warranty of the
Stockholders or the Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of any Stockholder or the Company in
connection herewith (PROVIDED, HOWEVER, that notwithstanding any language to the
contrary, the liability of the Stockholders with
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regard to Section 3.4, the Accredited Investors with regard to Section 3.30 and
the Unaccredited Investors with regard to Section 3.31 shall be several and as
to their own representations); or
(2) any nonfulfillment of any covenant or agreement by the
Stockholders or, prior to the Effective Time, the Company, under this Agreement;
or
(3) the business, operations or assets of the Company prior to
the Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or, subject to Section 8.1(a)(i)(4), the Schedules to
this Agreement; or
(4) all matters disclosed on Schedules 3.21 (Environmental and
Safety Matters), 3.23 (Taxes), 3.24 (Litigation), 3.25 (Compliance with Laws)
and any outstanding liabilities or obligations of the Companies as of the
Closing Date under EDC's tax equalization policy whether or not disclosed on
Schedule 3.11(a)(iv) (Liabilities and Obligations, etc.) or Schedule 3.23; or
(5) any loss of tax-free reorganization status for the
transactions contemplated by this Agreement caused by, directly or indirectly,
the actions or omissions of the Stockholders; or
(6) any information or representation regarding the Companies
provided in the Private Placement Materials; and
(ii) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 8.1(a).
(b) AppNet covenants and agrees to indemnify, defend, protect and hold
harmless the Stockholders and their assigns (individually, an "EDC Indemnified
Party" and collectively, "EDC Indemnified Parties") from, against and in respect
of all Damages suffered, sustained, incurred or paid by an EDC Indemnified
Party, in any action or proceeding between the EDC Indemnified Party and AppNet,
or the EDC Indemnified Party and a third party, in connection with, resulting
from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of AppNet set
forth in this Agreement or any certificate delivered by AppNet in connection
herewith;
(ii) any nonfulfillment of any covenant or agreement by AppNet
under this Agreement; and
(iii) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 8.1(b).
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8.2. LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 8.1
unless the aggregate amount of Damages exceeds Twenty-Five Thousand Dollars
($25,000) (the "Indemnification Threshold") (at which point the Stockholders or
AppNet, as the case may be, shall become liable for the aggregate Damages, not
just amounts in excess of Twenty-Five Thousand Dollars ($25,000); PROVIDED,
HOWEVER, that the Indemnification Threshold shall not apply to:
(i) adjustments to the Merger Consideration as set forth in
Sections 1.3 and 1.4, or
(ii) EDC's tax equalization policy disclosed on Schedule
3.11(a)(iv)(Liabilities and Obligations, etc.) and the matters disclosed in
Schedule 3.23 (Taxes);
(b) the aggregate amount of the Stockholders' or AppNet's liability
under this Section 8 shall not exceed the Merger Consideration;
(c) without limiting the generality of the foregoing, there shall be
no claim for indemnity in respect of Damages to the extent amounts have been
collected under any applicable policy or policies of insurance (the Indemnified
Party (as defined in Section 8.3(a)) agreeing to take reasonable steps, at the
request and the expense of the Indemnifying Party, to assert any covered claims
against the insurer, but the Indemnified Party's right to indemnification not
being limited during the pendency of any such claim);
(d) the indemnification obligations under this Section 8, or under any
certificate or writing furnished in connection herewith, shall terminate at the
date that is the later of clause (i) or (ii) of this Section 8.2(d):
(i) (1) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 8.2(d), the second anniversary of the
Closing Date, or
(2) with respect to representations and warranties contained
in Sections 3.21 (Environmental Matters) 3.22 (Employment Matters), 3.23 (Taxes)
and the indemnification set forth in Section 8.1(a)(i)(2), (4) or (5), the later
of (A) the date that is six (6) months after the expiration of the longest
applicable federal or state statute of limitation (including extensions
thereof), or (B) five (5) years after the Closing Date; or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 8.2(d) (such claims
referred to as "Pending Claims").
