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Exhibit 2.15
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
by and among
APPLIEDTHEORY CORPORATION,
APPLIEDTHEORY TT ACQUISITION CORP.,
TEAM TECH INTERNATIONAL, INC.,
ART BORREGO,
ROGER LEWIS
and
TIM BLACKWOOD
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June 10, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..............................................................................1
1.1. The Merger..........................................................................1
1.2. Closing; Effective Time.............................................................1
1.3. Effect on Capital Stock.............................................................2
1.4. Intentionally Omitted...............................................................4
1.5. Intentionally Omitted...............................................................4
1.6. Escrow of Parent Common Stock; Adjustment to Merger Consideration...................4
1.7. Performance Incentive Payment.......................................................5
1.8. Registration Rights.................................................................7
1.9. Shares of Dissenting Stockholders...................................................7
1.10. Merger Sub Common Stock............................................................8
1.11. Articles of Incorporation and By-Laws..............................................8
1.12. Directors and Officers.............................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY STOCKHOLDERS.............................8
2.1. Authority; Execution and Delivery...................................................8
2.2. No Other Agreements to Sell the Company Stock or the Business of the Company........9
2.3. Ownership of Company Stock..........................................................9
2.4. Validity of Contemplated Transactions...............................................9
2.5. Consents and Approvals..............................................................9
2.6. Accounts and Notes Receivable, etc..................................................9
2.7. Related Parties....................................................................10
2.8. Litigation.........................................................................10
2.9. Authority; Execution and Delivery..................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY STOCKHOLDERS
REGARDING THE COMPANY........................................................10
3.1. Organization.......................................................................10
3.2. Capitalization; Subsidiaries.......................................................11
3.3. Authorization; Binding Agreement...................................................12
3.4. Noncontravention...................................................................12
3.5. Governmental Approvals.............................................................13
3.6. Financial Statements...............................................................13
3.7. No Undisclosed Liabilities.........................................................13
3.8. Validity of Leases and Contracts...................................................13
3.9. Absence of Certain Changes or Events...............................................14
3.10. Litigation, Judgments, No Default, Etc............................................16
3.11. Compliance........................................................................16
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3.12. Accounts Receivable; Equipment and Assets.........................................16
3.13. Tax Matters.......................................................................17
3.14. Employee Benefit Plans............................................................20
3.15. Finders and Investment Bankers....................................................22
3.16. Collective Bargaining Agreements; Employment Matters..............................22
3.17. Insurance.........................................................................22
3.18. No Conflict of Interest...........................................................23
3.19. Intellectual Property.............................................................23
3.20. Compliance with Laws..............................................................25
3.21. Licenses and Permits..............................................................26
3.22. Copies of Documents...............................................................26
3.23. No Existing Discussions...........................................................26
3.24. Year 2000.........................................................................26
3.25. Disclosure........................................................................26
3.26. Company Representations and Warranties............................................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................27
4.1. Organization.......................................................................27
4.2. Capitalization.....................................................................27
4.3. Authorization; Binding Agreement...................................................28
4.4. Noncontravention...................................................................28
4.5. SEC Filings; Financial Statements..................................................28
4.6. Governmental Approvals.............................................................29
ARTICLE V COVENANTS..............................................................................30
5.1. Conduct of Business of the Company.................................................30
5.2. Conduct of Business of Parent and Merger Sub.......................................32
5.3. Closing Financial Statements.......................................................33
5.4. Access and Information.............................................................33
5.5. No Solicitation....................................................................33
5.6. Reasonable Efforts.................................................................34
5.7. Changes in Representation and Warranties; Notification of Certain Matters..........35
5.8. Takeover Statutes..................................................................35
5.9. Non-Disclosure; Public Announcements...............................................35
5.10. Indemnification of Directors and Officers.........................................36
5.11. Lock-up...........................................................................37
5.12. Sale of Cybercentral..............................................................37
5.13. Taxes.............................................................................37
5.14. Employment Agreements.............................................................38
5.15. Conduct of Company During Performance Incentive Period............................38
5.16. Accounting Fees...................................................................38
ARTICLE VI CONDITIONS............................................................................38
6.1. Conditions to Each Party's Obligations.............................................38
6.2. Conditions to Obligation of Parent and Merger Sub..................................39
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6.3. Conditions to Obligation of the Company............................................40
6.4. Frustration of Closing Conditions..................................................41
ARTICLE VII NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC...........................41
7.1. Survival of Representations, Warranties, Etc.......................................41
7.2. Company Stockholders Agreement to Indemnify........................................41
7.3. Parent Agreement to Indemnify......................................................43
7.4. Procedures Relating to Indemnification.............................................44
ARTICLE VIII TERMINATION.........................................................................44
8.1. Termination........................................................................44
8.2. Procedure for and Effect of Termination............................................45
ARTICLE IX MISCELLANEOUS.........................................................................46
9.1. Certain Definitions................................................................46
9.2. Amendment and Modification.........................................................46
9.3. Waiver of Compliance; Consents.....................................................47
9.4. Restrictive Legend.................................................................47
9.5. Notices............................................................................47
9.6. Assignment.........................................................................49
9.7. Expenses...........................................................................49
9.8. Gender; Plurals, etc...............................................................49
9.9. Governing Law......................................................................49
9.10. Counterparts......................................................................49
9.11. Interpretation....................................................................49
9.12. Entire Agreement..................................................................49
9.13. No Third Party Beneficiaries......................................................50
9.14. Severability......................................................................50
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 10, 2000 (the "Agreement"),
by and among AppliedTheory Corporation, a Delaware corporation ("Parent"),
AppliedTheory TT Acquisition Corp., a Texas corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), Team Tech International, Inc., a Texas
corporation (the "Company"), Art Borrego, Roger Lewis and Tim Blackwood (the
"Company Stockholders").
WHEREAS, the Company Stockholders and the respective boards of directors
of each of Parent, Merger Sub and the Company have determined that the merger of
Merger Sub with and into the Company (the "Merger") on the terms and conditions
contained herein and in accordance with the Texas Business Corporation Act (the
"TBCA") is advisable and have approved the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, as amended;
WHEREAS, Merger Sub was created solely for the purpose of effecting the
Merger and will conduct no other activity; and
WHEREAS, the Company Stockholders, Parent, Merger Sub and the Company
desire to make certain representations, warranties, covenants and agreements in
connection with this Agreement and to prescribe certain conditions to the
Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2) and in accordance
with the TBCA, Merger Sub shall be merged with and into the Company and the
separate corporate existence of Merger Sub shall thereupon cease. The Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation") and will be a wholly-owned subsidiary of
Parent. The Merger shall have the effects specified in the TBCA.
1.2. Closing; Effective Time. Subject to the provisions of Article VI,
the closing of the Merger (the "Closing") shall take place in New York City at
the offices of Dewey Ballantine LLP, as soon as practicable but in no event
later than 10:00 a.m. New York City time on the second business day after the
earliest date on which each of the conditions set forth in Article VI (other
than conditions that are satisfied by the delivery of documents or the payment
of money at or prior to the Closing) have been
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satisfied or waived by the party or parties entitled to the benefit of such
conditions, or at such other date, time and place as Parent and the Company
shall mutually agree. The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date." At the Closing, Merger Sub and
the Company shall cause a certificate of merger (a "Certificate of Merger") to
be executed and filed with the Secretary of State of the State of Texas in
accordance with the TBCA. The Merger shall become effective as of the date and
time of such filing or as of such subsequent date and time as Parent and the
Company shall agree to and shall be set forth in the Certificate of Merger (the
"Effective Time").
1.3. Effect on Capital Stock.
(a) At the Effective Time, each share of common stock, no par
value, of the Company (the "Company Stock") issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares (as defined in Section
1.9) and Parent Shares (as defined in Section 1.3(d)) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive approximately .03656264 (the "Exchange Ratio") shares
of common stock, par value $.01 per share, of Parent ("Parent Common Stock")
(the aggregate number of shares of Parent Common Stock into which the
outstanding Company Stock is convertible shall be 516,279 shares of Parent
Common Stock and shall be referred to as the "Merger Consideration"); provided,
that the Company Equity Value (as hereinafter defined), the Merger Consideration
and the Exchange Ratio shall be subject to adjustment as set forth in Section
1.5 herein; and provided, further, that pursuant to Section 1.3(e), no
fractional share of Parent Common Stock shall be delivered hereunder. The
parties hereto determined the Exchange Ratio by dividing $11,100,000 (the
"Company Equity Value") by $21.50 and dividing the resulting number by
14,120,400 (the "Company Capitalization"), such number being the sum of (i) the
total number of shares of Company Stock outstanding at the Effective Time and
(ii) the total number of shares of Company Stock that are subject to Company
Options (as defined in Section 1.3(c)) outstanding immediately prior to the
Effective Time. The Company Equity Value and Exchange Ratio shall be subject to
adjustment as provided in Section 1.5 and, solely for purposes of Section
1.3(c), as provided in Section 1.7(d).
(b) Subject to Sections 1.5 and 1.6 hereof, following the
Effective Time, the Merger Consideration shall be delivered to those parties who
are holders of Company Stock (the "Selling Stockholders") immediately prior to
the Effective Time in exchange for certificates representing all outstanding
shares of Company Stock and any other outstanding ownership interests in the
Company (other than the Company Options (as defined in Section 1.3(c)). The
Company Stockholders acknowledge and agree that the Parent Common Stock
delivered to the holders of Company Stock hereunder shall not be registered
under the Securities Act of 1933, as amended (the "Securities Act") and that the
sale or other disposition of such Parent Common Stock shall be subject to the
restrictions arising under Rule 144 of the Securities Act until a registration
statement shall have been filed for the purposes of registering such Parent
Common Stock under the Securities Act. As of the Effective Time, all shares of
Company Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist. If, between the date of this
Agreement and the Effective
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Time, the shares of Parent Common Stock shall be changed into a different number
or class of shares by reason of a stock split, stock dividend, reverse stock
split, reclassification, recapitalization or other similar transaction, the
Merger Consideration shall be adjusted accordingly.
(c) Section 1.3(c) of the Disclosure Schedule (as defined in
Article II) contains a true, accurate and correct list, as of the date hereof
and the Effective Time, setting forth the number of shares of Company Stock that
are subject to all outstanding options to purchase Company Stock (the "Company
Options"), whether or not vested, and identifying the holder of each Company
Option, the number of shares of Company Stock subject to the Company Options
held by such holder, whether or not such option is an incentive stock option,
the date upon which each Company Option was granted, the vesting schedule and
each stock option agreement evidencing the grant of such Company Options (a
"Company Option Agreement"). At the Effective Time, all Company Options, whether
or not exercisable and whether or not vested, shall, by virtue of the Merger and
without any further action on the part of the Company or the holder thereof, be
converted into an option to purchase Parent Common Stock, and Parent shall
assume each such Company Option in accordance with the terms (as in effect as of
the date of this Agreement) of the Company Option Plan (as defined in Section
3.2(a)) and the terms of the stock option agreement by which it is evidenced.
From and after the Effective Time, (i) each Company Option assumed by Parent may
be exercised by the holder thereof solely for Parent Common Stock, (ii) the
number of shares of Parent Common Stock subject to each such Company Option (the
"Option Conversion Ratio") shall be equal to the product of (A) the number of
shares of Company Stock subject to such Company Option immediately prior to the
Effective Time multiplied by (B) the Exchange Ratio, rounding down to the
nearest whole share, (iii) the per share exercise price under each such Company
Option (the "Option Conversion Price") shall be adjusted by dividing (x) the per
share exercise price under such Company Option by (y) the Exchange Ratio and
rounding up to the nearest cent and (iv) except as expressly provided for in
this Agreement and the Company Option Agreement with each particular holder of
the Company Options, any restriction on the exercise or transfer of any such
Company Option shall continue in full force and effect in accordance with its
terms and the term, exercisability, vesting schedule and other provisions of or
relating to such Company Option shall otherwise remain unchanged; provided,
however, that each Company Option assumed by Parent in accordance with this
Section 1.3(c) shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, stock dividend, reverse
stock split, reclassification, recapitalization or other similar transaction
subsequent to the Effective Time.
Prior to the Effective Time, the Company shall take all action that may
be necessary (including amending the Company Option Plan) to effectuate the
provisions of this Section 1.3(c) and to ensure that, from and after the
Effective Time, holders of Company Options have no rights with respect thereto
other than those specifically provided in this Section 1.3(c).
(d) Each share of Company Stock held in the Company's treasury
immediately prior to the Effective Time, if any, and each share of Company
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Stock then owned by Parent, Merger Sub or any other wholly-owned subsidiary of
Parent, other than any such shares held on behalf of third parties, if any
(collectively, the "Parent Shares"), shall, by virtue of the Merger, be
automatically cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(e) No fractional shares of Parent Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of Parent
Common Stock, cash adjustments will be paid to holders in respect of any
fractional share of Parent Common Stock that would otherwise be issuable, and
the amount of such cash adjustment shall be equal to the product obtained by
multiplying such stockholder's fractional share of Parent Common Stock that
would otherwise be payable by the per share value of Parent Common Stock set
forth in Section 1.4 herein.
(f) Each of Parent, Merger Sub and the Company shall be
entitled to deduct and withhold from the Merger Consideration (and any dividends
or distributions thereon) otherwise payable hereunder to any person such amounts
as it is required to deduct and withhold with respect to the making of such
payment under any provision of federal, state, local or foreign income tax law.
To the extent that Parent, Merger Sub or the Company so withholds those amounts,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of Company Stock in respect of which such
deduction and withholding was made by Parent, Merger Sub or the Company, as the
case may be.
(g) The parties intend this transaction to constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
1.4. Intentionally Omitted.
1.5. Intentionally Omitted.
1.6. Escrow of Parent Common Stock; Adjustment to Merger Consideration.
The parties hereto agree that, at the Closing, a portion of the Parent Common
Stock delivered to the holders of Company Stock as Merger Consideration
representing 10% of the Merger Consideration (the "Escrow Fund") shall be
deducted from the shares of Parent Common Stock deliverable to the Company
Stockholders and shall be held by Wells Fargo Bank - Investment Management and
Trust Department in Austin, Texas as escrow agent ("Escrow Agent"), subject to
an escrow agreement (the "Escrow Agreement") by and among Escrow Agent and the
Company Stockholders prior to Closing. A form of the Escrow Agreement is
attached hereto as Exhibit A. The parties hereto acknowledge and agree that
Escrow Agent shall hold the Escrow Fund pursuant to the Escrow Agreement. The
Company Stockholders and Parent further acknowledge and agree that they shall
each be responsible for up to one half of any administration and other fees
charged by the Escrow Agent up to $4,000 annually or up to $2,000 each per year;
provided, that the Company Stockholders shall be solely responsible for any
administration and other fees charged by the Escrow Agent in excess of $4,000.
