<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 3, 2000
PERFICIENT, INC.
(Exact name of Registrant as specified in Charter)
Delaware 001-15169 74-2853258
------------------------- ----------- -------------------
(State or other Juris- (Commission (IRS Employer
diction of Incorporation) File Number) Identification No.)
7600-B North Capital of Texas Highway
Suite 220
Austin, Texas 78731
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (512) 306-7337
Not Applicable
--------------------------------------------------------------
(Former Name and Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 3, 2000, we consummated the acquisition by way of merger of
LoreData, Inc., a Connecticut corporation, with and into our wholly-owned
subsidiary, Perficient Acquisition Corp., a Delaware corporation. Perficient
Acquisition Corp. is the surviving corporation to the merger and will continue
under the name, "Perficient LoreData, Inc."
We acquired LoreData for an aggregate purchase price of $2,460,000,
subject to certain post-closing adjustments. The purchase price of $2,460,000
consists of (i) $385,000 in cash that was paid at closing, (ii) 30,005 shares of
our common stock, par value $0.001 per share, also paid at closing, and (iii)
131,709 shares of common stock that are being held in escrow for disposition by
the escrow agent in accordance with an Escrow Agreement dated as of January 3,
2000. The shares of common stock issued in connection with the merger had a
value of $12.83 per share, which was the average closing price of the common
stock for the ten consecutive trading days prior to the public announcement of
the transaction on December 13, 1999. A copy of each of the Agreement and Plan
of Merger dated as of December 10, 1999 by and among Perficient, Inc.,
Perficient Acquisition Corp., LoreData, Inc. and John Gillespie, and the
Amendment to Agreement and Plan of Merger dated as of January 3, 2000 are
incorporated herein by reference as Exhibits 10.13 and 10.14, respectively. We
utilized proceeds from our initial public offering of common stock to fund the
cash portion of the purchase price.
In connection with the acquisition of LoreData, we also entered into a
Registration Rights Agreement with John Gillespie pursuant to which we agreed to
file a registration statement by August 3, 2000 to register 20% of our common
stock issued in the acquisition.
Prior to the acquisition, the assets of LoreData were used to provide
internet consulting services to its customers. We intend to continue such uses
for the assets of LoreData.
The foregoing summary does not purport to be complete and is qualified
in its entirety by reference to the full text of the Agreement and Plan of
Merger and the Amendment to Agreement and Plan of Merger, copies of which are
attached hereto as Exhibits 10.13 and 10.14, respectively.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The historical financial statements of the business acquired
are not included in this report and will be filed by amendment as soon as
practicable, but not later than 60 days after this report is required to be
filed.
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
The PRO FORMA financial information for the Company after
giving effect to the acquisition is not included in this report and will be
filed by amendment as soon as practicable, but not later than 60 days after this
report is required to be filed.
(c) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
10.13 Agreement and Plan of Merger dated as of December 10,
1999 by and among Perficient, Inc., Perficient
Acquisition Corp., LoreData, Inc. and John Gillespie
10.14 Amendment to Agreement and Plan of Merger dated as of
January 3, 2000 by and among Perficient, Inc.,
Perficient Acquisition Corp., LoreData, Inc. and John
Gillespie
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PERFICIENT, INC.
Dated: January 14, 2000 By: /s/ John A. Hinners
------------------------------------
Name: John A. Hinners
Title: Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.13 Agreement and Plan of Merger dated as of December 10,
1999 by and among Perficient, Inc., Perficient
Acquisition Corp., LoreData, Inc. and John Gillespie
10.14 Amendment to Agreement and Plan of Merger dated as of
January 3, 2000 by and among Perficient, Inc.,
Perficient Acquisition Corp., LoreData, Inc. and John
Gillespie
</TABLE>
<PAGE>
EXHIBIT 10.13
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PERFICIENT, INC.
PERFICIENT ACQUISITION CORP.,
LOREDATA, INC.,
AND
THE SOLE SHAREHOLDER OF LOREDATA, INC.