8.3. INDEMNIFICATION PROCEDURES. All claims or demands for indemnification
under this Section 8 ("Claims" and individually, a "Claim") shall be asserted
and resolved as follows:
(a) In the event that any AppNet Indemnified Party or EDC Indemnified
Party (each, an "Indemnified Party") has a Claim against any party obligated to
provide indemnification pursuant to Section 8.1 hereof (the "Indemnifying
Party") which does not involve a Claim being asserted against or sought to be
collected by a third party, the Indemnified
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Party shall with reasonable promptness notify (i) the Stockholders'
Representative, if the Indemnified Party is an AppNet Indemnified Party, or (ii)
AppNet if the Indemnified Party is an EDC Indemnified Party (the Stockholders'
Representative and AppNet are each hereafter referred to as the "Indemnification
Representative" for the purposes of this Section 8.3) of such Claim, specifying
the nature of such Claim and the amount or the estimated amount thereof to the
extent then feasible (the "Claim Notice"). If the Indemnification Representative
does not notify the Indemnified Party within thirty (30) days after the date of
delivery of the Claim Notice that the Indemnifying Party disputes such Claim,
with a detailed statement of the basis of such position, the amount of such
Claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with this
Section 8.3(a), the Indemnified Party shall respond in a written statement to
the objection within thirty (30) days and, for sixty (60) days thereafter,
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such Claims (and, if the parties should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties).
(b) (i) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice to the Indemnification Representative. The
Indemnification Representative shall have thirty (30) days from the date of
delivery of the Claim Notice to notify the Indemnified Party (A) whether the
Indemnifying Party disputes liability to the Indemnified Party hereunder with
respect to the Third Party Claim, and, if so, the basis for such a dispute, and
(B) if such party does not dispute liability, whether or not the Indemnifying
Party desires, at the sole cost and expense of the Indemnifying Party, to defend
against the Third Party Claim, provided that the Indemnified Party is hereby
authorized (but not obligated) to file any motion, answer or other pleading and
to take any other action which the Indemnified Party shall deem necessary or
appropriate to protect the Indemnified Party's interests.
(ii) In the event that the Indemnification Representative timely
notifies the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, PROVIDED that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at its sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified Party against a
Third Party Claim, whether by failure of such party to give the Indemnified
Party timely notice as provided herein or otherwise, then the Indemnified Party,
without waiving any rights against such party, may settle or defend against such
Third Party Claim in the Indemnified Party's sole discretion and the Indemnified
Party shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
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(iii) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Indemnification
Representative, any Third Party Claim seeks material prospective relief which
could have an adverse effect on any Indemnified Party or the Surviving
Corporation or any subsidiary, the Indemnified Party shall have the right to
control or assume (as the case may be) the defense of any such Third Party Claim
and the amount of any judgment or settlement and the reasonable costs and
expenses of defense shall be included as part of the indemnification obligations
of the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, the Indemnifying Party shall have the right to participate in, but
not control, the defense of such Third Party Claim at the sole cost and expense
of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 8.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 8.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
8.4. SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Company, the Stockholders,
AppNet and Newco in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Stockholders will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 8.2. The
representations of AppNet and Newco will survive the Closing and will remain in
effect until, and will expire upon, the third anniversary of the Closing Date.
8.5. REMEDIES CUMULATIVE. The remedies set forth in this Section 8 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
8.6. RIGHT TO SET OFF. Subject to the limitations set forth in Section 8.2,
AppNet shall have the right, but not the obligation, to set off, in whole or in
part, any claim it has pursuant to this Section 8 against the Pledged Shares (as
more fully set forth in the Pledge Agreement).