The Escrow Fund shall be subject to the Escrow Agreement (with such
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changes therein as Parent, Company Stockholders and Escrow Agent shall
reasonably approve prior to the Closing); provided, that as further described in
the Escrow Agreement, during the term of the Escrow Agreement, the Company
Stockholders shall be deemed the owners of and shall have voting power over all
Parent Common Stock in the Escrow Fund; provided, further, that any dividends or
other distributions with respect to Parent Common Stock that are made in the
form of cash or any other form of property, except for ownership rights in
Parent or any of its Subsidiaries (as defined in Section 9.1), shall be
distributed to the Company Stockholders; provided, further, that any dividends
or other distributions with respect to Parent Common Stock that are made in the
form of capital stock or of any other form of ownership interest in Parent or
any of its Subsidiaries shall remain in the Escrow Fund until the end of the
term of the Escrow Agreement. As further provided in the Escrow Agreement, if
during the term of the Escrow Agreement Parent shall suffer a Loss (as defined
in Section 7.2) hereof, Parent shall be entitled to receive for its own account
payment out of the Escrow Fund of that number of shares of Parent Common Stock,
valued as set forth in Section 1.4, as is required to reimburse Parent for such
Loss and satisfy Parent's right to indemnification under Section 7.2. Any claims
for payment in respect of Losses which are made by Parent under Section 7.2
hereof during the period between the Closing and the one-year anniversary of the
Closing (the "Escrow Release Date") shall be satisfied out of the Escrow Fund
unless and until the Escrow Fund shall be depleted, in which case Parent shall
be entitled to payment directly from the Company Stockholders in satisfaction of
any Losses; provided, that Parent's right to payment for Losses is in all cases,
in addition to and not in substitution of any other rights or remedies available
to Parent under this Agreement, any other agreement in respect of the
transactions contemplated by this Agreement, or by operation of law or in
equity, including the right to specific performance or injunctive relief. On the
Escrow Release Date, any shares of Parent Common Stock remaining in the Escrow
Fund shall be released to the Company Stockholders, subject to the provisions of
the Escrow Agreement. If there is any inconsistency between the terms of the
Escrow Agreement and this Agreement regarding the Escrow Fund, the terms of the
Escrow Agreement shall control.
1.7. Performance Incentive Payment.
(a) Within a reasonable period of time following confirmation
by Parent (but in any event no later than December 31, 2000), that: (i) the
Surviving Corporation's third quarter 2000 net revenue, calculated in accordance
with GAAP (the "Third Quarter Revenue"), subject to Section 1.7(b) hereof, is
(1) equal to or greater than $1,352,001 but equal to or less than $1,774,500 and
the EBITDA for the third quarter is at least 7.10% of the Third Quarter Revenue,
or (2) equal to or greater than $1,774,501 and the EBITDA for the third quarter
is at least 7.9% of the Third Quarter Revenue; and (ii) the result of the
Surviving Corporation's total liabilities minus its actual current assets as of
September 30, 2000 is equal to or less than the result of the Company's total
liabilities minus its actual current assets as of April 30, 2000, each of the
Selling Stockholders and any other holders of Parent Common Stock who acquired
such shares pursuant to the exercise of Company Options outstanding at the
Effective Time (the "Incentive Payees") shall receive from Parent a payment (the
"Third Quarter Stockholder Payment") to be calculated and distributed in
accordance with this Section 1.7. The term
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"net revenue" referred to in the first sentence of this Section 1.7 shall be
equal to the result of (x) subject to Section 1.7(b) below, all amounts billed
by the Surviving Corporation to its customers in the quarter ending September
30, 2000, less (y) the amount of any adjustment to revenue for bad debts,
uncollectible accounts receivable.
(b) Any revenue received from, or any of the Surviving
Corporation's accounts receivable in the third quarter of 2000 that are
attributable to, enerFinity, Inc., any other entity related to enerFinity, Inc.,
any other party identified on Section 2.7 of the Disclosure Schedule or any
other party related thereto shall not be included in the Surviving Corporation's
Third Quarter Revenue. In addition, the parties hereto understand and agree that
there shall be no reduction to the Third Quarter Stockholder Payment as a result
of the Surviving Corporation's failure to collect payment for the enerFinity AR
(as defined in Section 3.12).
(c) With respect to each Incentive Payee, the Third Quarter
Stockholder Payment shall be calculated by:
(i) determining the amount that is a proportionate amount
of that range of payments described in the table set forth
below which corresponds to the Third Quarter Revenue
produced by the Surviving Corporation (the "Incentive
Payment"), then
(ii) dividing (x) the number of shares of Company Stock
held by such Incentive Payee immediately prior to the
Effective Time by (y) the Company Capitalization (the
"Incentive Payee Share"), then
(iii) multiplying the Incentive Payment by the Incentive
Payee Share, and then
(iv) dividing the result of clause (iii) by $21.50 and
rounding down to the nearest whole number, the result of
this clause (iv) being the number of shares of Parent
Common Stock to be delivered to the applicable Incentive
Payee as the applicable Third Quarter Payment;
provided, that no fractional shares of Parent Common Stock shall be issued
pursuant to this Section 1.7.
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Shares of Parent
Third Quarter 2000 Revenue Incentive Payment Common Stock
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$0 - 1,352,000 $0 0
$1,352,001 - 1,436,500 $4,450,000 - 4,894,999 206,977 - 227,674
$1,436,501 - 1,521,000 $4,895,000 - 5,339,999 227,674 - 248,372
$1,521,001 - 1,605,500 $5,340,000 - 8,899,999 248,372 - 413,953
$1,605,501 - 1,690,000 $8,900,000 - 8,900,000 413,953 - 413-953
$1,690,001 - 1,774,500 $8,900,000 - 8,900,000 413,953 - 413,953
$1,774,501 - 1,859,000 $8,900,000 - 10,234,999 413,953 - 476,046
$1,859,001 - 1,943,500 $10,235,000 - 10,902,499 476,047 - 507,093
$1,943,501 - 2,028,000 $10,902,500 - 11,569,999 507,093 - 538,139
$2,028,001 or greater $11,570,000 538,140
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(d) In addition, the Incentive Payment determined in the
foregoing Section 1.7(c)(i) shall be treated as an increase in the value of the
Company and accordingly, for purposes of Section 1.3(c), the Company Equity
Value shall be increased by the amount of the Incentive Payment and the Exchange
Ratio (as determined in Section 1.3(a)), Option Conversion Ratio and Option
Conversion Price (both as determined in Section 1.3(c)) shall be adjusted.
1.8. Registration Rights. The Parent Common Stock to be delivered to
the holders of Company Stock as Merger Consideration shall have the benefit of a
registration rights agreement between Parent and such holders of Company Stock
who execute such agreement with Parent in the form attached hereto as Exhibit B
(the "Registration Rights Agreement").
1.9. Shares of Dissenting Stockholders.
(a) Notwithstanding anything in this Agreement to the contrary,
any shares of Company Stock that are issued and outstanding immediately prior to
the Effective Time and that are held by a stockholder who has properly exercised
and perfected his appraisal rights under Section 5.12 of the TBCA ("Dissenting
Shares") shall not be converted into or exchangeable for the right to receive
the Merger Consideration but shall entitle the holder thereof to receive payment
therefor as shall be determined pursuant to Section 5.12 of the TBCA.
(b) If such holder shall have failed to perfect or shall have
effectively withdrawn or lost his right to payment of fair value under the TBCA,
then as of the Effective Time, each share of Company Stock of such holder shall
thereupon be deemed to have been converted into and to have become exchangeable
for the right to receive the shares of Parent Common Stock without any interest
thereon, in accordance with Section 1.3 hereof, and such shares shall no longer
be Dissenting Shares.
(c) The Company shall give the Parent (i) prompt notice of its
receipt of any written demands for dissenters' rights for any shares of Company
Stock, withdrawals of such demands, and any other instruments relating to the
Merger served
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pursuant to Section 5.12 of the TBCA and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for dissenters' rights under the TBCA. The Company shall not, except
with the prior written consent of the Parent or as may be required under
applicable law, voluntarily make any payment with respect to any demands for
dissenters' rights for Company Stock or offer to settle or settle any such
demands.
1.10. Merger Sub Common Stock. Each share of Merger Sub Common Stock (as
defined in Section 4.2(b)) issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into one share of common stock of the
Surviving Corporation.
1.11. Articles of Incorporation and By-Laws. At the Effective Time, (i)
the articles of incorporation of the Surviving Corporation shall be amended and
restated in their entirety to read as the articles of incorporation of Merger
Sub in effect immediately prior to the Effective Time, except that such articles
of incorporation shall provide that the name of the corporation be AppliedTheory
Austin Corporation, and (ii) the by-laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended in accordance with applicable law, except that such
by-laws shall provide that the name of the corporation be AppliedTheory Austin
Corporation.
1.12. Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
and the officers of the Company and of the Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, each to hold
office in accordance with the articles of incorporation and by-laws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
STOCKHOLDERS
Except as disclosed in writing in the disclosure schedules being
delivered at or prior to the execution of this Agreement (the "Disclosure
Schedule"), which schedules shall identify the specific sections or subsections
in this Agreement to which each such disclosure relates, the Company
Stockholders hereby represent and warrant to Parent and Merger Sub as follows:
2.1. Authority; Execution and Delivery. The Company Stockholders have
the power, capacity and authority to enter into this Agreement and the other
agreements contemplated hereby and to perform fully their obligations hereunder
and thereunder. This Agreement and the other agreements contemplated hereby have
been duly executed and delivered by the Company Stockholders and constitute the
legal, valid and binding obligations of the Company Stockholders, enforceable
against the Company
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Stockholders in accordance with their terms, except as the enforcement hereof
(or thereof) may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general or by general
principles of equity.
2.2. No Other Agreements to Sell the Company Stock or the Business of
the Company. Except as provided for in this Agreement, the Company Stockholders
have no obligation, absolute or contingent, to any other person to (i) sell
their Company Stock, (ii) sell any assets of the Company (other than sales of
inventory in the ordinary course of the Company's business), (iii) issue, sell
or otherwise transfer any capital stock or any security convertible into or
exchangeable for capital stock of the Company, (iv) effect any merger,
consolidation or other reorganization of the Company or (v) enter into any
agreement with respect to any of the foregoing.
2.3. Ownership of Company Stock. The Company Stockholders are the
beneficial and record owners of the shares of Company Stock identified on
Section 2.3 of the Disclosure Schedule as being owned by each such Company
Stockholder and all such shares of Company Stock are, free and clear of any
Liens (as defined in Section 3.2(b)) of any nature whatsoever.
2.4. Validity of Contemplated Transactions. Subject to Sections 3.4 and
3.5 of this Agreement, the execution, delivery and performance of this Agreement
by each Company Stockholder does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any other person under (a) any existing law, ordinance, or
governmental rule or regulation to which the Company Stockholder is subject, (b)
any judgment, order, writ, injunction, decree or award of any Governmental
Entity which is applicable to the Company Stockholder, or (c) any mortgage,
indenture, agreement, contract, commitment, lease, plan or other instrument,
document or understanding, oral or written, to which such Company Stockholder is
a party, by which the Company Stockholder may have rights or by which any of the
properties or assets of the Company Stockholder may be bound or affected, or
give any party with rights thereunder the right to terminate, modify, accelerate
or otherwise change the existing rights or obligations thereunder.
2.5. Consents and Approvals. Except for spousal consents, neither the
execution and delivery by the Company Stockholders of this Agreement or the
other agreements contemplated hereby, nor the performance of the transactions
contemplated hereby and thereby, require the consent or approval of any person
nor constitute (with or without notice or lapse of time or both) a default or
cause any payment obligation to arise under (a) any law or court order to which
the Company Stockholders are subject, (b) any Contract or other document to
which the Company Stockholders are a party or by which the properties or other
assets of the Company Stockholders may be subject.
2.6. Accounts and Notes Receivable, etc. Except as set forth on Section
2.6 of the Disclosure Schedule, there are no outstanding Company receivables
from or advances to the Company Stockholders. There is no contest, claim,
counterclaim, defense or right of set-off with respect to any amounts owing from
the Company Stockholders to the Company.
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2.7. Related Parties. Except as set forth on Section 2.7 of the
Disclosure Schedule, none of the Company Stockholders holds, or has held,
directly or indirectly, any interest that corresponds to, or is convertible
into, 1% or more of the outstanding equity interests of any entity that conducts
or has conducted business, or any entity that is or has been a party to an
agreement, with the Company or any Company Subsidiary.
2.8. Litigation. There is no action, claim, suit or proceeding pending
or, to the knowledge of the Company Stockholders, threatened by or against or
affecting the Company Stockholders or their Company Stock and, to the knowledge
of the Company Stockholders, there is no investigation pending or threatened
against or affecting the Company Stockholders or their Company Stock, in each
case before any court or governmental or regulatory authority or body, that
could reasonably be expected to have an adverse effect on the consummation of
the transactions contemplated by this Agreement. There are no writs, decrees,
injunctions or orders of any court or governmental or regulatory agency,
authority or body outstanding against such Stockholder with respect to his
Company Stock.