DATED AS OF DECEMBER 10, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.01 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . .1
1.03 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . .1
1.04 EFFECT OF THE MERGER . . . . . . . . . . . . . . . . . . . . . .2
1.05 CONVERSION OF COMPANY COMMON STOCK . . . . . . . . . . . . . . .2
1.06 ESCROWED CONSIDERATION . . . . . . . . . . . . . . . . . . . . .3
1.07 CERTIFICATE OF INCORPORATION . . . . . . . . . . . . . . . . . .3
1.08 BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.09 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. . . . . . .3
1.10 ADDITIONAL ACTIONS . . . . . . . . . . . . . . . . . . . . . . .4
1.11 ACCOUNTING AND TAX TREATMENT . . . . . . . . . . . . . . . . . .4
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
PAYMENT OF MERGER CONSIDERATION. . . . . . . . . . . . . . . . . . . . . .4
2.01 EXCHANGE OF SHARES.. . . . . . . . . . . . . . . . . . . . . . .4
2.02 FORFEITURE OF MERGER CONSIDERATION.. . . . . . . . . . . . . . .5
2.03 ADJUSTMENT OF MERGER CONSIDERATION . . . . . . . . . . . . . . .7
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER. . . . .8
3.01 CORPORATE ORGANIZATION AND QUALIFICATION . . . . . . . . . . . .8
3.02 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . .8
3.03 AUTHORITY; NO VIOLATION. . . . . . . . . . . . . . . . . . . . .9
3.04 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 10
3.05 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 10
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . 11
3.07 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . 11
3.08 TAXES AND TAX RETURNS. . . . . . . . . . . . . . . . . . . . . 12
3.09 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . 14
3.10 COMPLIANCE WITH APPLICABLE LAW; CERTAIN AGREEMENTS; LICENSING. 15
3.11 CERTAIN CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . 16
3.12 AGREEMENTS WITH REGULATORY AGENCIES. . . . . . . . . . . . . . 17
3.13 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . 17
3.14 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . 19
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3.18 BROKER'S FEES. . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 BANK ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.21 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB . . . . . . . . . . . . 20
4.01 CORPORATE ORGANIZATION AND QUALIFICATION . . . . . . . . . . . 20
4.02 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . 20
4.03 AUTHORITY; NO VIOLATIONS . . . . . . . . . . . . . . . . . . . 21
4.04 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 21
4.05 BROKER'S FEES. . . . . . . . . . . . . . . . . . . . . . . . . 22
4.06 SEC REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
COVENANTS RELATING TO CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . 22
5.01 COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . 22
5.02 NO SOLICITATION; NON-DISCLOSURE. . . . . . . . . . . . . . . . 24
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.01 REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . 25
6.02 SECURITIES LAWS MATTERS. . . . . . . . . . . . . . . . . . . . 25
6.03 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . 26
6.04 ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . . . 26
6.05 LEGAL CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . 26
6.06 ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 26
6.07 DISCLOSURE SUPPLEMENTS . . . . . . . . . . . . . . . . . . . . 26
6.08 NO INCONSISTENT ACTIONS. . . . . . . . . . . . . . . . . . . . 26
6.09 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.10 EMPLOYMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . 27
6.11 COMPANY SHAREHOLDER REPRESENTATION LETTER. . . . . . . . . . . 27
6.12 RETENTION BONUSES. . . . . . . . . . . . . . . . . . . . . . . 27
6.13 PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER . . 28
7.02 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. . . . . . . . . . 28
7.03 CONDITIONS TO OBLIGATIONS OF THE COMPANY . . . . . . . . . . . 29
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<PAGE>
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
TERMINATION AND AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 30
8.01 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.02 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . 31
8.03 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.04 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.05 EXTENSION; WAIVER. . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.01 AGREEMENT TO INDEMNIFY . . . . . . . . . . . . . . . . . . . . 32
9.02 SURVIVAL OF INDEMNITY. . . . . . . . . . . . . . . . . . . . . 32
9.03 ADDITIONAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . 32
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.01 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.02 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.03 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . 35
10.04 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.05 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 35
10.06 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . 35
10.07 ENFORCEMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . 35
10.08 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.09 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
EXHIBIT A - ESCROW AGREEMENT
EXHIBIT B - REGISTRATION RIGHTS AGREEMENT
EXHIBIT C - EMPLOYMENT AGREEMENT
EXHIBIT D - REPRESENTATION LETTER
EXHIBIT E - RETENTION BONUS
EXHIBIT F - FIRPTA AFFIDAVIT
EXHIBIT G - OPINION OF COUNSEL TO COMPANY
EXHIBIT H - OPINION OF COUNSEL TO PARENT AND SUB
EXHIBIT I - NONCOMPETITION AGREEMENT
EXHIBIT J - INDEMNIFICATION LETTER
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of December
10, 1999, by and among Perficient, Inc., a Delaware corporation ("Parent"),
Perficient Acquisition Corp., a Delaware corporation ("Sub"), LoreData, Inc.,
a Connecticut corporation (the "Company"), and the sole Shareholder of the
Company set forth on the signature page hereto (the "Shareholder").
WHEREAS, the respective Boards of Directors of Parent and the Company
have determined that it is advisable and in the best interests of their
respective companies and their shareholders to consummate the business
combination transaction provided for herein in which the Company will, subject
to the terms and conditions set forth herein, merge with and into Sub (the
"Merger"); and
WHEREAS, the shareholders of each of Sub and the Company have approved
and adopted this Agreement and the transactions contemplated hereby; and
WHEREAS, Parent, Sub, the Company and the Shareholder desire to make
certain representations, warranties and covenants in connection with the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER. Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law ("DGCL") and
the Connecticut Business Corporation Act ("CBCA"), at the Effective Time (as
hereinafter defined), the Company shall merge with and into Sub. Sub shall
become the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger, and shall continue its corporate existence under
the laws of the State of Delaware. Parent shall cause the Surviving Corporation
to become a wholly-owned subsidiary of Parent. The name of the Surviving
Corporation shall be "Perficient LoreData, Inc.", a Delaware corporation. Upon
consummation of the Merger, the separate corporate existence of the Company
shall terminate.