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9. EMPLOYMENT, CONFIDENTIALITY, NON-COMPETITION AND NONSOLICITATION
9.1. EMPLOYMENT.
(a) In the event that any Stockholder terminates his employment with
the Surviving Corporation voluntarily or his employment with the Surviving
Corporation is terminated for Cause (as defined below) prior to the date which
is five hundred and forty (540) days after the Closing Date, such Stockholder
shall forfeit a PRO RATA portion of the Pledged Shares due such Stockholder
based on the amount of time remaining between the date of the termination of
employment of such Stockholder and the date which is five hundred and forty
(540) days after the Closing Date (as more fully set forth in the Pledge
Agreement). For purposes of this Agreement, "Cause" means (a) the conviction of
a Stockholder by a court of competent jurisdiction for fraud, theft,
embezzlement or a crime of moral turpitude; or (b) any material breach of the
confidentiality provision of Section 9.2 or the noncompetition and
nonsolicitation provisions of Section 9.3 of this Agreement by a Stockholder.
(b) If at any time prior to the date which is five hundred and forty
(540) days after the Closing Date, in the event that any Stockholder takes a
"leave of absence" or any other extended leave outside of any vacation, sick or
personal leave entitled such Stockholder under the normal vacation, sick or
personal time policies of the Company without the prior written consent of
AppNet, such Stockholder shall forfeit a PRO RATA portion of the Pledged Shares
due such Stockholder based on the total duration of such leave by the
Stockholder.
(c) Notwithstanding the terms of Section 9.1(a) or (b) to the
contrary, James M. Edgar ("Edgar") and Carol Kay Lynn shall not forfeit any
Pledged Shares under Sections 9.1(a) or (b) should either such person not remain
employed by the Surviving Corporation for the duration of the five hundred forty
(540) day period after the Closing Date.
9.2. CONFIDENTIALITY.
(a) Each Stockholder acknowledges that the continued success of the
business of AppNet depends upon the use and protection of a large body of
confidential and proprietary information, and that, as a consequence of his
signing this Agreement and/or his employment with AppNet, he will possess and
have access to, highly valuable, confidential and proprietary information of
AppNet that may not be known to the public in general, and that it would be
improper for him to make use of this information for the benefit of himself and
persons other than AppNet. All of such confidential and proprietary information
now existing or to be developed in the future will be referred to in this
Agreement as "Confidential Information." This includes, without limitation,
information not previously disclosed to the public or to the trade by AppNet's
management with respect to AppNet's products, facilities, and methods, trade
secrets and other intellectual property, software, source code, systems,
procedures, manuals, confidential reports, product price lists, customer lists,
financial information (including the revenues, costs, or profits associated with
any of AppNet's products), business plans, prospects, or opportunities; PROVIDED
HOWEVER, that "Confidential Information" shall not include such information (i)
as becomes known to the public generally through no fault of any Stockholder,
(ii) of which
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disclosure is required by law or the order of any governmental authority under
color of law, or (iii) which the Stockholder reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, PROVIDED, that prior to disclosing any information pursuant to
clause (i), (ii) or (iii) above, the Stockholder threatening to disclose any
information shall give prior written notice thereof to AppNet and provide AppNet
with the opportunity to contest such disclosure and shall cooperate with efforts
to prevent such disclosure. For purposes of this Section 9, the term "AppNet"
includes all subsidiaries of AppNet (including, without limitation, the
Companies and any companies AppNet has resolved to acquire).
(b) Disclosure of any Confidential Information shall not be prohibited
if such disclosure is directly pursuant to a valid and existing order of a court
or other governmental body or agency within the United States; provided,
however, that (i) the Stockholder shall first have given prompt notice to AppNet
of any such possible or prospective disclosure (or proceeding pursuant to which
any such disclosure may result) and (ii) Stockholder shall afford AppNet a
reasonable opportunity to prevent or limit any such disclosure.
(c) Each Stockholder will preserve and protect as confidential all of
the Confidential Information known to Stockholder or at any time in
Stockholder's possession. In addition, during such time as such Stockholder is
employed by Surviving Corporation and at all times thereafter, such Stockholder
will not disclose to any unauthorized person or use for his own account any of
such Confidential Information without the written consent of AppNet. Each
Stockholder agrees to deliver to Surviving Corporation (or at AppNet's request,
to AppNet) upon the termination of such Stockholder's employment with Surviving
Corporation, or at any other time as AppNet may request in writing, all
memoranda, notes, plans, records, reports and other documents (and copies
thereof) containing or otherwise relating to any of the Confidential Information
(including, without limitation, all acquisition prospects, lists and contact
information) which he may then possess or have under his control. Each
Stockholder acknowledges that all such memoranda, notes, plans, records, reports
and other documents are and at all times will be and remain the property of the
Surviving Corporation and/or AppNet.