2.9. Authority; Execution and Delivery. The Company Stockholders have
all requisite power, capacity and authority to enter into this Agreement and to
perform fully their obligations hereunder. This Agreement has been duly executed
and delivered by the Company Stockholders and constitutes the legal, valid and
binding obligation of the Company Stockholders, enforceable against the Company
Stockholders in accordance with its terms, except as the enforcement hereof (or
thereof) may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights in general or by general
principles of equity.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
COMPANY STOCKHOLDERS REGARDING THE COMPANY
Except as disclosed in writing in the Disclosure Schedule, which
Disclosure Schedule shall identify the specific sections or subsections in this
Agreement to which each such disclosure relates, the Company and the Company
Stockholders hereby jointly and severally represent and warrant to Parent as
follows:
3.1. Organization. The Company and each of its Subsidiaries (as defined
in Section 9.1, each a "Company Subsidiary" and collectively the "Company
Subsidiaries") are duly organized, validly existing and in good standing under
the laws of the jurisdiction of their incorporation or organization and have all
requisite power and authority to own, lease and operate their properties and to
carry on their businesses as now being conducted. The Company and each Company
Subsidiary are duly qualified or licensed to do business and are in good
standing in each jurisdiction in which the property owned, leased or operated by
them or the nature of the business conducted by them makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that, individually or in the aggregate,
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would not have a material adverse effect on the business, financial condition or
results of operations of the Company or any Company Subsidiary (a "Company
Material Adverse Effect"). Section 3.1 of the Disclosure Schedule sets forth a
list of all jurisdictions where the Company and the Company Subsidiaries are
qualified to do business. The Company has previously delivered to Parent true,
correct and complete copies of the articles of incorporation and by-laws (or
equivalent governing instruments) and all amendments thereto, as currently in
effect, of the Company and each Company Subsidiary.
3.2. Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Stock and 1,000,000 shares of preferred stock, no
par value (the "Company Preferred Stock"). As of May 30, 2000, there were
12,157,000 shares of Company Stock and no shares of Company Preferred Stock
issued and outstanding. As of May 30, 2000, options to acquire 1,963,400 shares
of Company Stock were outstanding pursuant to the terms of the Team Tech
Incentive Stock Option Plan (the "Company Option Plan"), such options being
described on Section 1.3(c) of the Disclosure Schedule. Since such date, neither
the Company nor any Company Subsidiary has granted or otherwise promised or
undertaken to grant any additional options or other rights that are convertible
into, or exercisable for, Company Stock or other ownership rights of the
Company, nor have any of such parties made representations that are convertible
into, or exercisable for, Company Stock or other ownership right's of the
Company. All issued and outstanding shares of Company Stock have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as described on Section 1.3(c) of the Disclosure
Schedule, the Company does not have outstanding any subscription, option, put,
call, warrant or other right or commitment to issue or any obligation or
commitment to redeem or purchase, any of its authorized capital stock or any
securities convertible into or exchangeable for any of its authorized capital
stock. Except as disclosed on Section 3.2(a) of the Disclosure Schedule, there
are no shareholder agreements, voting agreements, voting trusts or other similar
arrangements to which the Company is a party which have the effect of
restricting or limiting the transfer, voting or other rights associated with the
capital stock of the Company. Section 3.2(a) of the Disclosure Schedule contains
a true, accurate and correct shareholders' list, setting forth the number of
shares of Company Stock owned beneficially and of record by each stockholder of
the Company as of the date of this Agreement, and a list setting forth all
outstanding options and other rights convertible into, or exercisable for,
Company Stock as well as all holders thereof.
(b) Section 3.2(b) of the Disclosure Schedule contains a true,
accurate and correct list of all Company Subsidiaries, setting forth the
Company's ownership interest in each such Company Subsidiary and the ownership
interest that other parties may have in each such Company Subsidiary (if any).
Except for the Company's ownership interest in the Company Subsidiaries, the
Company does not own, directly or indirectly, any equity interest in any
corporation, partnership, joint venture, business, trust or entity. All of the
outstanding shares of capital stock of each Company Subsidiary are owned by the
Company or a Company Subsidiary (collectively, the "Company Subsidiary Shares"),
have been duly authorized and are validly issued, fully
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<PAGE> 16
paid and nonassessable and free of preemptive rights. There are no irrevocable
proxies or similar obligations with respect to any of the Company Subsidiary
Shares and all of the Company Subsidiary Shares are owned by the Company or a
Company Subsidiary, as the case may be, free and clear of all liens, claims,
pledges, charges, claims, encumbrances, third party rights, security interests
or other restrictions (collectively, "Liens") with respect thereto. No Company
Subsidiary has outstanding any subscription, option, put, call, warrant or other
right or commitment to issue, nor any obligation or commitment to redeem or
purchase, any of its authorized capital stock, or any securities convertible
into or exchangeable for any of its authorized capital stock. Section 3.2(b) of
the Disclosure Schedule sets forth the name and jurisdiction of incorporation
each Company Subsidiary.
3.3. Authorization; Binding Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby. The execution and delivery of this
Agreement and all agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby have been unanimously approved by
the board of directors of the Company and duly and validly authorized by all
necessary corporate action on the part of the Company and, where applicable, the
Company Stockholders. This Agreement constitutes, and all agreements and
documents contemplated hereby to which the Company is, or will be, a party
constitute, legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
3.4. Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the articles of
incorporation, as amended, or by-laws, as amended, of the Company or the
equivalent governing instruments of any Company Subsidiary, (b) except as set
forth on Section 3.4 of the Disclosure Schedule, require any consent, approval
or notice under or conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration) under, or impair
invalidate or otherwise affect, any of the terms, conditions or provisions of
any Real Property Lease (as defined in Section 3.8), Contract (as defined in
Section 3.8), Future Contract (as defined in Section 3.8), Indebtedness (as
defined in Section 3.8), any Company Property (as defined in Section 3.19(b)) or
other items or rights identified on Section 3.19(b) of the Disclosure Schedule,
or any other note, bond, mortgage, indenture, license, agreement or other
instrument or obligation (the "Other Agreements") to which the Company or any
Company Subsidiary is a party or by which any of them or any portion of their
properties or assets may be bound or (c) violate any order, judgment, writ,
injunction, determination, award, decree, law, statute, rule or regulation
(collectively, "Legal Requirements") applicable to the Company or any Company
Subsidiary or any portion of their properties or assets, except with respect to
clauses (b) and (c) such matters that, individually or in the aggregate, have
not had and could not reasonably be expected to have a Company Material Adverse
Effect.
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3.5. Governmental Approvals. No consent, approval or authorization of,
or declaration or filing, with any foreign, federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(each, a "Governmental Entity") on the part of the Company or any Company
Subsidiary that has not been obtained or made is required in connection with the
execution or delivery by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby, other than (a) the filing
of the certificate of merger with the Secretary of State of the State of Texas,
and (b) consents, approvals, authorizations, declarations or filings that, if
not obtained or made, would not, individually or in the aggregate, have a
Company Material Adverse Effect or prevent the Company from consummating the
transactions contemplated hereby.
3.6. Financial Statements. Section 3.6 of the Disclosure Schedule sets
forth true, correct and complete copies of the audited balance sheets,
statements of income, statements of stockholders' equity and statements of cash
flows for the fiscal years ended December 31, 1998 and December 31, 1999,
unaudited balance sheets as of March 31, 2000 and April 30, 2000 and unaudited
statements of income, statements of changes of operations, statements of
stockholders' equity and statements of cash flows for the three-month period
ending March 31, 2000 as well as for the four-month period ending April 30, 2000
(collectively, the "Company Financial Statements"). The Company Financial
Statements, including the related notes, have been prepared from and are in
accordance with the books and records of the Company and are true, complete and
accurate and fairly present in all material respects the financial position,
results of operations and changes in financial position of the Company as of the
dates and for the periods indicated (subject in the case of unaudited
statements, to normal year-end audit adjustments which would not be material in
amount or effect, in each case in accordance with GAAP consistently applied
throughout the periods indicated).
3.7. No Undisclosed Liabilities. Neither the Company nor any Company
Subsidiary has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) which are not reflected in the Company Financial
Statements except for liabilities and obligations incurred in the ordinary
course of business since April 30, 2000, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Company Material
Adverse Effect.
3.8. Validity of Leases and Contracts. Neither the Company nor any
Company Subsidiary owns any real property. Section 3.8 of the Disclosure
Schedule sets forth a list of every (a) lease of real property and all other
leased interests in real property that are used by the Company or any Company
Subsidiary (a "Real Property Lease"), (b) all material leases, licenses,
contracts, agreements, purchase or sales orders, employee secrecy or
confidentiality agreements, undertakings, indentures and written commitments to
which the Company or any Company Subsidiary is a party or by which any of the
assets of the Company or any Company Subsidiary is bound, including all ongoing
agreements, licenses, written commitments or other engagements and other
instruments of any kind, including all agreements by any person or entity with
the Company with respect to non-competition or non-disclosure that relate to the
Company or any of its assets, but excluding Company Plans (as defined in Section
3.14(a)) (collectively, the
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<PAGE> 18
"Contracts"), (c) any written proposal, quotation or bid made or received by the
Company in connection with its business that, if accepted, would lead to a
contract for the provision of services by the Company (a "Future Contract") and
(d) any note, debenture, bond, equipment trust agreement, letter of credit, loan
agreement or other contract or commitment for the borrowing or lending of money
or agreement or arrangement for a line of credit or guarantee, pledge or
undertaking of the indebtedness of any other person (collectively,
"Indebtedness"). To the Company's knowledge, each Real Property Lease or
Contract pursuant to which the Company leases real or personal property and each
other Contract, Future Contract or Indebtedness, is valid, legally binding and
enforceable in accordance with its terms and neither the Company nor any Company
Subsidiary is in default under any material provision of any such lease,
contract, agreement or instrument. After obtaining the consents identified on
Section 3.4 of the Disclosure Schedule, upon the completion of the transactions
contemplated by this Agreement, each such agreement will be valid, legally
binding and enforceable by the Surviving Corporation in accordance with its
terms. Any party from whom the Company leases real property or which is a party
to any Contract, Future Contract or Indebtedness, is not, and will not (with due
notice or lapse of time or both), be in default under any provision of any such
Real Property Lease, Contract, Future Contract or Indebtedness. The Company is
not a party to any oral agreements, undertakings or commitments with respect to
any of the matters listed in this Section 3.8 except for ordinary non-material
business arrangements.
3.9. Absence of Certain Changes or Events. Except as disclosed on
Section 3.9(a) of the Disclosure Schedule, since April 30, 2000, the Company and
the Company Subsidiaries have conducted business in the ordinary and usual
course and, without limiting the generality of the foregoing:
(a) There have been no changes, developments, events,
conditions or state of affairs which, individually or in the aggregate, have had
or could reasonably be expected to have a Company Material Adverse Effect;
(b) Except as contemplated by the transactions described in
this Agreement and specifically set forth on Section 3.9(b) of the Disclosure
Schedule, there has not been any split, combination or reclassification of
Company Stock or any issuance, or authorization of the issuance, of any
securities in respect of, in lieu of, or in substitution for the capital stock
of the Company or any Company Subsidiary or any declaration, setting side or
payment of any dividend or other distribution (whether in cash, securities,
property or otherwise) in respect of the capital stock of the Company or any
Company Subsidiary;
(c) Except as contemplated by the transactions described in
this Agreement and specifically set forth on Section 3.9(c) of the Disclosure
Schedule, neither the Company nor any Company Subsidiary has purchased, redeemed
or otherwise acquired or committed itself to acquire, directly or indirectly,
any of the capital stock of the Company or any Company Subsidiary;
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(d) Neither the Company nor any Company Subsidiary has sold,
assigned, conveyed or otherwise transferred any Owned Property (as defined in
Section 3.19);
(e) Neither the Company nor any Company Subsidiary has sold,
assigned, conveyed or otherwise transferred any properties or assets of the
Company or any Company Subsidiary;
(f) Neither the Company nor any Company Subsidiary has
mortgaged, pledged or subjected to any Lien any assets of the Company or of any
Company Subsidiary;
(g) Neither the Company nor any Company Subsidiary has
cancelled, terminated, entered into or modified any Contract, Future Contract or
Real Property Lease;
(h) Neither the Company nor any Company Subsidiary has waived
any material right of the Company with respect to the business of the Company,
whether or not in the ordinary course of business;
(i) Neither the Company nor any Company Subsidiary has incurred
any liability or loss with respect to any of the assets or operations of the
Company, except for liabilities incurred in the ordinary course of business,
consistent with past practices, which do not result in a Company Material
Adverse Effect;
(j) Neither the Company nor any Company Subsidiary has incurred
any capital expenditure or executed any lease or other agreement with respect to
any assets of the Company or any aspect of the business of the Company, or
incurred any liability therefor, requiring any payment or payments in excess of
$10,000 individually or $25,000 in the aggregate;
(k) There have not been any material cancellations or any
threats of material cancellations by any supplier, customer or contractor of the
Company or any Company Subsidiary with respect to the business of the Company or
any Company Subsidiary;
(l) Neither the Company nor any Company Subsidiary has effected
any amendment or supplement to, or extension of, any Company Plan;
(m) Neither the Company nor any Company Subsidiary has (i)
granted to any director or executive officer of, or consultant to, the Company
or any Company Subsidiary any increase in compensation, except for customary
increases in cash compensation in the ordinary course of business consistent
with prior practice, except as was required under any employment agreements or
plans in effect as of April 30, 2000, (ii) agreed to any granting by the Company
or any Company Subsidiary to any such director, executive officer or consultant
of any increase in severance or termination pay, except as was required under
any employment, severance or termination agreements or plans in effect as of
April 30, 2000, (iii) except as permitted by Section
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<PAGE> 20
5.1, after the date of this Agreement, agreed to any entry by the Company or any
Company Subsidiary into, or any amendment of, any employment, consulting,
deferred compensation, indemnification, severance or termination agreement with
any such director, executive officer or consultant or (iv) agreed to, or taken
any action to, accelerate the vesting of any Company Option or other
equity-based compensation;
(n) Neither the Company nor any Company Subsidiary has made any
change in accounting methods or principles used for financial or regulatory
reporting purposes materially affecting the consolidated assets, liabilities or
results of operations; and
(o) Neither the Company nor any Company Subsidiary has entered
into any agreement or arrangement or otherwise agreed to do any of the
foregoing.
3.10. Litigation, Judgments, No Default, Etc. (a) Except as disclosed on
Section 3.10(a) of the Disclosure Schedule, there is no action or proceeding
pending or threatened against or affecting the Company or any Company
Subsidiary, the outcome of which, individually or in the aggregate, could
reasonably be expected to result in a Company Material Adverse Effect, (b) there
is no judgment, decree, injunction, rule or order (collectively, "Orders") of
any court, arbitrator or Governmental Entity outstanding against the Company or
any Company Subsidiary, and (c) there are no facts that would result in any such
action or proceeding which could reasonably be expected to have a Company
Material Adverse Effect.