1.02 PLAN OF MERGER. This Agreement shall constitute an agreement of
merger for purposes of the DGCL and the CBCA.
1.03 EFFECTIVE TIME. As promptly as practicable after all of the
conditions set forth in Article VII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, the
Company and Sub shall duly execute and file certificates/articles of merger
<PAGE>
(collectively, the "Certificate of Merger") with the Secretary of State of
the State of Delaware (the "Delaware Secretary") in accordance with the DGCL
and with the Secretary of State of the State of Connecticut (the "Connecticut
Secretary") in accordance with the CBCA. The Merger shall become effective
on the date (the "Effective Date") and at such time (the "Effective Time") as
the Certificate of Merger is filed with the Delaware Secretary or at such
later date and time as is specified in the Certificate of Merger.
1.04 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided herein and as set forth in Section 259 of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, (i) all the property, rights, privileges, powers and franchises
of the Company shall vest in the Surviving Corporation, (ii) all debts,
liabilities, obligations, restrictions, disabilities and duties of Sub and the
Company shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation and (iii) the Surviving
Corporation shall become a wholly-owned subsidiary of Parent.
1.05 CONVERSION OF COMPANY COMMON STOCK.
(a) At the Effective Time, each issued and outstanding share
of common stock, no par value per share, of the Company (the "Company Common
Stock") immediately prior to the Effective Time (other than shares of Company
Common Stock held in the Company's treasury) shall, by virtue of this
Agreement and without any action on the part of the holder thereof, be
converted into the right to receive and be exchangeable for (i) $385,000
(the "Cash Price") divided by the number of shares of Company Common Stock
outstanding on a fully-diluted basis (the "Cash Per Share Price"); (ii) the
Conversion Number (as defined below) of shares of common stock, par value
$0.001 per share, of Parent (the "Parent Common Stock") (such consideration
to be referred to as the "Stock Per Share Price" and, together with the Cash
Per Share Price, the "Per Share Price"); a portion of which shall be subject
to forfeiture or adjustment as provided in Section 2.02 and Section 2.03 and
Article IX hereof.
(b) Each share of Company Common Stock converted into the
Parent Common Stock pursuant to this Article I shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each certificate (each a "Certificate," and collectively, the "Certificates")
previously representing any such shares of Company Common Stock shall
thereafter represent the right to receive (i) cash equal to the Cash Per
Share Price multiplied by the number of shares of Company Common Stock
represented by such certificate; and (ii) shares of Parent Common Stock equal
to the Stock Per Share Price multiplied by the number of shares of Company
Common Stock represented by such Certificate, plus any cash for fractional
shares upon conversion (in the aggregate, the "Merger Consideration"), a
portion of which shall be subject to forfeiture or adjustment as provided in
Section 2.02 and Section 2.03 and subject to Article IX hereof.
(c) For purposes of this Agreement, the Conversion Number shall
be the quotient of:
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<PAGE>
(i) $2,365,000 less the product of $145,000 multiplied by
the difference of (i) fifteen (15) and (ii) the number of employees listed on
EXHIBIT E hereto on the Closing Date (the "Stock Price") divided by the
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time, divided by
(ii) the average closing price of Parent Common Stock as
reported on the Nasdaq SmallCap Market for the ten (10) consecutive trading days
immediately preceding the public announcement of the Merger (the "Average
Closing Price").
For example, if the Average Closing Price is $12 and the number
of employees listed on Exhibit E on the Closing Date is 13, then the
Conversion Number shall be 1,729.166 [which equals (($2,365,000 - ($145,000 x
(15-13)))/100/12)].
(d) If, between the date of this Agreement and the Effective
Time as to the Per Share Price, the outstanding shares of Parent Common Stock
shall be changed into a different number of shares by reason of any
reclassification, recapitalization or exchange of shares or if a stock split,
combination, stock dividend, stock rights or extraordinary dividend thereon
shall be declared with a record date within said period, the Stock Per Share
Price and the Average Closing Price shall be correspondingly adjusted, as
applicable. No fractional shares of Parent Common Stock will be issued and,
in lieu thereof, any shareholder entitled to receive a fractional share of
Parent Common Stock shall be paid in cash an amount equal to the value of
such fractional shares, which shall be calculated as the fraction of the
share of Parent Common Stock that would otherwise be issued multiplied by the
Average Closing Price.
1.06 ESCROWED CONSIDERATION. Such number of shares of Parent Common
Stock equal to the Conversion Number less $385,000 divided by the Average
Closing Price (the "Escrowed Shares") plus the cash portion of any fractional
shares upon conversion (calculated in accordance with Section 1.05(d)) (the
"Escrowed Cash") shall be held in escrow (the Escrowed Shares and the
Escrowed Cash are herein collectively referred to as the "Escrowed
Consideration") for a period of one (1) year from the Closing Date, subject
to Section 2.02 and Section 2.03 and subject to Article IX, pursuant to the
terms and subject to the conditions set forth in the Escrow Agreement.