(d) Each Stockholder will fully comply with any agreement reasonably
required by any of AppNet business partners, suppliers or contractors with
respect to the protection of the confidential and proprietary information of
such entities.
(e) This Section 9.2 shall not apply to any information independently
discovered or invented by any Stockholder after such Stockholder's employment
with the Surviving Corporation, AppNet and its subsidiaries has been terminated.
9.3. NONCOMPETITION AND NONSOLICITATION. No Stockholder will, for a period
of four (4) years following the Closing Date, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
Person (as defined below):
(a) Own, manage, control, participate in, consult with, render
services for, or in any manner engage in any business selling products or
services in direct competition with any business conducted by AppNet or the
Surviving Corporation that the Stockholder actively
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assisted or was involved with during his employment with the Surviving
Corporation or AppNet at any location in the Territory (as defined below);
(b) Own, manage, control, participate in, consult with, render
services for, or in any manner engage, in any business selling products or
services in direct competition with AppNet or the Surviving Corporation within
the field of internet strategy consulting at any location in the Territory;
(c) Induce or attempt to induce any employee of AppNet or the
Surviving Corporation to leave the employ of AppNet or the Surviving
Corporation, or in any way interfere with the relationship between AppNet or the
Surviving Corporation and any employee thereof;
(d) Hire any person who was an employee of AppNet or the Surviving
Corporation within one year prior to the time of such hiring;
(e) Service, solicit or accept any business from any customer or
licensee of AppNet or the Surviving Corporation for the purpose of competing
with AppNet or the Surviving Corporation;
(f) Induce or attempt to induce any owner of a site location,
customer, supplier, licensee or other business relation of AppNet or the
Surviving Corporation to cease doing business with AppNet or the Surviving
Corporation or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and AppNet or the Surviving
Corporation;
(g) Directly or indirectly disclose to any other person the name or
address of any customer of AppNet or the Surviving Corporation for the purpose
of competing with AppNet or the Surviving Corporation; or
(h) Directly or indirectly acquire or attempt to acquire an interest
in any business relating to the business of AppNet or the Surviving Corporation
and with which, to such Stockholder's knowledge, AppNet or the Surviving
Corporation has entertained discussions or has requested and received
information relating to the acquisition of such business by AppNet or the
Surviving Corporation in the one-year period immediately preceding the
termination of employment of the Stockholder with the Surviving Corporation or
AppNet.
For purposes of this Section 9.3, (i) the term "Territory" as applicable to
a given Stockholder shall mean: (A) all of the counties in the State of
California listed in SCHEDULE 9.3 or in any other state in the United States, if
such Stockholder has been primarily employed by the Companies in the United
States, (B) Australia, if such Stockholder has been primarily employed by the
Companies in Australia, and (C) the European Union, if such Stockholder has been
primarily employed by the Companies in the United Kingdom; PROVIDED HOWEVER,
that notwithstanding the foregoing, as to Robert M. White, the term "Territory"
shall mean both, the United States AND Australia; (ii) the term "Person" means
an individual, a partnership, a limited liability company, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
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subdivision thereof. Notwithstanding any language in this Section 9.3 to the
contrary, (i) this Section 9.3 shall not be deemed to prohibit any Stockholder
from acquiring as an investment not more than one percent (1%) of the capital
stock of a competing business whose stock is traded on a national securities
exchange and (ii) Edgar shall be relieved from the restrictions of Section
9.3(a) or (b) hereof in providing consulting services, from and after December
31, 2000, to companies other than AppNet or the Surviving Corporation, subject
to the prior written consent of AppNet (which consent shall not be unreasonably
withheld or delayed) with respect to each consulting engagement which would
otherwise violate the provisions of Section 9.3(a) or (b). In seeking AppNet's
consent for any specific proposed consulting engagement, Edgar shall provide
AppNet with a written description of the proposed engagement, and the consent if
any thereafter granted by AppNet shall be limited to the scope of the engagement
so disclosed by Edgar. Notwithstanding any such consent by AppNet, (i) Edgar
shall continue to be bound by subparagraphs (c) through (h) of this Section 9.3
(and all other Sections of this Agreement) and (ii) each Stockholder
acknowledges and agrees that no such consent or any subsequent course of conduct
by or arrangement between AppNet, the Surviving Corporation and Edgar pursuant
to this Section 9.3 shall be construed to limit the enforceability of this
Section 9 against all other Stockholders, and this Section 9 shall remain in
full force and effect with regard to all other Stockholders in accordance with
its terms.