3.11. Compliance. Neither the Company nor any Company Subsidiary is in
default or violation of any term, condition or provision of (a) its articles of
incorporation, as amended, or by-laws, as amended (or equivalent governing
instruments), or (b) any Real Property Lease, Contract, Indebtedness or Other
Agreements to which it is a party or by which any of them or any portion of
their properties or assets may be bound; except with respect to the foregoing
clause (b) such matters that, individually or in the aggregate, have not had and
could not reasonably be expected to have a Company Material Adverse Effect.
3.12. Accounts Receivable; Equipment and Assets.
(a) Section 3.12 of the Disclosure Schedule sets forth a
complete list of the accounts receivable of the Company and all Company
Subsidiaries as of April 30, 2000. The accounts receivable of the Company or the
applicable Company Subsidiary arose out of the ordinary course of business of
the Company, have been billed or invoiced in the ordinary course of business in
accordance with all applicable laws, regulations and administrative rulings and
procedures, represent bona fide indebtedness of the applicable debtor of the
Company or any Company Subsidiary, not subject to defense, set-off or
counterclaim and are collectible in full, net of the reserves set forth in the
books of the Company.
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(b) Notwithstanding the foregoing or anything else to the
contrary contained in this Agreement, neither the Merger Consideration, the
Company Equity Value, nor the Incentive Payment shall be reduced or adjusted in
any way because the Company (or its successors or assigns) fails at any time to
collect the $455,919.20 invoiced by the Company to enerFinity, Inc. prior to the
Closing through those certain invoices dated January 31, 2000, February 29, 2000
and March 31, 2000 (the "enerFinity AR"). Furthermore, the Parent agrees that
following the Closing, except for claims alleging fraud, no party under Parent's
control (including the Surviving Corporation, the Parent, their affiliates,
successors and assigns) shall be permitted by any party under Parent's control
to bring any claim or cause of action against any individual officer, director,
shareholder, or employee of enerFinity, Inc. related to the enerFinity AR. The
Parent covenants that if it sells the Surviving Corporation after the Closing or
sells, pledges, assigns or otherwise conveys the enerFinity AR, the other party
to such transaction will agree to the be bound by the restrictions described in
this Section 3.12(b) as though such party was a party under Parent's control.
(c) Notwithstanding the foregoing paragraph (a) of this Section
3.12, all accounts receivable of the Company that are set forth on Section 3.12
of the Disclosure Schedule and arise from work performed for, or services
provided to, enerFinity, Inc. arose out of the ordinary course of business of
the Company or the applicable Company Subsidiary or the applicable Company
Subsidiary, have been billed or invoiced in the ordinary course of business in
accordance with all applicable laws, regulations and administrative rulings and
procedures, represent bona fide indebtedness of the applicable debtor of the
Company or any Company Subsidiary, not subject to defense, set-off or
counterclaim and are collectible in full.
(d) All assets of the Company and the Company Subsidiaries
consisting of equipment, whether reflected in the Company Financial Statements
or otherwise, are well maintained and in good operating condition, except for
reasonable wear and tear and except for items which have been written down in
the Company Financial Statements to a realizable market value or for which
adequate reserves have been provided in the Company Financial Statements. The
present quantity of all such equipment of the Company and the Company
Subsidiaries is reasonable and warranted in the present course of the business
conducted by the Company and the Company Subsidiaries. All of such equipment
(except for leased equipment for which the lessors have valid security interest)
is free and clear of any lien or security interest or other encumbrance.
3.13. Tax Matters. "Taxes", as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies, or other
assessments, including, without limitation, all net income, gross income, sales,
use, ad valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
alternative minimum, severance or withholding taxes or
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<PAGE> 22
charges imposed by any Governmental Entity, whether foreign or domestic, and
includes any additions to tax, interest and penalties. "Tax Return", as used in
this Agreement, means a report, return, statement, declaration or other
information required to be supplied with respect to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(a) Filing of Timely Tax Returns. Except for Tax Returns that
are currently subject to an extension that has been properly obtained, all Tax
Returns required to be filed by the Company and each Company Subsidiary under
applicable law have been filed on a timely basis. All such Tax Returns were and
are true, complete and correct.
(b) Payment of Taxes. The Company and each Company Subsidiary
have, within the time and in the manner prescribed by law, paid all Taxes that
are currently due and payable. No written claim (and no other claim) has ever
been made by an authority in a jurisdiction where any of the Company or its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
in that jurisdiction.
(c) Tax Reserves. The Company and each Company Subsidiary have
established (and until the Closing Date will maintain) on their books and
records, including the Company Financial Statements and the Closing Financial
Statements (as defined in Section 5.3) (i) reserves adequate to pay all Taxes
and all deficiencies in Taxes asserted, proposed or threatened against the
Company or the Company Subsidiaries and (ii) reserves for deferred income taxes,
in each case in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of the
Company or any Company Subsidiary except liens for Taxes not yet due.
(e) Withholding Taxes. The Company and each Company Subsidiary
have complied in all respects with the provisions of the Code relating to the
withholding of Taxes, including, without limitation, the withholding and
reporting requirements under Sections 1441 through 1464, 3401 through 3406, and
6041 through 6049 of the Code, as well as any similar provisions under any other
laws, and have, within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental authorities all
amounts required.
(f) Intentionally Omitted.
(g) Waivers of Statute of Limitations. Neither the Company nor
any Company Subsidiary has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect to
any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations; Deficiencies. Section
3.13(h) of the Disclosure Schedule contains a list of all Taxes and Tax Returns
relating to taxable periods with respect to which the statute of limitations has
not expired or been closed. No deficiency for any Taxes has been proposed,
asserted, assessed or, to the Company's knowledge, threatened against the
Company or any Company Subsidiary that
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has not be resolved and paid in full or previously disclosed by the Company to
the Parent. Section 3.13(h) of the Disclosure Schedule lists all open years with
respect to Taxes and Tax Returns.
(i) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or any Company Subsidiary.
Neither the Company nor any Company Subsidiary nor any Company Stockholder has
any knowledge of any threatened action, audit or administrative or court
proceeding with respect to any such Taxes or Tax Returns. Further, to the best
of the Company's and the Company Stockholders' knowledge, no state of facts
exists or has existed which would constitute grounds for the assessment of any
liability for Taxes with respect to the periods which have not been audited by
the Internal Revenue Service (the "IRS") or other taxing authority.
(j) Tax Rulings. Neither the Company nor any Company Subsidiary
has received a Tax Ruling (as defined below) or entered into a Closing Agreement
(as defined below) with any taxing authority that could have a continuing
adverse effect after the Closing Date. "Tax Ruling", as used in this Agreement,
shall mean a written ruling of a taxing authority relating to Taxes. "Closing
Agreement", as used in this Agreement, shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
(k) Availability of Tax Returns. To the extent not previously
provided, as soon as practicable after the date hereof, the Company and the
Company Subsidiaries will make available to the Parent complete and accurate
copies of such of the following materials as the Parent may reasonably request:
(i) Tax Returns filed by the Company and any Company Subsidiary since the
Company's incorporation, (ii) audit reports received from any taxing authority
relating to any Tax Return filed by the Company and any Company Subsidiary and
(iii) Closing Agreements entered into by the Company and any Company Subsidiary
with any taxing authority.
(l) Tax Sharing Agreements. Neither the Company nor any Company
Subsidiary is a party to any Tax allocation or sharing or similar agreement or
arrangement with any person other than the Company and its Subsidiaries.
(m) Affiliated Groups; Liability for Others. Neither the
Company nor any Company Subsidiary has ever been a member of an affiliated group
of corporations filing consolidated, combined or unitary Tax Returns other than
an affiliated group in which the Company was the common parent. Neither the
Company nor any Company Subsidiary has any liability for Taxes of any person
other than the Company and its Subsidiaries under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(n) Section 341(f). Neither the Company nor any Company
Subsidiary has filed a consent pursuant to Section 341(f) of the Code or has
agreed to
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have Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as that term is defined in Section 341(f)(4) of the Code) owned by the
Company or any Company Subsidiary.
(o) Section 168. No property of the Company or any Company
Subsidiary is property that the Company or any such Company Subsidiary or any
party to this transaction is or will be required to treat as being owned by
another person pursuant to the provisions of Section 168(f)(8) of the Code (as
in effect prior to its amendment by the Tax Reform Act of 1986) or is
"tax-exempt use property" within the meaning of Section 168 of the Code.
(p) Section 481 Adjustments. Neither the Company nor any
Company Subsidiary is required to include in income any adjustment pursuant to
Section 481(a) of the Code by reason of a voluntary change in accounting method
initiated by the Company or any Company Subsidiary, and the IRS has not proposed
any such adjustment or change in accounting method.
(q) Section 453. The Company has not disposed of any property
in a transaction being accounted for under the installment method pursuant to
Section 453 of the Code.
(r) Section 280G. Except as set forth on Section 3.13(r) of the
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to any agreement, contract, or arrangement that could result, either directly or
indirectly, on account of the transactions contemplated hereunder, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(s) Real Property Holding Corporation. The Company has 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).
3.14. Employee Benefit Plans.
(a) Section 3.14(a) of the Disclosure Schedule sets forth a
true and correct list of each deferred compensation plan, stock option plan,
incentive compensation plan, equity compensation plan, "welfare plan" (within
the meaning of Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")); "pension plan" (within the meaning of Section 3(2)
of ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed to
by the Company, any Company Subsidiary or by any trade or business, whether or
not incorporated, which together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "ERISA Affiliate") for
the benefit of any employee or former employee of the Company or any Company
Subsidiary. Such plans are referred to collectively herein as the "Company
Plans".
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(b) The Company has heretofore made available to Parent with
respect to each of the Company Plans true and correct copies of each of the
following documents, if applicable: (i) the Company Plan document; (ii) the
actuarial report for such Company Plan for each of the last two years, (iii) the
most recent determination letter from the IRS for such Company Plan, (iv) the
most recent summary plan description and related summaries of material
modifications and (v) the Form 5500 tax forms for each of the last two years.
(c) Each Company Plan is in material compliance with its terms
and the applicable provisions of the Code and ERISA; each Company Plan intended
to be "qualified" within the meaning of Section 401(a) of the Code has received
a determination letter from the IRS that the Company Plan is qualified and the
Company knows of no condition or event that could reasonably be expected to
adversely affect such status; neither the Company, the Company Subsidiaries, nor
any ERISA Affiliate has or at any time in the past has had (i) any liability,
contingent or otherwise, under Title IV of ERISA or Section 412 of the Code,
(ii) an obligation to contribute to any "multiemployer plan" (as defined in
Section 3(37) of ERISA); and there are no pending, or to the knowledge of the
Company, threatened or anticipated disputes, law suits, investigations, audits,
complaints or claims (other than routine claims for benefits) by, on behalf of
or against any of the Company Plans or any trusts related thereto.
(d) Neither the Company nor any Company Subsidiary has any
current or projected liability in respect of post-employment or post-retirement
health or medical or life insurance benefits for retired, former or current
employees of the Company, except as required to avoid excise tax under Section
4980B of the Code and to comply with Section 601 of ERISA.
(e) Except as disclosed on Section 3.14(e) of the Disclosure
Schedule, the execution of, and performance of the transactions contemplated in
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Company Plan, trust or loan
that will or may result in any material payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any current
or former employee, executive or director of the Company or any Company
Subsidiary.
(f) With respect to each Company Plan, there has not occurred,
and no person or entity is contractually bound to enter into, any nonexempt
"prohibited transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA, nor any transaction that would result in a civil penalty
being imposed under Section 409 or 502(i) of ERISA, except for any such
transactions which, individually or in the aggregate, would not be reasonably
likely to have a Company Material Adverse Effect.
(g) Neither the Company nor any Company Subsidiary has entered
into any agreement, contract, or arrangement or made or given any undertaking
that could result, either directly or indirectly, in any claim against the
Company, any Company Subsidiary or, following the Merger, Parent or the
Surviving Corporation to the
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effect that any holder of a Company Option is entitled to the acceleration of
vesting, elimination of transfer restrictions or any other change or
modification to his or her Company Option.
(h) The Company and each Company Subsidiary are in compliance
with all applicable federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment,
wages, hours and withholding.
3.15. Finders and Investment Bankers. Except as set forth on Section
3.15 of the Disclosure Schedule, neither the Company nor any Company Subsidiary,
nor any of their respective employees, officers or directors has employed any
investment banker, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the transactions contemplated
hereby.
3.16. Collective Bargaining Agreements; Employment Matters.
(a) Neither the Company nor any Company Subsidiary is a party
to or subject to any collective bargaining agreement with any labor union. There
are no labor controversies pending or threatened against the Company or any
Company Subsidiary.
(b) There are no pending collective bargaining negotiations
relating to the employees of the Company. There are no agreements with, or
pending petitions for recognition of, a labor union or association as the
exclusive bargaining agent for any or all of the employees of the Company, no
such petitions have been pending within the past five years and there has not
been any general solicitation of representation cards by any union seeking to
represent the employees of the Company as their exclusive bargaining agent at
any time within the past five years. There is no unfair labor practice, charge
or complaint or other proceeding pending or, threatened, against the Company
before the National Labor Relations Board or any other Governmental Entity.
There is no labor strike, slowdown or stoppage pending or threatened, against or
affecting the Company, nor has there been any such activity within the past two
years.
(c) There are no pending claims by any current or former
personnel against the Company or any Company Subsidiary, there are no pending
claims against the Company or any Company Subsidiary arising out of any statute,
ordinance or regulation relating to employment practices or occupational or
safety and health standards.
3.17. Insurance. The Company and each Company Subsidiary carries
insurance with insurers that are, to the best of the Company's knowledge,
solvent, in amount and types of coverage which, to the best of the Company's
knowledge, are customary in the industry and against risks and losses which are
usually insured against by persons holding or operating similar properties and
similar businesses. No material
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claims have been asserted under any of such insurance policies or relating to
the properties, assets or operations of the Company or any Company Subsidiary.
Section 3.17 of the Disclosure Schedule sets forth a complete and accurate list
of each insurance policy and the corresponding insurance carrier of the Company
and each Company Subsidiary.