1.07 CERTIFICATE OF INCORPORATION. Unless otherwise agreed to by
the parties prior to the Effective Time, at and after the Effective Time, the
Certificate of Incorporation of Sub shall be the Certificate of Incorporation
of the Surviving Corporation, until thereafter amended as provided by law and
such Certificate of Incorporation.
1.08 BYLAWS. Unless otherwise agreed to by the parties prior to the
Effective Time, at and after the Effective Time, the Bylaws of Sub shall be
the Bylaws of the Surviving Corporation, until thereafter amended as provided
by law, the Certificate of Incorporation of the Surviving Corporation and
such Bylaws.
1.09 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. As of the
Effective Time, the board of directors of the Surviving Corporation shall
consist of three (3) members who shall
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<PAGE>
be designated by Parent in writing prior to the Effective Time. Each of the
directors so designated shall hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation until his or her
respective successors are duly elected or appointed and qualified. The board
of directors of the Surviving Corporation shall elect the officers of the
Surviving Corporation.
1.10 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, title to and possession of any property or right of the Company
acquired or to be acquired by reason of, or as a result of, the Merger, or
(b) otherwise to carry out the purposes of this Agreement, the Company and
its proper officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of
such property or rights in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement; and the proper officers and directors of
the Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
1.11 ACCOUNTING AND TAX TREATMENT. The parties to this Agreement
intend that the Merger shall be treated as a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE II
PAYMENT OF MERGER CONSIDERATION
2.01 EXCHANGE OF SHARES.
(a) At the Effective Time, upon surrender of all the
Certificates representing all issued and outstanding shares of Company Common
Stock to Parent (or affidavits and bonds relating thereto), Parent shall
deliver to the Shareholder the Cash Price and such number of shares of Parent
Common Stock that are not placed in escrow under Section 1.06 hereunder. The
Shareholder shall also receive the Escrowed Consideration, which shall be
deposited in escrow in accordance and subject to the conditions contained in
Section 1.06, Section 2.02 and Section 2.03, Article IX hereof and the Escrow
Agreement.
(b) After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the shares of Company Common Stock
which were issued and outstanding immediately prior to the Effective Time.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such amount as
Parent may direct as indemnity against any claim that may be made against it
with respect to such
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<PAGE>
Certificate, Parent will deliver in exchange for such lost, stolen or
destroyed Certificate, a replacement stock Certificate.
2.02 FORFEITURE OF MERGER CONSIDERATION.
(a) In the event that the employment agreement (the
"Employment Agreement") between Parent and Shareholder is terminated by
Shareholder prior to the first anniversary of the Closing Date (as defined
below) for any reason other than death or Disability (as such term is defined
in the Employment Agreement), the Escrowed Consideration shall be immediately
returned in full to Parent subject to the terms of the Escrow Agreement. In
the event that the Employment Agreement is terminated as a result of
Shareholder's death or Disability, the Escrowed Consideration shall be
immediately paid to Shareholder's heirs, successors or estate subject to the
terms of the Escrow Agreement. In the event that the Employment Agreement is
terminated by Parent pursuant to a Termination for Cause (as such term is
defined in the Employment Agreement), then Parent shall receive, subject to
the terms of the Escrow Agreement, from escrow the amount of Escrowed
Consideration as is equal to the harm done to Parent as a result of the
action(s) or inaction(s) by Shareholder giving rise to the Termination for
Cause.
(b) In the event that the number of employees of the Company
listed on EXHIBIT E on the Closing Date is less than nineteen (19) (such
number of employees listed on EXHIBIT E being the "Initial Employee Number"),
Shareholder shall have an "Initial Employee Shortfall Number" equal to the
product of negative one (-1) multiplied by the difference between (i)
nineteen (19) and (ii) the number of employees listed on EXHIBIT E on the
Closing Date. For example, if the number of employees listed on Exhibit E on
the Closing Date is 17, then the Initial Employee Shortfall Number is -2.
(c) In the event that, during the one-year period following
the Closing Date, Shareholder hires employees for Parent or the Surviving
Corporation which hires are solely attributable to his efforts or have not
resulted from, or are not due to, the efforts of any other employee of Parent
or the Surviving Corporation and such employees remain in the employ of the
Parent or the Surviving Corporation for at least three (3) months (each, a
"New Employee"), Shareholder shall receive a hiring credit equal to the
product of one-half (1/2) multiplied by the number of New Employees hired (an
"Employee Hiring Credit Number"); PROVIDED THAT in the event that John Manley
is hired prior to the one year anniversary of the Closing Date, Shareholder
shall receive a hiring credit equal to one (1) (the "John Manley Hiring
Credit Number"). In the event that John Manley is not hired prior to the one
year anniversary of the Closing Date, the John Manley Hiring Credit Number
shall be zero (0). The sum of the Employee Hiring Credit Number and the John
Manley Hiring Credit Number shall be the "Total Hiring Credit Number".