9.4. SEVERABILITY; REFORMATION.The covenants in Sections 9.2 and 9.3 are
severable and separate, and the unenforceability of any specific covenant in
such sections shall not effect the provisions of any other covenant. If, at the
time of enforcement of Sections 9.2 and 9.3 of this Agreement, a court holds
that the restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum duration, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum duration, scope and area
permitted by law.
9.5. ADDITIONAL ACKNOWLEDGEMENTS. Each Stockholder acknowledges that the
provisions of this Section 9 are in consideration of good and valuable
consideration as set forth in this Agreement. Each Stockholder expressly agrees
and acknowledges that the restrictions contained in Section 9 do not preclude
such Stockholder from earning a livelihood, nor do they unreasonably impose
limitations on such Stockholder's ability to earn a living. In addition, each
Stockholder agrees and acknowledges that the potential harm to AppNet of its
non-enforcement outweighs any harm to such Stockholder of its enforcement by
injunction or otherwise. Each Stockholder acknowledges that he has carefully
read this Agreement and has given careful consideration to the restraints
imposed upon such Stockholder by this Agreement, and is in full accord as to
their necessity for the reasonable and proper protection of the Confidential
Information. Each Stockholder expressly acknowledges and agrees that each and
every restraint imposed by this Agreement is reasonable with respect to subject
matter, time period and geographical area.
9.6. INDEPENDENT COVENANTS. All of the covenants in this Section 9 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
AppNet, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by AppNet of
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such covenants. It is understood by the parties hereto that the covenants
contained in this Section 9 are essential elements of this Agreement and that,
but for the agreement of the Stockholders to comply with such covenants, AppNet
would not have agreed to enter into this Agreement. The Stockholders and AppNet
have independently consulted with their respective counsel and have been advised
concerning the reasonableness and propriety of such covenants with specific
regard to the nature of the business conducted by AppNet and the Company. The
Stockholders hereby agree that all covenants contained in this Section 9 are
reasonable and valid and waive all defenses to the strict enforcement hereof by
AppNet or the Company. The covenants contained in this Section 9 hereof shall
not be affected by any breach of any other provision hereof by any party hereto
and shall have no effect if this Agreement is terminated pursuant to its terms.
9.7. MATERIALITY. The Company and each Stockholder hereby agree that the
covenants set forth in this Section 9 are a material and substantial part of the
transactions contemplated by this Agreement, supported by adequate
consideration.
10. STOCKHOLDER APPROVAL
10.1. The Companies will cooperate and use their best efforts to distribute
the Private Placement Materials to each of its Accredited Investors and
Unaccredited Investors promptly after the Companies' receipt of the Private
Placement Materials from AppNet. Within five (5) days of the delivery by AppNet
of the Private Placement Materials to the Accredited Investors and the
Unaccredited Investors, the Company will hold a meeting of its Stockholders for
the purpose of obtaining the approval of the Stockholders to the transactions
contemplated by this Agreement (the "Shareholder Meeting").
10.2. Notwithstanding any language to the contrary in this Agreement,
the Stockholders shall not execute or be bound by the terms and conditions
applicable to the Stockholders under this Agreement until after they have
received and reviewed the Private Placement Materials and after the Shareholder
Meeting, PROVIDED, HOWEVER, that the Companies, Newco and AppNet shall be bound
by all of the terms and conditions of this Agreement as of the date of their
execution of this Agreement notwithstanding the fact that the Stockholders have
not yet signed the Agreement.