3.18. No Conflict of Interest. No present or former officer, director,
affiliate or associate of the Company or any Company Subsidiary has or claims to
have (i) any interest in the property, real or personal, tangible or intangible,
including, without limitation, licenses, inventions, technology, processes,
designs, computer programs, know-how and formulae used in or pertaining to the
business of the Company, or (ii) any contract, commitment, arrangement or
understanding, including, without limitation, loan arrangement, with the Company
or any Company Subsidiary. Except as set forth in Section 3.18 of the Disclosure
Schedule, no present officer or director of the Company or any Company
Subsidiary, and no affiliate thereof have any ownership or stock interest in any
other enterprise, firm, corporation, trust or any other entity which is engaged
in any line or lines of business which are the same as, or similar to, or
competitive with, the line or lines of business of the Company. For purposes of
this representation, ownership of not more than one percent of the voting stock
of any publicly held company whose stock is listed on any recognized securities
exchange or traded over the counter shall be disregarded.
3.19. Intellectual Property. (a) For purposes of this Section 3.19,
"Intellectual Property" shall mean, collectively: (x) all U.S. and foreign
registered, unregistered and pending (i) trade names, trade dress, trademarks,
service marks, assumed names, business names and logos, internet domain names
and all registrations and applications therefor, together with all goodwill
symbolized thereby, web sites and web pages and related items (and all
intellectual property and proprietary rights incorporated therein), (ii)
computer software, data files, source and object codes, user interfaces, manuals
and other specifications and documentation and all know-how relating thereto
(collectively, the "Computer Software"), (iii) copyrights (including, without
limitation, those in Computer Software, and all registrations and applications
therefor), (iv) utility and design patents, registered designs and invention
disclosures (including, without limitation, those relating to Computer
Software), and all grants, registrations and applications therefor
(collectively, the "Patents"), (v) trade secrets, inventions, processes,
formulae, know-how, concepts, ideas, research and development, designs, business
plans, strategies, marketing and other information and customer lists
(collectively, the "Trade Secrets"), and (vi) other intellectual property,
including, without limitation, adequate research and development facilities; and
(y) all Contracts relating to any of the items set forth in clause (x) above
(collectively, the "IP Contracts").
(b) Section 3.19(b) of the Disclosure Schedule sets forth a
complete and accurate list of (i) all material Intellectual Property in which
the Company or any Company Subsidiary has an ownership interest, indicating the
owner thereof, and all applications, registrations and grants with respect
thereto (collectively, the "Owned Property"), (ii) all material Intellectual
Property (other than the Owned Property) which is used in or relates to the
business of the Company or of any Company Subsidiary,
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indicating the owner or licensor thereof, and (iii) all IP Contracts with
respect to the Intellectual Property referred to in clauses (i) and (ii) above.
The Intellectual Property included in clauses (i) and (ii) above is collectively
referred to herein as the "Company Property".
(c) Except as set forth on Section 3.19(c) of the Disclosure
Schedule, the Company or a Company Subsidiary is the sole and exclusive owner of
the Owned Property, and is listed in the records of the appropriate U.S. and/or
foreign governmental agencies as the sole and exclusive owner of record for each
registration, grant and application listed in Section 3.19(b) of the Disclosure
Schedule.
(d) Except as set forth on Section 3.19(d) of the Disclosure
Schedule, no act has been done or omitted to be done by the Company or any
Company Subsidiary, or any licensee thereof, which has had or could have the
effect of impairing or dedicating to the public, or entitling any U.S. or
foreign governmental authority or any other person to cancel, forfeit, modify or
consider abandoned, any Owned Property, or give any person any rights with
respect thereto (other than pursuant to an IP Contract on Section 3.19(b) of the
Disclosure Schedule), and all of the Company's or a Company Subsidiary's rights
in the Company Property are valid, enforceable and free of defects, except for
such defects as are not reasonably expected to result in a material adverse
effect on the Company Property. Neither the Company nor any Company Subsidiary
has any knowledge of any facts or claims which cause or would cause any Company
Property to be invalid or unenforceable in any material respect, and neither the
Company nor any Company Subsidiary has received any notice that any person may
bring such a claim.
(e) The Company and each Company Subsidiary owns or otherwise
has the valid right to use through an IP Contract listed on Section 3.19(b) of
the Disclosure Schedule any and all Intellectual Property that is used in or is
necessary or advisable for the conduct of the Company's, or any Company
Subsidiary's, business as currently conducted and as contemplated to be
conducted, free and clear of any lien, encumbrance, royalty or other payment
obligations (except for royalties payable in respect of off-the-shelf Computer
Software at standard commercial rates) and otherwise on commercially reasonable
terms.
(f) Except for such conflicts, violations, infringements as
would not result in a Company Material Adverse Effect, none of the Company, any
Company Subsidiary or their businesses as currently conducted or as contemplated
to be conducted, is in conflict with or in violation or infringement of, or has
violated or infringed, nor has the Company or any Company Subsidiary received
any notice of any conflict with or violation or infringement of, nor are
proceedings or claims pending, nor have any such proceedings or claims been
instituted or asserted in writing against the Company or any Company Subsidiary,
nor are any proceedings threatened, alleging any violation, nor, to the best of
the Company's knowledge, is there any valid basis for any such proceeding or
claim, of any rights or asserted rights of any other person with respect to any
Intellectual Property of such other person.
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(g) No proceedings or claims in which the Company or any
Company Subsidiary alleges that any person is infringing upon, or otherwise
violating, any Company Property are pending, and none have been served by,
instituted or asserted by the Company or any such Company Subsidiary, nor are
any proceedings threatened alleging any such violation or infringement, nor does
the Company or any such Company Subsidiary know of any valid basis for any such
proceeding or claim.
(h) To the best of the Company's knowledge, after due inquiry,
neither the Company nor any Company Subsidiary has, prior to the date hereof,
divulged, furnished to or made accessible to any person, any Trade Secrets
included in the Company Property without prior thereto having obtained an
enforceable agreement of confidentiality from such person, and all such
confidentiality agreements are listed on Section 3.19(h) of the Disclosure
Schedule. All key personnel employed by the Company and any Company Subsidiary
have signed agreements of confidentiality which are, to the best of the
Company's knowledge, enforceable.
(i) The Company or a Company Subsidiary have obtained from all
individuals who participated in any respect in the invention or authorship of
any material Owned Property (as employees of the Company or a Company
Subsidiary, as consultants, as employees of consultants or otherwise) effective
waivers of any and all ownership rights of such individuals in such Owned
Property, and assignments to the Company or any Company Subsidiary of all rights
with respect thereto, other than from such individuals whose copyrightable works
the Company hereby represent to be "works made for hire" within the meaning of
Section 101 of the Copyright Act of 1976. No officer or employee of the Company
or any Company Subsidiary is subject to any agreement with any other person or
entity which requires such officer or employee to assign any interest in
inventions or other intellectual property or keep confidential any trade
secrets, proprietary data, customer lists or other business information or which
restricts such officer or employee from engaging in competitive activities or
solicitation of customers.
(j) To the best of the Company's knowledge, the Company has
taken all commercially reasonable efforts to safeguard and maintain its
proprietary rights in the Owned Property.
3.20. Compliance with Laws. To the best of the Company's knowledge, the
businesses of the Company and each Company Subsidiary have been conducted in all
material respects in accordance with all Legal Requirements applicable to the
Company or any Company Subsidiary (excluding ERISA, which is covered by Section
3.14 hereof). Neither the Company nor any Company Subsidiaries have received any
written notice of alleged material violations of any of the foregoing, and there
are no presently existing circumstances which would result or be likely to
result in violations of any of the foregoing, nor are there any pending or, to
the best knowledge of the Company, threatened hearings or investigations with
respect to alleged material violations of any of the foregoing.
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3.21. Licenses and Permits. To the best of the Company's knowledge, the
Company and each Company Subsidiary have obtained, and are in material
compliance with, all licenses, permits, consents, approvals, orders,
certificates, authorizations, declarations and filings required by applicable
law for the conduct of the businesses and operations of the Company and the
Company Subsidiaries as now conducted or as planned to be conducted
(collectively, the "Required Licenses"), and there are no proceedings pending
or, to the best of the Company's knowledge, threatened which may result in the
revocation, cancellation or suspension, or any materially adverse modification,
of any such Required License.
3.22. Copies of Documents. The Company has previously delivered to
Parent true and complete copies of (or, in the case of any oral agreements or
arrangements, true, correct and complete written summaries thereof) all of the
agreements, arrangements or other documents in respect of items identified on
any schedule to this Agreement which is prepared by or for the Company, as well
as:
(a) all Required Licenses; and
(b) all written results of any examinations of the Company, any
Company Subsidiary or any of their businesses by any governmental agency,
whether federal, state or local, in the past five years.
All books of account, financial and accounting records and other data of
the Company relating to the Company, any Company Subsidiary or any of their
businesses, including the Company Financial Statements, customers' and
suppliers' lists, all payroll, personnel and other employee records and any
minute books, have been maintained in all material respects in accordance with
good business practices and, as applicable, in accordance with GAAP consistently
applied.
3.23. No Existing Discussions. As of the date hereof, the Company is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to a Takeover Proposal (as defined in Section 5.5(b)).
3.24. Year 2000. All internal computer systems that are material to the
business, finances or operations of the Company ("Material Systems") are (i)
able to receive, record, store, process, calculate, manipulate and output dates
from and after January 1, 2000, time periods that include January 1, 2000 and
information that is dependent on or relates to such dates or time periods, in
the same manner and with the same accuracy, functionality, data integrity and
performance as when dates or time periods prior to January 1, 2000 are involved
and (ii) able to store and output date information in a manner that is
unambiguous as to century ("Year 2000 Compliant").
3.25. Disclosure. This Agreement and the schedules hereto do not and
will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein and therein not misleading
in light of the circumstances in which they were made.
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3.26. Company Representations and Warranties. All references to the
Company in this Agreement shall be deemed to include any Company Subsidiary and,
in making any representations or warranties in or under this Agreement, the
Company shall also be deemed to be making such representations or warranties on
behalf of any Company Subsidiary; provided, that the preceding clause of this
sentence shall not apply in those instances where, in light of the language and
context of the applicable provision, the result would be to give rise to an
inconsistency.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Except as disclosed in writing in the Disclosure Schedules being
delivered at or prior to the execution of this Agreement, which Disclosure
Schedules shall identify the specific sections or subsections in this Agreement
to which each such disclosure relates, Parent and Merger Sub hereby represent
and warrant to the Company as follows:
4.1. Organization. Parent and Merger Sub are corporations duly
incorporated, validly existing and in good standing under the laws of their
jurisdiction of incorporation and have all requisite power and authority to own,
lease and operate their properties and to carry on their businesses as now being
conducted. Parent is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing would not
have a material adverse effect on the business, results of operations or
financial condition of Parent and its Subsidiaries taken as a whole (a "Parent
Material Adverse Effect"). Parent is not aware of any facts or circumstances
with respect to the existence, good standing, power, authority or qualification
of any subsidiary of Parent that would be reasonably likely to give rise to a
Parent Material Adverse Effect. Merger Sub is a newly-formed, wholly-owned
subsidiary of Parent and, except for activities incident to the acquisition of
the Company, Merger Sub has not engaged in any business activities of any type
or kind whatsoever.
4.2. Capitalization.
(a) The authorized capital stock of Parent consists of
90,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred
stock, par value $.01 per share (the "Parent Preferred Stock"). As of May 31,
2000, there were approximately 24,291,594 shares of Parent Common Stock and no
shares of Parent Preferred Stock issued and outstanding. As of May 31, 2000,
options to acquire 3,427,863 shares of Parent Common Stock were outstanding.
Except as set forth on Section 4.2(a) of the Disclosure Schedule, as of the date
hereof Parent has no outstanding bonds, debentures, warrants, stock appreciation
rights, notes or other obligations whereby the holders of which have the right
to vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of Parent on any matter. All such issued
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and outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. Except as
contemplated by this Agreement, as of the date hereof, there are no existing
options, warrants, calls subscriptions, convertible securities, or other rights,
agreements or commitments, other than pursuant to the Parent Option Plans, which
obligate Parent or any of its Subsidiaries to issue, transfer or sell any shares
of capital stock of Parent or of any of its Subsidiaries.
(b) The authorized capital stock of Merger Sub consists of 100
shares of common stock, par value $.01 per share ("Merger Sub Common Stock"),
all of which shares are issued and outstanding and owned by Parent.
Notwithstanding any provisions to the contrary, Parent may, in its sole
discretion, increase or decrease the number of shares of authorized Merger Sub
Common Stock and the number of shares of Merger Sub Common Stock issued and
outstanding owned by Parent. Merger Sub has not engaged in any activities other
than in connection with the transactions contemplated by this Agreement.
4.3. Authorization; Binding Agreement. Each of Parent and Merger Sub
has all requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The consummation
by Parent and Merger Sub of the transactions contemplated hereby has been
approved by the board of directors of Parent and duly and validly authorized by
all necessary corporate action. This Agreement constitutes, and all agreements
and documents contemplated hereby (when executed and delivered pursuant hereto
for value received) will constitute legal, valid and binding obligations of
Parent and Merger Sub, as the case may be, enforceable against Parent and Merger
Sub in accordance with their respective terms, except as such enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
4.4. Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the certificate of
incorporation, articles of incorporation or by-laws or equivalent governing
instruments of Parent or Merger Sub, (b) require any consent, approval or notice
under or conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any Contracts and Other Agreements to which the
Parent is a party or by which any of them or any portion of their properties or
assets may be bound or (c) violate any Legal Requirements applicable to the
Parent or any portion of Parent's properties or assets, except with respect to
clauses (b) and (c) such matters that, individually or in the aggregate, have
not had and could not reasonably be expected to have a Parent Material Adverse
Effect.
4.5. SEC Filings; Financial Statements.
(a) As of their respective dates, each registration statement,
report, proxy statement or information statement (as defined in Regulation 14C
under the
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Securities Exchange Act of 1934, as amended (the "Exchange Act") of Parent
prepared by it since its initial public offering (including, without limitation,
the Registration Statement on Form S-1 with respect to its initial offering), in
the form (including exhibits and any amendments thereto) filed with the U.S.