(d) In the event that any employee of the Company listed on
EXHIBIT E hereto on the Closing Date (other than Shareholder) leaves the
employ of Parent or the Surviving Corporation for any reason prior to the
first anniversary of the Closing for a reason other than due to a termination
by Parent with the sole intent of adding to the Employee Attrition Number (as
defined hereunder) (each, a "Terminating Employee"), Shareholder shall have
an "Employee
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Attrition Number" equal to the product of negative one (-1) multiplied by
such number of Terminating Employees.
(e) The "Reconciliation Number" shall be the sum of (i) the
Initial Employee Shortfall Number plus (ii) the Total Hiring Credit Number plus
(iii) the Employee Attrition Number all as calculated on the one year
anniversary date of the Closing. In the event that the Reconciliation Number is
a negative number, Shareholder shall forfeit to Parent on the first anniversary
of the Closing a number of shares of Parent Common Stock valued at the Average
Closing Price having an aggregate value equal to the product of the
Reconciliation Number multiplied by negative one (-1) divided by the Initial
Employee Number multiplied by one million five hundred thousand dollars
($1,500,000), subject to the terms of the Escrow Agreement (the "Forfeiture
Amount"); PROVIDED, HOWEVER, that in no event shall the Forfeiture Amount
hereunder exceed one million five hundred thousand dollars ($1,500,000). In the
event that the Reconciliation Number is zero or a positive number, then on the
first anniversary of the Closing, Shareholder shall receive, subject to the
terms of the Escrow Agreement, all Escrowed Consideration remaining at such time
that is being held in escrow and is not subject to a Dispute (as such term is
defined in the Escrow Agreement).
Examples.
1. The Initial Employee Number is 15, Shareholder hires 4
persons (none of which are John Manley), and there are 3 Terminating Employees.
The Forfeiture Amount that Shareholder will forfeit is $500,000, calculated as
follows:
[(15-19) + (4 x .5) + (-3)] x (-1) x $1,500,000
-------------------------------------------------------
15
2. The Initial Employee Number is 15, Shareholder hires 2
persons (none of which are John Manley), and there are 3 Terminating Employees.
The Forfeiture Amount that Shareholder will forfeit is $600,000, calculated as
follows:
[(15-19) + (2 x .5) + (-3)] x (-1) x $1,500,000
--------------------------------------------------------
15
3. The Initial Employee Number is 17, Shareholder hires 4
persons (none of which are John Manley), and there are 3 Terminating Employees.
The Forfeiture Amount that Shareholder will forfeit is $264,705.88, calculated
as follows:
[(17-19) + (4 x .5) + (-3)] x (-1) x $1,500,000
-------------------------------------------------------
17
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4. The Initial Employee Number is 17, Shareholder hires 8
persons (none of which are John Manley), and there is 1 Terminating Employee.
The Reconciliation Number is 1 [(17-19) + (8 x .5) + (-1)] and Shareholder
receives all Escrowed Consideration remaining on the one year anniversary of
the Closing Date that is being held in escrow and is not subject to a Dispute.
5. The Initial Employee Number is 15, Shareholder hires 4
persons (one of which is John Manley), and there are 3 Terminating Employees.
The Forfeiture Amount that Shareholder will forfeit is $450,000, calculated as
follows:
[(15-19) + (3 x .5) + 1 + (-3)] x (-1) x $1,500,000
-----------------------------------------------------------
15
2.03 ADJUSTMENT OF MERGER CONSIDERATION.
(a) As soon as practicable but in no event later than ten
(10) days following the Closing Date, Shareholder shall cause the preparation
of a balance sheet of the Company, as at the Closing Date (the "Closing Date
Balance Sheet"), in accordance with generally accepted United States
accounting principles ("GAAP") and consistent with past practice. The cost
of preparation of the Closing Date Balance Sheet shall be borne by the
Company. The Company and Parent shall share with each other such detailed
calculations and supporting documents as the other shall reasonably require
in connection with its review of any calculations made thereunder. Parent
shall have the right, in its sole discretion, to cause a review or audit of
the Closing Date Balance Sheet, as Parent's expense, by its accountants,
provided that such review or audit shall be completed within 30 days
following the availability of the Closing Date Balance Sheet. Parent may
submit to Shareholder, not later than 30 days from the receipt of the Closing
Date Balance Sheet from Shareholder, a list of any components of the Closing
Date Balance Sheet appearing thereon with which Parent disagrees, if any.