11. GENERAL
11.1. TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the boards of directors of AppNet and the
Company; or
(b) by the Stockholders and the Company as a group, on the one hand,
or by AppNet, on the other hand, if the Closing shall not have occurred on or
before May 31, 2000, provided that the right to terminate this Agreement under
this Section 11.1(b) shall not be available to either party (with the
Stockholders and the Company deemed to be a single party for
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this purpose) whose material misrepresentation, breach of warranty or failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one hand,
or by AppNet, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholders and the Company deemed to be a single party for this purpose) of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders and the Company as a group, on the one hand,
or by AppNet, on the other hand, if there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
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 make the consummation of the Merger illegal.
11.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 11.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of Sections 11 and 8, and Sections 5.6(b)
and 9.2, shall remain in full force and effect and survive any termination of
this Agreement; (ii) each party shall remain liable for any breach of this
Agreement prior to its termination; and (iii) in the event of termination of
this Agreement pursuant to Section 11.1(c) above, then notwithstanding the
provisions of Section 11.7, the breaching party (with the Stockholders and the
Company deemed to be a single party for purposes of this Section 11), shall be
liable to the other party to the extent of the expenses incurred by such other
party in connection with this Agreement and the transactions contemplated
hereby, as well as any damages in accordance with applicable law.
11.3. SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
AppNet, and the heirs and legal representatives of the Stockholders.
11.4. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, including each
of the Exhibits and Schedules, sets forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement. This Agreement shall not be amended or modified except by a written
instrument duly executed by each of the parties hereto, or in accordance with
Section 9.4. Any extension or waiver by any party of any provision hereto shall
be valid only if set forth in an instrument in writing signed on behalf of such
party.
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11.5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
11.6. BROKERS AND AGENTS. Except as set forth in the next succeeding
sentence, AppNet and Newco (as a group) and the Company and each Stockholder (as
a group) each represents and warrants to the other that it has not employed any
broker or agent in connection with the transactions contemplated by this
Agreement and agrees to indemnify the other against all losses, damages or
expenses relating to or arising out of claims for fees or commission of any
broker or agent employed or alleged to have been employed by such party. The
Stockholders have engaged the services of Vrolyk & Company in connection with
the transactions contemplated by this Agreement. The Stockholders hereby
acknowledge and agree that any fees and expenses of Vrolyk & Company are the
obligations of Stockholders only and that AppNet is not liable for any such fees
and expenses, provided that any such fees and expenses remaining unpaid at the
Closing shall be paid pursuant to the provisions of Section 1.3(d).
11.7. EXPENSES. AppNet has and will pay the fees, expenses and
disbursements of AppNet and Newco and their agents, representatives, accountants
and counsel incurred in connection with the subject matter of this Agreement.
The Stockholders (and not the Company) have and will pay the fees, expenses and
disbursements of the Stockholders, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement, provided that any such
fees, expenses and disbursements remaining unpaid at the Closing shall be paid
pursuant to the provisions of Section 1.3(d).
11.8. SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
confidentiality obligations set forth in Section 5.6(b) and the noncompetition
and other provisions set forth in Section 9. It is accordingly agreed that, in
addition to any other remedies which may be available upon the breach of any
such covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
11.9. NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
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If to AppNet, Newco or the Surviving Corporation to:
AppNet, Inc.