Securities and Exchange Commission (the "SEC") (collectively, the "Parent
Reports") (i) complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading, except that information as of a
later date shall be deemed to modify information as of an earlier date. Each of
the consolidated balance sheets included in or incorporated by reference into
the Parent Reports (including the related notes and schedules) fairly presents
the consolidated financial position of Parent as of its date, and each of the
consolidated statements of income, retained earnings and cash flows included in
or incorporated by reference into the Parent Reports (including any related
notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of Parent for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied
throughout the periods indicated, except as may be noted therein. Except as
disclosed in writing to the Company or otherwise publicly disclosed by Parent,
since the date of the most recent Parent Report, there has not been a Parent
Material Adverse Effect.
(b) Parent has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) except (i) liabilities or
obligations reflected on, or reserved against in, a balance sheet of Parent or
in the notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied and included in the Parent Reports and (ii)
liabilities or obligations incurred in the ordinary course of business which are
not material in amounts.
4.6. Governmental Approvals. No consent, approval or authorization of,
or declaration or filing with, any Governmental Entity on the part of Parent of
any of its Subsidiaries that has not been obtained or made is required in
connection with the execution or delivery by Parent or Merger Sub of this
Agreement or the consummation by Parent or Merger Sub of the transaction
contemplated hereby, other than (a) the filing of the Certificate of Merger with
the Secretary of State of the State of Texas, (b) filings and other applicable
requirements under the Exchange Act, (c) such filings and approvals as are
required to be made or obtained under the securities or "blue sky" laws of
various states in connection with the issuance of Parent Common Stock
contemplated under this Agreement, and (d) consents, approvals, authorizations,
declarations or filings that, if not obtained or made, would not, individually
of in the aggregate, results in a Material Adverse Effect on Parent or prevent
Parent or Merger Sub from consummating the transactions contemplated hereby.
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ARTICLE V
COVENANTS
5.1. Conduct of Business of the Company. Except as otherwise
contemplated by this Agreement, from the date of this Agreement to the Effective
Time, the Company shall, and shall cause each Company Subsidiary to, and the
Company Stockholders shall cause the Company to, conduct its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, and use all commercially reasonable efforts to preserve
intact its business organization, keep available the services of its current
officers and employees and keep its relationships with customers, suppliers,
licensors, licensees and employees and others with which it has business
relationships. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or as set forth on Section 5.1 of
the Disclosure Schedule, from the date of this Agreement to the Effective Time,
the Company shall not, and shall not permit any Company Subsidiary to, do any of
the following without the prior written consent of the Parent:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii) 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 (iii) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Company Subsidiary or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
(b) issue, sell, grant, pledge, deliver, otherwise encumber or
subject to any Lien (i) any shares of its capital stock, (ii) any securities
convertible into or exchangeable for, or any options, warrants or rights to
acquire, any such shares, voting securities or convertible or exchangeable
securities, or (iii) any "phantom" stock, "phantom" stock rights, stock
appreciation rights or stock-based performance units, other than the issuance of
Company Stock upon the exercise of Company Options outstanding on the date of
this Agreement and in accordance with their present terms;
(c) amend its articles of incorporation or by-laws (or
equivalent governing instruments), except as required by the terms of this
Agreement;
(d) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing assets of, or by any other manner, any equity interest in
or portion of any business of any corporation, partnership, company, limited
liability company, joint venture, association or other business organization or
division thereof or (ii) any assets that, individually, are in excess of $10,000
or, in the aggregate, are in excess of $25,000;
(e) enter into any joint venture agreement or strategic
alliance or similar agreement or arrangement with any person or entity;
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(f) sell, lease (as lessor), license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any material properties
or material assets;
(g) sell, lease, assign, transfer, convey, deliver or
otherwise dispose of, or divest, or purchase or acquire, or enter into any
material agreement with any person with respect to, any Owned Property, except
in the ordinary course of business consistent with prior practice;
(h) (i) grant to any officer or director of the Company or
any Company Subsidiary any increase in compensation, except to the extent
required under employment agreements in effect as of the date hereof and set
forth on Section 3.14 of the Disclosure Schedule, (ii) grant to any employee,
officer or director of the Company or any Company Subsidiary any increase in
severance or termination pay, except to the extent required under any agreement
or plan in effect as of the date hereof and set forth on Section 3.14(a) of the
Disclosure Schedule, (iii) enter into any employment, consulting, deferred
compensation, indemnification, severance or termination agreement with any such
employee, officer or director, (iv) establish, adopt, enter into or amend in
any material respect any collective bargaining agreement or Company Plan, (v)
take any action to accelerate any rights or benefits, or make any material
determinations not in the ordinary course of business consistent with prior
practice, under any Company Plan or (vi) take any action to accelerate, or,
where the Company has reserved the unilateral discretion to prevent such
acceleration, fail to take any action to prevent the acceleration of, the
vesting of any Company Options or other equity-based compensation;
(i) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may be required by a
change in GAAP;
(j) (i) incur any indebtedness for borrowed money, increase
any indebtedness for borrowed money, guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any Company Subsidiary, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
or (ii) make any loans, advances, capital contributions to, or investments in,
any other person, other than to or in the Company or any Company Subsidiary,
except as disclosed on Section 5.1(j)(ii) of the Disclosure Schedule;
(k) (i) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise) in excess of $10,000 individually or
$25,000 in the aggregate, other than (x) the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with prior practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the Company's financial statements (or the notes
thereto) dated as of the last day of the month ending prior to the date hereof,
which have previously been provided to Parent, and (y) with respect to Taxes,
(ii) cancel any
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indebtedness or waive any claims or rights of substantial value or (iii) waive
the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any Company Subsidiary
is a party;
(l) engage in any transaction or enter into any agreement or
arrangement with any shareholder or affiliate of the Company;
(m) enter into any other agreements, commitments or contracts
that are material to the Company and the Company Subsidiaries taken as a whole,
other than in the ordinary course of business consistent with past practice;
(n) except as contemplated by this Agreement, take or cause to
be taken any action described in clauses (b) through (g) of Section 3.9 above;
(o) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article VI not being satisfied;
(p) make or rescind any material election with respect to
Taxes, make a request for a Tax Ruling or enter into a Closing Agreement with
respect to Taxes, settle or compromise any material Tax matter, or, with
respect to any material Tax matter, change any method of accounting or
reporting;
(q) establish, adopt, enter into, make any new rights or
awards under, amend or otherwise modify any Company Plan, or increase the
salary, wage, bonus or other compensation of any employee, except as disclosed
on Section 5.1(q) of the Disclosure Schedule; or
(r) agree, commit or arrange to do any of the foregoing.
5.2. Conduct of Business of Parent and Merger Sub. Except as otherwise
contemplated by this Agreement, from the date of this Agreement to the
Effective Time, Parent shall not, and shall not permit any of its Subsidiaries
to:
(a) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article VI not being satisfied;
(b) take any action or enter into any agreement that could
reasonably be expected to jeopardize or materially delay the receipt of any
Requisite Regulatory Approval (as defined in Section 6.1(b));
(c) solely in the case of Parent, declare or pay any dividends
on or make any other distributions in respect of any of its capital stock;
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(d) change its methods of accounting in effect as of March 31,
2000, except in accordance with changes in GAAP or SAP as are concurred to by
Parent's independent auditors; or
(e) agree, commit or arrange to do any of the foregoing.
5.3. Closing Financial Statements. The Company Stockholders and the
Company shall prepare unaudited balance sheets for the Company for the period
ending on the last day of the calendar month prior to Closing and financial
statements for the Company for the period between December 31, 1999 and the
last day of the month preceding the month in which the Closing occurs (such
date, the "Closing Balance Sheet Date" and such financial statements, the
"Closing Financial Statements"), which financial statements shall be set forth
on Section 5.3 of the Disclosure Schedule and shall identify the revenue and
EBITDA for such period; provided, that if the Closing occurs on or before the
fifteenth day of a month, the Closing Balance Sheet Date shall be the last day
of the month that is two months prior to the month in which the Closing occurs
and the Closing Financial Statements shall be for the period between December
31, 1999 and the adjusted Closing Balance Sheet Date. The Closing Financial
Statements (i) shall have been prepared in accordance with the books and
records of the Company, in accordance with GAAP consistently applied throughout
the period covered thereby, (ii) fairly present the financial condition and
results of operations of the Company as of the date thereof and for the period
covered therein and (iii) contain and reflect all necessary adjustments and
accruals for a fair presentation of the financial condition and the results of
operations of the Company as of the date thereof and for the period covered
therein (subject in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect, in each case in
accordance with GAAP consistently applied throughout the periods indicated).
5.4. Access and Information. The Company shall, and shall cause each
Company Subsidiary to, afford to Parent and its authorized representatives
(including, but not limited to, its accountants, financial advisors and legal
counsel) reasonable access during normal business hours to all of their
properties, personnel, books and records and the Company and each Company
Subsidiary shall furnish promptly to the Parent all information within their
control or possession concerning their business, properties and personnel as
Parent may reasonably request. All such information shall be kept confidential
in accordance with the Non-Disclosure Agreement between the Company and Parent,
dated February 12, 2000.
5.5. No Solicitation.
(a) The Company shall not authorize or permit any Company
Stockholder or any officer, director, employee, representative or agent of the
Company (collectively, "Representatives") to directly or indirectly solicit,
initiate or encourage any inquiries relating to or that may reasonably be
expected to lead to, or make any proposal which constitutes, a Takeover
Proposal (as defined below), or recommend or endorse any Takeover Proposal, or
participate in any discussions or negotiations, or provide third parties with
any nonpublic information, relating to any such inquiry or proposal or
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otherwise facilitate any effort or attempt to make or implement a Takeover
Proposal. The Company shall (i) advise Parent orally (within one day) and in
writing (as promptly as practicable) of the receipt of any such inquiry or
proposal by it, by any Company Subsidiary or by any of the Representatives and
(ii) inform Parent orally and in writing, as promptly as practicable after the
receipt thereof, of the material terms and conditions of any such inquiries or
proposals (including the identity of the party making such inquiry or proposal)
and shall keep Parent informed of the status thereof. The Company will
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Parent with respect to any of the foregoing and require the return
(or if permitted by the terms of the applicable confidentiality agreement, the
certified destruction) of all confidential information previously provided to
such parties.
(b) For purposes of this Agreement, "Takeover Proposal" shall
mean any purchase, tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company or any
Company Subsidiary or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of the
Company or any Company Subsidiary, other than the transactions contemplated or
permitted by this Agreement.
5.6. Reasonable Efforts.
(a) Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto shall cooperate and shall use all
reasonable best efforts to take, or cause to be taken, all actions, and to do
or cause to be done, and to assist and cooperate with the other party in doing,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable, including, but not limited to, (i)
preparing and filing all forms, registrations and notices required to be filed
to consummate the transactions contemplated by this Agreement, including
filings and submissions pursuant to the Exchange Act and the TBCA, (ii) taking
such commercially reasonable actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions or waivers by any third party or
Governmental Entity, (iii) using all reasonable best efforts to satisfy or
cause the satisfaction of all conditions to Closing and (iv) using all
reasonable best efforts to cause the Company Stockholders to be released from
any personal guaranties that are in effect with respect to obligations of the
Company, such actions to include Parent's agreeing to be substituted as
guarantor of those obligations of the Company that are, prior to the Effective
Time, guaranteed by any of the Company Stockholders. Each party shall promptly
consult with the other with respect to, provide any necessary information with
respect to and provide the other (or its counsel) copies of, all filings made
by such party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement and the
transactions contemplated by this Agreement. No party will take any action
which would prevent the satisfaction of any conditions to Closing set forth in
Article VI hereof.
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(b) Each party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the transactions
contemplated by this Agreement. If any party or affiliate thereof receives a
request for additional information or documentary material from any such
Governmental Entity with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request.
5.7. Changes in Representation and Warranties; Notification of Certain
Matters. Between the date of this Agreement and the Effective Time, the Company
and the Company Stockholders shall give notice in writing to Parent, and Parent
and Merger Sub shall give notice in writing to the Company, promptly upon
becoming aware of (i) any information known to such party that indicates in the
reasonable judgment of such party that any representation or warranty of such
party contained herein will not be true and correct in a manner that results or
would likely result in a failure of the condition specified in Section 6.2(a),
in the case of a notice from the Company and the Company Stockholders, or
Section 6.3(a), in the case of a notice from Parent and Merger Sub and (b) the
occurrence of any event known to such party which in the reasonable judgment of
such party will result, or has a reasonable prospect of resulting in, the
failure by such party to satisfy a condition specified in Article VI; provided,
however, that the delivery of any notice pursuant to this Section 5.7 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
5.8. Takeover Statutes. If any takeover statute is or may become
applicable to the transactions contemplated hereby, the Board of Directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate the
effects of any takeover statute on any of the transactions contemplated hereby.
5.9. Non-Disclosure; Public Announcements.
(a) Neither the Company nor the Company Stockholders will at
any time from and after the date of this Agreement divulge, furnish or make
accessible to anyone any information or documentation regarding the
transactions contemplated by this Agreement, any confidential or secret aspects
of the Company or the Surviving Corporation or any financial or other
information about the Company or the Surviving Corporation except as required
by law and except for the press release contemplated by Section 5.9(b) hereof.
Any information which at or prior to the time of disclosure was generally
available to the public through no breach of this covenant shall not be deemed
confidential information for purposes hereof, and the undertakings in this
covenant with respect to confidential information shall not apply thereto.
(b) The initial press release or releases with respect to the
transactions contemplated by this Agreement shall be in the form satisfactory
to Parent after consulting with the Company. For as long as this Agreement is
in effect, the
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Company shall not, and shall cause its Affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without
the consent of Parent, except where such release or announcement is required by
applicable law, in which case the Company will consult with Parent and issue a
release or announcement reasonably satisfactory in form and content to Parent.
5.10 Indemnification of Directors and Officers.
(a) From and after the Effective Time, Parent agrees that it
will indemnify and hold harmless each present and former director and officer
of the Company (individually, an "Indemnified Person" and, collectively, the
"Indemnified Persons") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at, or after, the
Effective Time, to the fullest extent that the Company would have been
permitted under the TBCA and its charter or by-laws in effect on the date
hereof to indemnify such Indemnified Person (and Parent shall also advance
expenses as incurred to the fullest extent permitted under applicable law;
provided, that the Indemnified Person to whom expenses are advanced provides a
written affirmation of his or her good faith belief that the standard of
conduct necessary for indemnification has been met), and an undertaking to
repay such advances if it is ultimately determined that such Indemnified Person
is not entitled to indemnification).