The parties shall thereafter have 15 days to discuss and reach resolution on
any items of dispute. Any items of dispute regarding the Closing Date
Balance Sheet which are not so resolved shall be submitted to a nationally
recognized firm of public accountants mutually acceptable to Shareholder and
Parent, who shall have no conflict of interest with respect to either party
and who shall serve as an arbitrator hereunder, the expenses of which shall
be shared one-half by Shareholder and one-half by Parent. The determination
of such firm with respect to any and all disputes shall be conclusive and
binding upon all parties.
(b) If, following such review and other procedures described
in Section 2.03(a), the Closing Date Balance Sheet reflects a Net Working
Capital (as defined below) less than $50,000, then the Stock Price payable
hereunder shall be reduced on a dollar-for-dollar basis by the amount of such
shortfall (the "Shortfall Amount"). For purposes of this Agreement, "Net
Working Capital" shall mean the sum of the Cash plus Accounts Receivable less
Current Liabilities as reflected on the Closing Date Balance Sheet,
calculated in accordance with GAAP and consistent with past practice. At
such time that the parties have agreed upon the Closing Date Balance Sheet
and if an adjustment is required under this Section, then such number of the
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Escrowed Shares shall be returned to the Parent as equal the Shortfall Amount
divided by the Average Closing Price subject to the terms of the Escrow
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
The Company and the Shareholder, jointly and severally, hereby represent
and warrant to Parent and Sub as follows:
3.01 CORPORATE ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Connecticut.
The Company has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary. The Certificate or Articles
of Incorporation and Bylaws of the Company, copies of which have previously
been delivered to Parent, are true, accurate and complete copies of such
documents as in effect as of the date of this Agreement.
(b) Except as set forth on SCHEDULE 3.01, the Company has no
direct or indirect Subsidiaries. Except as set forth on SCHEDULE 3.01, the
Company does not own, control or hold with the power to vote, directly or
indirectly of record, beneficially or otherwise, any capital stock or any
equity or ownership interest in any corporation, partnership, association,
joint venture or other entity, except for less than five percent (5%) of any
equity security registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). As used in this Agreement, the word
"Subsidiary" means any corporation, partnership, limited liability company,
or other organization, whether incorporated or unincorporated, which is or
was consolidated with such party or with which such party is or was
consolidated for financial reporting purposes.
(c) The minute books of each of the Company and its
Subsidiaries contain true, accurate and complete records of all meetings and
other corporate actions held or taken by its shareholders and board of
directors (including committees thereof).
3.02 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
20,000 shares of Company Common Stock. As of the date of this Agreement,
there are 100 shares of Company Common Stock issued and outstanding all of
which are owned by the Shareholder in the amounts as set forth in SCHEDULE
3.02 annexed hereto. Shareholder is the sole shareholder of the Company.
Except as set forth on SCHEDULE 3.02, all of the issued and outstanding
shares of
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Company Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. The authorized and issued and
outstanding capital stock of each Subsidiary of the Company is set forth on
SCHEDULE 3.02. All of the issued and outstanding shares of capital stock of
each Subsidiary of the Company are owned by the Company, have been duly
authorized and validly issued and are fully paid, non-assessable and free of
preemptive rights with no personal liability attaching to the ownership
thereof. Except as set forth in SCHEDULE 3.02 hereto, the Company does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Company Common Stock or any other equity security
of the Company or any of its Subsidiaries or any securities representing the
right to purchase or otherwise receive any shares of Company Common Stock or
any other equity security of the Company or any of its Subsidiaries other
than as provided for in this Agreement. There are no bonds, debentures, notes
or other indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for securities having the right to vote) on any matters
on which the Shareholder of the Company may vote.
(b) Except as disclosed on SCHEDULE 3.02(b) hereto, there
are no agreements or understandings, with respect to the voting of any shares
of Company Common Stock or any Subsidiary of the Company or which restrict
the transfer of such shares, to which the Company or any of its Subsidiaries
is a party and there are no such agreements or understandings to which the
Company or any of its Subsidiaries is a party with respect to the voting of
any such shares or which restrict the transfer of such shares, other than
applicable federal and state securities laws.
(c) All dividends on Company Common Stock which have been
declared prior to the date of this Agreement have been paid in full.
3.03 AUTHORITY; NO VIOLATION.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated by this
Agreement have been duly and validly authorized by all requisite corporate
action on the part of the Company and, except for the approval of the
adoption of this Agreement by the vote or consent of the Shareholder of the
Company required by the Company's Certificate or Articles of Incorporation
and Bylaws and the filing of the Certificate of Merger, no other corporate
proceedings on the part of the Company are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and
(assuming the due authorization, execution and delivery by Parent and Sub)
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers), moratorium or similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
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<PAGE>
(b) Except as set forth in SCHEDULE 3.03 hereto, neither the
execution and delivery of this Agreement by the Company, nor the consummation by
the Company of the transactions contemplated hereby, nor compliance by the
Company with any of the terms or provisions, hereof, will (i) violate, conflict
with or result in a breach of any provision of the Articles of Incorporation or
Bylaws of the Company, (ii) assuming that the consents and approvals referred to
in Section 3.04 hereof are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree, license or
injunction applicable to the Company or any of its Subsidiaries, or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provisions of or the loss of any benefit under, constitute a
default (or any event, which, with notice or lapse of time, or both would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party, or by which the Company or any of its Subsidiaries or any of their
respective properties or assets may be bound or affected.