6707 Democracy Boulevard
Suite 1000
Bethesda, Maryland 20817
Attn: Ken S. Bajaj, President
(Telefax: (301) 581-2478)
with a required copy to:
Venable, Baetjer and Howard & Civiletti, LLP
1615 L Street, N.W., Suite 400
Washington, D.C. 20036
Attn: Arthur E. Cirulnick, Esquire
(Telefax: (202) 429-3231)
If to any Stockholder to:
Edgar, Dunn & Company
847 Sansome Street, 4th Floor
San Francisco, California 94111
Attn: David A. Poe
(Telefax: (415) 394-7629)
with a required copy to:
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, Suite 2300
Los Angeles, California 90071
Attn: Michael K. Lindsey, Esquire
(Telefax: (213) 627-0705)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
11.10. GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of Delaware (without regard
to its laws relating to choice-of-law or conflicts-of-law). Any disputes arising
out of, in connection with or with respect to this Agreement, the subject matter
hereof, the performance or non-performance of any obligation hereunder, or any
of the transactions contemplated hereby shall be adjudicated in a court of
competent civil jurisdiction sitting in the County of Montgomery, Maryland and
nowhere else. Each of the parties hereto hereby irrevocably submits to the
jurisdiction of such court for the purposes of any suit, civil action or other
proceeding arising out of, in connection
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with or with respect to this Agreement, the subject matter hereof, the
performance or non-performance of any obligation hereunder, or any of the
transactions contemplated hereby (collectively, "Suit"). Each of the parties
hereto hereby waives and agrees not to assert by way of motion, as a defense or
otherwise in any such Suit, any claim that it is not subject to the jurisdiction
of the above courts, that such Suit is brought in an inconvenient forum, or that
the venue of such Suit is improper.
11.11. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 9.4.
11.12. ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
11.13. MUTUAL DRAFTING; CONSTRUCTION. This Agreement is the mutual product
of the parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto. Any reference to any federal, state,
local or foreign statute or law shall be deemed also to refer to all rules and
regulation promulgated thereunder, unless the context requires otherwise. The
use of the word "including" in this Agreement means "including without
limitation." The use of any gender in this Agreement shall be deemed to be or
include the other gender, and the use of the singular in this Agreement shall be
deemed to be or include the plural, and VICE VERSA, wherever appropriate
11.14. FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
APPNET, INC. APPNET/EDC, INC.
By: /s/ Ken S. Bajaj By: /s/ Ken S. Bajaj
--------------------------- ---------------------------
Ken S. Bajaj Ken S. Bajaj
President President
EDGAR, DUNN & COMPANY
By: /s/ David A. Poe
---------------------------
STOCKHOLDERS STOCKHOLDERS
POE REVOCABLE TRUST DATED GEOFFREY D. GRIFFIN
NOVEMBER 27, 1991
/s/ David A. Poe /s/ Geoffrey D. Griffin
------------------------------- ------------------------------
By: David A. Poe, Trustee
PETER T. DUNN JAMES M. EDGAR
/s/ Peter T. Dunn /s/ James M. Edgar
------------------------------- ------------------------------
ROBERT M. WHITE CLIFTON W. LEWIS
/s/ Robert M. White /s/ Clifton W. Lewis
------------------------------- ------------------------------
CAROLE KAY LYNN JONATHAN H. PARKER
/s/ Carole Kay Lynn /s/ Jonathan H. Parker
------------------------------- ------------------------------
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JANE E. CLONINGER JOHN BRESNAHAN
/s/ Jane E. Cloninger /s/ John Bresnahan
------------------------------- ------------------------------
THAD PETERSON ANGELITA VERDUN
/s/ Thad Peterson /s/ Angelita Verdun
------------------------------- ------------------------------
MARGARET BROWN WESTON COOK
/s/ Margaret Brown /s/ Weston Cook
------------------------------- ------------------------------
MIA E. E. NAM BRIAN STIFEL
/s/ Mia E. E. Nam /s/ Brian Stifel
------------------------------- ------------------------------
LINDA PHILLIPPE KENNETH HOWES
/s/ Linda Phillippe /s/ Kenneth Howes
------------------------------- ------------------------------
PETER SIDENIUS ROGER ALEXANDER
/s/ Peter Sidenius /s/ Roger Alexander
------------------------------- ------------------------------
PASCAL BURG DAVID KEVIN JENKINS
/s/ Pascal Burg /s/ David Kevin Jenkins
------------------------------- ------------------------------
ERIC SCHNEIDER
/s/ Eric Schneider
-------------------------------
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