(b) Any Indemnified Persons wishing to claim indemnification
under paragraph (a) of this Section 5.10, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Parent thereof
in writing, but the failure to so notify shall not relieve Parent of any
liability it may have to such Indemnified Person to the extent that such
failure does not prejudice Parent. In the event of any such claim, action,
suit, proceeding or investigation, (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and to use counsel
reasonably acceptable to the Indemnified Person Parent shall not be liable to
such Indemnified Persons for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Persons in connection with
the defense thereof, except that if Parent or the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Persons and advises
that there are issues which raise conflicts of interest between Parent or the
Surviving Corporation and the Indemnified Persons, the Indemnified Persons may
retain counsel satisfactory to them, and Parent or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Persons; provided, however, that Parent shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Persons
in any jurisdiction unless the use of one counsel for such Indemnified Persons
would present such counsel with a conflict of interest, (ii) the Indemnified
Persons will cooperate in the defense of any such matter and (iii) Parent shall
not be liable for any settlement effected without its prior written consent;
and
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provided, further, that Parent shall not have any obligation hereunder to any
Indemnified Persons if and when a court of competent jurisdiction shall
ultimately determine, and such determination shall be become final, that the
indemnification of such Indemnified Persons in the manner contemplated hereby
is prohibited by applicable law.
(c) Notwithstanding the provisions of this Section 5.10, the
right to indemnification under this provision shall not extend to the Company
Stockholders with respect to their obligation to indemnify for Losses (as
hereinafter defined) under Section 7.2 of this Agreement.
(d) The provisions of this Section 5.10 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Person and, his
or her heirs and representatives.
5.11 Lock-up. Each of the Company Stockholders hereby covenants and
agrees with Parent that during the period between the Closing Date and ending
365 days following the Closing Date, except as provided in, and pursuant to,
the Registration Rights Agreement, they shall not sell, transfer, assign or
otherwise dispose of the Parent Common Stock which the Company Stockholders
shall have received as Merger Consideration without the prior written consent
of the Parent, which consent the Parent shall be entitled to withhold in its
full discretion.
5.12 Sale of Cybercentral. In consideration of the Company's and the
Company Stockholder's entering into this Agreement and consummating the
transactions contemplated hereby, Parent hereby covenants and agrees that if
Parent shall sell the Company's software for the Company's Cybercentral system
through a transaction other than a transaction through which a material portion
of the business of the Company (as of the date hereof) is sold, or otherwise
transferred, each of the Company Stockholders shall be entitled to receive
their pro rata portion of 20% of the consideration that Parent shall receive
therefor; provided, that the consideration to be delivered to the Company
Stockholders shall take the same form as the consideration paid to Parent. In
the event that Parent shall sell the software for the Company's Cybercentral
system prior to September 30, 2000, Parent or the Surviving Corporation shall
retain a royalty free license to use such software until October 1, 2000.
5.13 Taxes. The Company Stockholders shall be liable for and shall
pay any and all Taxes of the Company attributable to any taxable period ending
on or prior to the Closing Date and the allocable portion of any and all Taxes
of the Company attributable to any partial period (through and including the
Closing Date) of any taxable period beginning before and ending after the
Closing Date to the extent that such Taxes are not reflected in the reserve for
Taxes shown in the Closing Financial Statements. The Taxes attributable to any
partial period shall be computed as if the taxable period ended on the Closing
Date, except that any Taxes imposed on the ownership of real, personal or
intangible property shall be allocated, pro rata on a daily basis, between the
partial period ending on the Closing Date and the balance of the taxable
period.
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5.14 Employment Agreements. Parent shall execute employment letters
(each, an "Employment Letter") and confidentiality and non-disclosure
agreements with each of Tim Blackwood, Art Borrego and Roger Lewis which shall,
among other things, prohibit such parties from directly or indirectly owning,
operating or managing an Internet business that provides e-business solutions
that are in direct competition with the business of Parent, as described in the
registration on Form S-1 for Parent's initial public offering, for a period of
two years following such employee's termination of employment with Parent. A
form of such confidentiality and non-disclosure agreement and of each
Employment Letter is attached hereto as Exhibit C and such agreements shall be
executed by the employees identified in this Section 5.14 prior to the Closing.
5.15 Conduct of Company During Performance Incentive Period. From the
Closing Date to September 30, 2000 (the "Performance Incentive Period"), the
Surviving Corporation shall conduct its business in the usual, regular and
ordinary course in material accordance with a written operating plan for the
period up to September 30, 2000 (the "Operating Plan") mutually agreed upon
between Parent and the Company Stockholders prior to the execution of this
Agreement, which shall include, without limitation, basic operating strategy
and projected operating budget for the Surviving Corporation. The Operating
Plan is attached hereto as Exhibit D. Parent will allow the Company
Stockholders to continue to operate the Surviving Corporation until October 1,
2000 in the ordinary course in a manner consistent with the past practices of
the Company. Parent shall not take any affirmative action with respect to the
Surviving Corporation with the intention of reducing the likelihood that the
Surviving Corporation will reach the maximum amount of Third Quarter 2000
Revenue as described in the table in Section 1.7 hereof. Parent covenants not
to take any affirmative action with the intention of causing the Incentive
Payment to be decreased. Further, the parties hereto understand and agree that
neither the Company nor the Company Stockholders make any representation,
warranty or covenant with respect to budget goals for periods after September
30, 2000.
5.16 Accounting Fees. Parent hereby covenants and agrees with the
Company that in the event that the accounting fees incurred by the Company for
the completion of the Company's 1999 audit are in excess of $9,000, Parent
shall reimburse the Company for the amount by which such fees exceed $9,000, up
to $5,000.
ARTICLE VI
CONDITIONS
6.1. Conditions to Each Party's Obligations. The respective obligation
of each party to effect the Merger is subject to the satisfaction or waiver at
or prior to the Effective Time of each of the following conditions:
(a) no court or Governmental Entity of competent jurisdiction
shall have enacted, issued, entered, promulgated or enforced any Legal
Requirements prohibiting, restraining, enjoining or otherwise preventing the
consummation of the Merger; and
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(b) all consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Entity (each a "Requisite
Regulatory Approval") required in connection with the execution and delivery of
this Agreement and the performance of its terms shall have been obtained or
made (as the case may be), except for filings in connection with the Merger and
any other documents required to be filed after the Effective Time.
6.2. Conditions to Obligation of Parent and Merger Sub. The obligation
of Parent and Merger Sub to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) the representations and warranties of the Company and the
Company Stockholders contained in this Agreement, regardless of whether such
representations or warranties arise under Articles II or III hereof or pursuant
to another provision of this Agreement, shall be true and correct in all
material respects, except that representations and warranties qualified by
materiality or "Company Material Adverse Effect" shall be true in all respects,
as of the date of this Agreement and as of the Closing Date, as though made on
and as of such time, except to the extent that any such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all material
respects, and those not qualified by materiality or Company Material Adverse
Effect shall be true in all respects, on and as of such earlier date);
(b) the Company and the Company Stockholders shall have
performed in all material respects the obligations required to be performed by
them under this Agreement at or prior to the Closing Date;
(c) from the date of this Agreement through the Effective
Time, there shall not have occurred a Company Material Adverse Effect;
(d) Parent shall have received a certificate signed by an
executive officer of the Company to the effect of Sections 6.2(a), (b) and (c)
hereof;
(e) Parent shall have received a certificate executed by each
of the Company Stockholders to the effect of Sections 6.2(a), (b) and (c)
hereof;
(f) the Company shall have provided Parent with evidence
satisfactory to Parent that the Company has obtained all consents, waivers or
approvals required for the assignment or transfer of all agreements and
instruments identified on Section 3.8 of the Disclosure Schedule hereto;
(g) the Company shall have furnished Parent with an opinion,
dated the Closing Date, of Stahl, Martens & Bernal, LLP, counsel to the
Company, in the form attached hereto as Exhibit E in form and substance
satisfactory to Parent;
(h) the Company Stockholders and the Company shall have
provided Parent with a certified statement, pursuant to Section 1.1445-2(c)(3)
of the
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Treasury Regulations, that the Company is not, and has not been within the last
five years, a "United States real property holding corporation";
(i) no claim, action, suit, investigation or other proceeding
shall be pending or threatened by any third party (including any governmental
agency) before any court or administrative agency or otherwise relating to the
transactions provided for herein or which may affect Parent or the Company in a
manner which is materially adverse;
(j) the Company Stockholders shall have executed the Escrow
Agreement;
(k) Parent and the Company shall have mutually agreed upon the
Operating Plan;
(l) Tim Blackwood, Art Borrego and Roger Lewis shall each have
executed an Employment Letter with Parent in the form of Exhibit C; and
(m) the Company and the Company Stockholders shall have
furnished Parent with all other documents, certificates and other instruments
reasonably requested by Parent.
6.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger shall be subject to the fulfillment or waiver at
or prior to the Effective Time of the following additional conditions:
(a) the representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct in all material
respects as of the Effective Time, except that representations and warranties
qualified by materiality or Parent Material Adverse Effect shall be true in all
respects, as of the date of this Agreement and as of the Closing Date, as
though made on and as of such time and except to the extent that any such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct in all
material respects, and those not qualified by materiality or Parent Material
Adverse Effect shall be true in all respects, on and as of such earlier date);
(b) Parent and Merger Sub shall have performed in all material
respects their obligations required to be performed by them under this
Agreement at or prior to the Closing Date;
(c) the Company shall have received a certificate signed by an
executive officer of each of Parent and Merger Sub to the effect of Sections
6.3(a) and (b) hereof;
(d) Parent shall have executed the Escrow Agreement and the
Registration Rights Agreement; and
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(e) Parent and the Company shall have mutually agreed upon the
Operating Plan.
6.4. Frustration of Closing Conditions. Neither the Company nor Parent
may rely on the failure of any condition set forth in Section 6.1, 6.2 or 6.3,
as the case may be, to be satisfied if such failure was caused by such party's
failure to use all reasonable efforts to consummate the Merger and the other
transactions contemplated by this Agreement.
ARTICLE VII
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All statements contained in any Exhibit or Disclosure Schedule hereto or
in any certificate or instrument of conveyance delivered by or on behalf of the
parties pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be deemed representations and warranties by the
parties hereunder.
7.1. Survival of Representations, Warranties, Etc. Except as otherwise
provided herein, the representations and warranties contained in this Agreement
or in any certificate or other instrument delivered pursuant to this Agreement,
shall survive the Closing for a period of 18 months after the Closing Date;
provided, however, that: (i) the representations and warranties contained in
Section 3.13 hereof shall survive the Closing Date until 30 days after the
expiration of the applicable statutes of limitations for the assessment of
Taxes; (ii) if the giving of any representation or warranty contained in this
Agreement is made with willful or knowing fraud, it shall survive the Closing
Date for an unlimited period of time; (iii) any specific claim or action of
which specific written notice setting forth with particularity the facts
underlying such claim or action is given to the party which made such
representation or warranty prior to the date on which such representation or
warranty otherwise terminates as provided herein, may continue to be asserted
and shall be indemnified against pursuant to this Article VII; and (iv) the
representations and warranties set forth in Section 2.2 hereof shall survive
the Closing without limitations.
7.2. Company Stockholders Agreement to Indemnify.
(a) Subject to paragraphs (b), (c) and (d) of this Section
7.2, the Company Stockholders shall fully indemnify, defend and hold harmless,
on an after-tax basis, Parent, Merger Sub and the Surviving Corporation and
their officers, directors, employees, agents, representatives, and Affiliates
and their successors and assigns against and in respect of any and all
liabilities, losses, damages, claims, penalties, actions, fines, deficiencies,
costs, taxes, loss of deductions or expenses (including, without limitation,
the reasonable fees, expenses and disbursements of counsel) (collectively,
"Losses") regardless of whether an action has been filed or asserted against
Parent, Merger Sub, or the Surviving Corporation after the Closing Date,
arising from, in connection with or resulting from (i) any misrepresentation,
inaccuracy or breach of representation, warranty, covenant or agreement by the
Company, any Company Subsidiary or the
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<PAGE> 46
Company Stockholders made in this Agreement (including, without limitation, the
Disclosure Schedules and Exhibits hereto and the certificates delivered
hereunder) or as provided herein; (ii) the business, operations or assets of
the Company prior to the Effective Time or the actions or omissions of the
Company's directors, officers, shareholders, employees or agents prior to the
Effective Time, other than Losses arising from matters expressly disclosed in
the Company Financial Statements, this Agreement or the Disclosure Schedules to
this Agreement, or incurred by the Company in the ordinary course of business
in compliance with Section 5.1 hereof from the date of the execution of this
Agreement through the Closing Date, and (iii) any claims or litigation
involving the Company which are pending or, to the knowledge of the Company,
threatened prior to the Closing Date. The parties hereto understand and agree
that subject to, and as further described in, Section 7.1 of this Agreement,
the indemnification obligations of the Company Stockholders shall be reduced to
the extent that such Loss, when raised through a notice or claim, relates to a
representation, warranty indemnification obligation or covenant that has
expired pursuant to Section 7.1 hereof and all provisos therein.
(b) No obligation to indemnify, defend and hold harmless
Parent, Merger Sub or the Surviving Corporation under this Section 7.2 shall
arise unless and until the amount of Losses incurred exceeds $100,000 in the
aggregate; provided, that in the case of aggregate Losses in excess of
$100,000, the Company Stockholders shall be liable for the entire amount of
such Loss or Losses. The maximum amount for which the Company Stockholders may
liable pursuant to their indemnification obligations under this Section 7.2
shall be the product of (x) the total of (1) the number of shares of Parent
Common Stock delivered to the Company Stockholders as Merger Consideration
following the Closing and (2) the number of shares of Parent Common Stock
delivered to the Company Stockholders as a Third Quarter Stockholder Payment
pursuant to Section 1.7 hereof and (y) $21.50.