3.04 CONSENTS AND APPROVALS. Except for (a) the filing of the
Certificate of Merger with the Delaware Secretary and the Connecticut Secretary,
respectively, pursuant to the DGCL and the CBCA, respectively, to effect the
Merger, (b) such filings as may be necessary as a result of any facts or
circumstances relating solely to Parent or Sub, and (c) such filings,
authorizations, consents or approvals as may be set forth in SCHEDULE 3.04
hereto, no consents or approvals of, or filings or registrations with, any
court, administrative agency, regulatory agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or with
any third party are necessary in connection with the execution and delivery by
the Company of this Agreement and the consummation by the Company of the Merger
and the other transactions contemplated hereby.
3.05 FINANCIAL STATEMENTS.
(a) The Company has previously delivered to Parent copies of
the unaudited consolidated balance sheets of the Company as of December 31,
1998, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal year 1998, inclusive. The
Company has also previously delivered to Parent copies of the unaudited
consolidated balance sheets of the Company as of September 30, 1999, and the
related unaudited consolidated statements of income and cash flows for the nine
months ended September 30, 1999. All such financial statements delivered under
this Section 3.05(a) to Parent shall be collectively referred to herein as the
"Financial Statements." The unaudited consolidated interim financial statements
of the Company and its Subsidiaries have been prepared in accordance with GAAP
consistently applied during the periods involved, complied as of their
respective dates in all material respects with applicable accounting
requirements, and fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the dates
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thereof and the consolidated income and retained earnings and sources and
applications of funds for the periods then ended.
(b) Except as set forth on SCHEDULE 3.05(b) hereto for
liabilities incurred since September 30, 1999 in the ordinary course of business
consistent with past practice and as otherwise set forth on SCHEDULE 3.05(b)
hereto, the Company does not have any liabilities or obligations of any nature
whatsoever (whether absolute, accrued, contingent or otherwise) which are not
adequately reserved or reflected on the balance sheet of the Company for the
quarter ended September 30, 1999, and there do not exist any circumstances that
could be expected to result in such liabilities or obligations.
(c) SCHEDULE 3.05(c)(i) contains the Company's accounts
receivable report as of September 30, 1999, which report is true and accurate in
all material respects and has been prepared in accordance with the Company's
normal practice. The accounts receivable reflected in the September 30, 1999
report contained in SCHEDULE 3.05(c)(i) and all the accounts receivable arising
after such date are valid and genuine and arose from bona fide transactions in
the ordinary course of the Company's business and have been recorded in
accordance with the Company's historical revenue recognition policy. Except as
set forth ON SCHEDULE 3.05(c)(ii), no account receivable has been assigned or
pledged to any other person and no defense or set off to any such account
receivable has been asserted by the account obligor. The allowance for bad debt
for the Company's accounts receivable set forth on the September 30, 1999
unaudited consolidated balance sheet is adequate and in accordance with the
historical accounting practices of the Company, and all of the accounts
receivable of the Company on hand at the Effective Time, net of such allowance
for bad debt, are and will be good and collectible in full within 180 days
following the Effective Time.
(d) Since September 30, 1999 neither the Company nor its
Subsidiaries has declared or paid any dividends, or made any other distribution
on or in respect of, or directly or indirectly purchased, retired, redeemed or
otherwise acquired any shares of the capital stock of the Company or issued or
sold any such shares of capital stock.
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SCHEDULE 3.06 hereto, since September 30, 1999, there has not been any Material
Adverse Effect on the Company (including without limitation any loss of
employees or customers that has had a Material Adverse Effect, or that is likely
to have a Material Adverse Effect, on the Company) and no fact or condition
exists which is likely to cause such a Material Adverse Effect on the Company in
the future. As used in this Agreement, the term "Material Adverse Effect"
means, with respect to Parent, Sub or the Company, as the case may be, any
change or effect that is or is reasonably expected to be materially adverse to
the business, properties, assets, liabilities, financial condition or results of
operations of such party and its Subsidiaries, taken as a whole.
3.07 LEGAL PROCEEDINGS. Except as set forth IN SCHEDULE 3.07 hereto,
the Company is not a party to any, and there are no pending or threatened,
legal, administrative, arbitrable or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against or affecting the
Company or any of its Subsidiaries or any property or asset of the
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Company or any of its Subsidiaries, before any court, arbitrator,
administrative agency or Governmental Entity, domestic or foreign. Neither
the Company nor any of its Subsidiaries nor any property or asset of the
Company is subject to any order, writ, judgment, injunction, decree,
determination or award which restricts its ability to conduct business in any
area in which it presently does business.