(c) Notwithstanding the provisions of the foregoing Section
7.2(b), the Company Stockholders shall fully indemnify, defend and hold
harmless on an after-tax basis Parent, the Surviving Corporation, any of their
Affiliates and their successors and assigns against and in respect of any and
all Losses (including any fees, expenses and disbursements of counsel and other
agents) arising from, in connection with or resulting from any
misrepresentation, inaccuracy or breach with respect to Sections 3.12(c), 3.13,
5.1(p) and 5.13, and the provisions of Section 7.2(b) hereof shall not apply to
limit the obligations of the Company Stockholders under this Section 7.2(c).
(d) Except with respect to the limitation set forth in Section
7.1 herein and in addition to the foregoing provisions of Section 7.2, the
Company Stockholders agree that it shall not be necessary or required that
Parent exercise any right, assert any claim or demand or enforce any remedy
whatsoever against the Company before or as a condition to the obligations of
the Company Stockholders hereunder. The indemnification liability of the
Company Stockholders under the foregoing provisions of Section 7.2 shall be
absolute and unconditional as if the Company Stockholders rather than the
Company have made the representations and warranties herein irrespective of any
right of set-off or counterclaim which may at any
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<PAGE> 47
time be available to or asserted by the Company Stockholders against Parent or
any Affiliates thereof.
(e) In addition, notwithstanding the foregoing provisions of
this Section 7.2, the Company Stockholders will indemnify Parent for the costs
of curing, on an emergency expedited basis, any failure of the equipment,
hardware, software or systems used or intended to be used for or in connection
with the Company's business (the "Equipment") and each component thereof to
handle date information before, during and after January 1, 2000, including
accepting date input, providing date output and performing calculations on
dates or portions of dates, functioning accurately and without interruption
before, during and after January 1, 2000, without any change in operations
associated with the advent of the year 2000 and the new century, responding to
two-digit year input in a way that resolves the ambiguity as to century in a
disclosed, defined and predetermined manner, recognizing the year 2000 as a
leap year, processing two-digit year date information in ways that are
similarly unambiguous as to century, and storing and provide output of date
information in ways that are similarly unambiguous as to century.
(f) For purposes of this Section 7.2, the Company Stockholders
shall be considered to be a single Indemnifying Party (as defined in Section
7.4).
7.3 Parent Agreement to Indemnify.
(a) Parent shall fully indemnify, defend and hold harmless, on
an after-tax basis, the Company Stockholders against and in respect of any and
all Losses, regardless of whether an action has been filed or asserted against
the Company Stockholders after the Closing Date, arising from, in connection
with or resulting from any misrepresentation or breach of any representation,
warranty, covenant or agreement by Parent or Merger Sub made in this Agreement
(including, without limitation, the Disclosure Schedule and Exhibits hereto and
the certificates delivered hereunder) or as provided herein; provided, however,
that no obligation to indemnify, defend and hold harmless the Company
Stockholders under this Section 7.3 shall arise unless and until the amount of
Losses incurred exceeds $100,000 in the aggregate; and provided, further, that
in the case of aggregate Losses in excess of $100,000, Parent shall be liable
for the entire amount of such Loss or Losses.
(b) In addition to the foregoing provisions of Section 7.3,
Parent agrees that it shall not be necessary or required that the Company
Stockholders exercise any right, assert any claim or demand or enforce any
remedy whatsoever against Parent before or as a condition to the obligations of
Parent hereunder; provided, that where the Company Stockholders' failure to do
any of the foregoing results in the loss of substantive rights with respect to
the ability of Parent to defend such claim, then Parent shall have no
obligation to indemnify the Company Stockholders to the extent of such loss.
The indemnification liability of the Company Stockholders under the foregoing
provisions of Section 7.3 shall be absolute and unconditional as if Parent
rather than Merger Sub had made the representations and warranties herein
irrespective of any right
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<PAGE> 48
of set-off or counterclaim which may at any time be available to or asserted by
Parent against the Company Stockholders.
7.4. Procedures Relating to Indemnification. Promptly after the
receipt by any party hereto of notice of any claim, action, suit or proceeding
of any third party for which it intends to seek indemnification hereunder, such
party or parties (the "Indemnified Party") shall give written notice of such
claim (a "Notice of Claim") to the party or parties obligated to provide
indemnification hereunder (collectively, the "Indemnifying Party"), stating the
nature and basis of such claim and the amount thereof, to the extent known. The
failure of the Indemnified Party to so notify the Indemnifying Party shall not
impair the Indemnified Party's ability to seek indemnification from the
Indemnifying Party unless such failure has resulted in the loss of substantive
rights with respect to the Indemnifying Party's ability to defend such claim,
and then only to the extent of such loss. The Indemnifying Party shall be
entitled to participate in the defense or settlement of such matter and the
parties agree to cooperate in any such defense or settlement and to give each
other full access to all information relevant thereto. The Indemnifying Party
shall not be obligated to indemnify an Indemnified Party hereunder for any
settlement entered into without the Indemnifying Party's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed. If
any Notice of Claim relates to a claim by a person or persons (other than by
federal, state or local income tax authorities or by Parent), and the amount of
such claim is acknowledged by the Company Stockholders to be fully covered by
the foregoing indemnity, the Company Stockholders may elect to defend against
such claim at their expense, in lieu of Parent assuming such defense; provided,
that Parent shall be entitled to participate in or monitor such defense at its
expense and the Company Stockholders will fully cooperate with Parent and its
counsel with respect thereto. If the Company Stockholders so elect to assume
such defense, they shall retain counsel reasonably satisfactory to Parent. No
compromise or settlement of such claim may be effected by either party without
the other party's consent (which shall not be unreasonably withheld) unless (i)
there is no finding or admission of any violation of law and no effect on any
other claims that may be made against such other party and (ii) the sole relief
provided is monetary damages that are paid in full by the party seeking the
settlement.
ARTICLE VIII
TERMINATION
8.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time:
(a) By the mutual written consent of Parent, Merger Sub and
the Company;
(b) By Parent and Merger Sub, on the one hand, or the Company,
on the other hand, at any time on or after the later to occur of:
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<PAGE> 49
(i) 60 days after the date on which any request or application
for a Requisite Regulatory Approval shall have been denied or withdrawn
at the request or recommendation of the Governmental Entity which must
grant such Requisite Regulatory Approval, unless within the 60-day
period following such denial or withdrawal a petition for rehearing or
an amended application has been filed with the applicable Governmental
Entity; provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 8.1(b)(i) if such
denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein; and
(ii) 45 days following the date hereof, if the Effective Time
shall not have occurred on or before that date and if any of the
conditions to the obligation of the terminating party to close the
Merger has not, at that time, been fulfilled; provided, however, that
the right to terminate this Agreement under this Section 8.1(b)(ii)
shall not be available to any party whose failure to fulfill materially
any covenant or obligation under this Agreement has been the cause of,
or resulted in, either the failure of the Effective Time to occur on or
before such date or the failure of fulfillment before such date of any
of the conditions to such terminating party's obligation to close the
Merger; or
(iii) at such time as a court of competent jurisdiction or other
Governmental Entity shall have issued an Order or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger
and such Order or other action shall have become final and
nonappealable;
(c) By and Merger Sub, on the one hand or the Company, on the
other hand, (provided, that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein), if there shall have been a material breach of any of the
representations, warranties or covenants set forth in this Agreement on the
part of the other party, which breach is not cured within 30 days following
written notice to the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing; provided, however, that neither
party shall have the right to terminate this Agreement pursuant to this Section
8.1(c) unless the breach of representation, warranty or covenant would entitle
the terminating party not to consummate the transactions contemplated hereby
under Section 6.2(a) (in the case of a breach of representation or warranty by
the Company) or Section 6.3(a) (in the case of a breach of representation or
warranty by Parent and Merger Sub) or which breach, by its nature, cannot be
cured prior to the Closing.
8.2. Procedure for and Effect of Termination. In the event that this
Agreement is terminated and the Merger is abandoned by Parent or Merger Sub, on
the one hand, or by the Company, on the other hand, pursuant to Section 8.1,
written notice of such termination and abandonment shall forthwith be given to
the other parties and this Agreement shall terminate and the Merger shall be
abandoned without any further action.
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<PAGE> 50
If this Agreement is terminated as provided herein, no party hereto shall have
any liability or further obligation to any other party under the terms of this
Agreement except (i) with respect to the willful breach by any party hereto,
and (ii) that this Section 8.2, the last sentence of Section 5.4, Section 9.2
and Section 9.3 shall survive the termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them in this Section 9.1:
(a) "Affiliate", with respect to any person, shall mean any
person controlling, controlled by or under common control with such person;
(b) "Business Day" shall mean each day on which banking
institutions in New York, NY are not authorized or required to close;
(c) "including" shall, unless the context clearly requires
otherwise, mean including but not limited to the items or things following such
term;
(d) "knowledge", "to the knowledge of", "best knowledge" and
any similar language shall mean, with respect to the Company or any of its
Subsidiaries, the actual knowledge, after due inquiry, of the Company
Stockholders and of any other person who, on the date hereof, is an officer of
the Company or any such Subsidiary;
(e) "person" shall mean and include an individual, a
partnership, a joint venture, a limited liability company, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof; and
(f) "Subsidiary", with respect to any corporation or other
person, shall mean any corporation 50% or more of the outstanding voting power
of which, or any partnership, joint venture, limited liability company or other
entity 50% or more of the total equity interest of which is directly or
indirectly owned by such person, and any other entity over which such
corporation or other person has control as a result of ownership interests, any
contract or other arrangement, or through any other means. For purposes of this
Agreement, all references to "Subsidiaries" of a person shall be deemed to mean
"Subsidiary" if such person has only one Subsidiary.
9.2. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented, whether before or after the
Stockholder Approvals, only by a written agreement signed by each of the
parties hereto at any time prior to the Effective Time with respect to any of
the terms contained herein; provided, however, that after this Agreement is
adopted by the Company's Stockholders, no such amendment or modification shall
(a) alter or change the amount or kind of the consideration to be delivered to
the stockholders of the Company, (b) alter or change any term of the articles
of incorporation of the Surviving Corporation to be effected by the
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<PAGE> 51
Merger or (c) alter or change any of the terms or conditions of this Agreement
if such alteration or change would adversely affect the stockholders of the
Company.
9.3. Waiver of Compliance; Consents. Any failure of Parent or Merger
Sub, on the one hand, or the Company, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Parent,
Merger Sub or the Company, respectively, only by a written instrument signed by
the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 9.3.
9.4. Restrictive Legend. Each certificate representing Parent Common
Stock to be delivered to the holders of Company Stock hereunder shall, except
as otherwise provided in this Section 9.4, be stamped or otherwise imprinted
with a legend substantially in the following form:
"THIS SECURITY IS SUBJECT TO RESTRICTIONS REGARDING
THE SALE THEREOF UNDER AN AGREEMENT AND PLAN OF
MERGER DATED JUNE 10, 2000 BETWEEN THE HOLDER THEREOF
AND PARENT CORPORATION, HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAWS,
AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
IT HAS BEEN REGISTERED UNDER THAT ACT AND THE APPLICABLE
STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to Parent the securities being sold thereby may be publicly sold
without registration under the Securities Act or under the applicable state
securities laws.
9.5. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in
person, by telecopier (with a confirmed receipt thereof) or registered or
certified mail (postage prepaid, return receipt requested), and on the next
business day when sent by overnight courier service, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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<TABLE>
<S> <C>
(1) if to Parent or Merger Sub:
AppliedTheory Corporation
1500 Broadway, Third Floor
New York, NY 10036
Attention: David A. Buckel
Senior Vice President & Chief
Financial Officer
Telecopier: (212) 398-4142
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: Frank E. Morgan II, Esq.
Telecopier: (212) 259-6333
(2) if to the Company:
Team Tech International, Inc.
100 Congress Avenue, Suite 950
Austin, TX 78701
with a copy to:
Stahl, Martens & Bernal, L.L.P.
7320 N. MoPac, Suite 211
Austin, TX 78731
Attention: Brent G. Stahl, Esq.
Telecopier: (512) 346-2712
(3) if to the Company Stockholders:
Art Borrego
11808 Rain Forest Cove
Austin, Texas 78759
(512) 258-9705
Roger Lewis
8913 Spicebrush Drive
Austin, Texas 78759
(512) 795-8400
</TABLE>
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<PAGE> 53
Tim Blackwood
3505 West Avenue
Austin, Texas 78705
(512) 453-5118
with a copy to:
Stahl, Martens & Bernal, L.L.P.
7320 N. MoPac, Suite 211
Austin, TX 78731
Attention: Brent G. Stahl, Esq.
Telecopier: (512) 346-2712
9.6. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, administrators, executors, representatives, affiliates,
subsidiaries, successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties.
9.7. Expenses. Except as provided in Section 5.16 of this Agreement,
whether or not the Merger is consummated, all fees, charges and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees, charges or expenses.
9.8. Gender; Plurals, etc. Whenever used herein, the singular number
shall include the plural, the plural the singular and the use of any gender
shall be applicable to all genders.
9.9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State, without regard to the
choice of law principles thereof.
9.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.11 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
9.12 Entire Agreement. This Agreement (including the schedules,
exhibits, documents or instruments referred to herein) and the Confidentiality
Agreement embody the entire agreement and understanding of the parties hereto
in respect of the subject matter hereof and thereof and supersede all prior
agreements and understandings,
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<PAGE> 54
both written and oral, among the parties, or between any of them, with respect
to the subject matter hereof and thereof.
9.13 No Third Party Beneficiaries. Except as provided in Section 5.10
and 7.2(a), this Agreement is not intended to, and does not, create any rights
or benefits of any party other than the parties hereto.
9.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first above written.
TEAM TECH INTERNATIONAL, INC.
By: /s/ Art Borrego
---------------------------
Name: Art Borrego
Title: President/CEO
THE COMPANY STOCKHOLDERS:
/s/ Art Borrego
------------------------------
Art Borrego
/s/ Roger Lewis
------------------------------
Roger Lewis
/s/ Tim Blackwood
------------------------------
Tim Blackwood
APPLIEDTHEORY CORPORATION
By: /s/ Danny E. Stroud
---------------------------
Name: Danny E. Stroud
Title: Vice President - Corporate
Development and Western
Operations
APPLIEDTHEORY TT ACQUISITION
CORP.
By: /s/ Danny E. Stroud
------------------------------
Name: Danny E. Stroud
Title: Secretary