3.08 TAXES AND TAX RETURNS.
(a) For purposes of this Agreement, the terms "Tax" and "Taxes"
shall mean any and all taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross income, gross receipts,
premium, sales, use, ad valorem, value added, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties (including penalties
for failure to file in accordance with applicable information reporting
requirements), and additions to tax by any authority, whether federal, state,
local, domestic or foreign. The term "Tax Return" shall mean any report,
return, form, declaration or other document or information required to be
supplied to any authority in connection with Taxes.
(b) The Company and its Subsidiaries and to the extent required
in connection with the activities of the Company, the Shareholder (collectively,
the "Taxpayer") have filed all Tax Returns that were required to be filed. All
such Tax Returns were when filed, and continue to be, correct and complete in
all material respects. All Taxes owed by the Taxpayer (whether or not shown on
any Tax Return) have been timely paid. Except as set forth on SCHEDULE 3.08(b)
annexed hereto, the Taxpayer currently is not the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Taxpayer does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no liens with
respect to Taxes on any of the assets or property of the Taxpayer.
(c) The Taxpayer has withheld or collected and paid all Taxes
required to have been withheld or collected and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, shareholder,
any other third party, or otherwise.
(d) There is no dispute or claim concerning any Tax Liability
of the Taxpayer either (A) claimed or raised by any authority in writing or (B)
as to which the Taxpayer or the directors and officers (and employees
responsible for Tax matters) of the Taxpayer has knowledge. There are no
proceedings with respect to Taxes pending, except as set forth on SCHEDULE
3.08(d) annexed hereto.
(e) SCHEDULE 3.08(e) annexed hereto sets forth an accurate,
correct and complete list of all federal, state, local, and foreign Tax Returns
filed with respect to the Taxpayer for taxable periods ended on or after
December 31, 1994, indicates those Tax Returns that have been audited and
indicates those Tax Returns that currently are the subject of audit. The
Company has delivered to Parent correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by or on behalf
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of the Taxpayer since December 31, 1994. No other audit or investigation with
respect to Taxes is pending or has been threatened.
(f) The Taxpayer has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(g) None of the assets of the Taxpayer are assets that Sub or
Parent or any affiliate of Parent is or shall be required to treat as being
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code.
(h) The Taxpayer has not agreed to make, nor is it required to
make, any adjustments under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(i) The Taxpayer is not a party to any contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code, or the payment of any consideration which would not be deductible by
reason of Section 162(m) of the Code.
(j) The Taxpayer has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii).
(k) The Taxpayer is not a party to any agreement, whether
written or unwritten, providing for the payment of Tax liabilities, payment for
Tax losses, entitlements to refunds or similar Tax matters.
(1) No ruling with respect to Taxes relating to the Taxpayer
has been requested by or on behalf of the Taxpayer.
(m) The Taxpayer (A) has never been a member of an affiliated
group (within the meaning of Section 1504 of the Code, or any similar group as
defined for state, local or foreign tax purposes) filing a consolidated federal
(or combined or unitary state, local or foreign) income Tax Return or (B) does
not have any liability for the taxes of any Person (other than the Taxpayers)
under Reg. Section 1.1502-6 (or any similar provision of state, local or foreign
Law), as a transferee or successor, by contract, or otherwise.
(n) The unpaid Taxes of the Taxpayer (A) did not, as of the
most recent fiscal quarter end, exceed the reserves for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) on its books at such time and (B) do not exceed
that reserve as adjusted for the passage of time through the Effective Date in
accordance with the past custom and practice of the Taxpayer in filing its Tax
Returns.
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(o) SCHEDULE 3.08(o) sets forth the following information with
respect to the Company as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Effective Date giving effect to the
consummation of the transactions contemplated hereby): the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Company.
3.09 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 3.09 hereto sets forth a true and complete list of
all Plans maintained or contributed to by the Company or any of its Subsidiaries
during the five- (5) years preceding this Agreement. The term "Plans" for
purposes of this Article III means all employee benefit plans, arrangements or
agreements that are maintained or contributed to, or that were maintained or
contributed to at any time during the five (5) years preceding the date of this
Agreement, by the Company or any of its Subsidiaries, or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company would be deemed a "single employer" within the meaning
of Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) The Company has heretofore delivered to Parent true and
complete copies of each of the Plans and all related documents, including but
not limited to (i) all required Forms 5500 and all related schedules for such
Plans (if applicable) for each of the last two (2) years, (ii) the actuarial
report for such Plan (if applicable) for each of the last two (2) years, and
(iii) the most recent determination letter from the IRS (if applicable) for such
plan.
(c) (i) Except as set forth in SCHEDULE 3.09 hereto, each of
the Plans has been operated and administered in all material respects in
accordance with applicable laws, including but not limited to ERISA and the
Code, (ii) each of the Plans intended to be "qualified" within meaning of
Section 40(a) of the Code has been maintained so as to qualify from the
effective date of such Plan to the Effective Time, (iii) with respect to each
Plan which is subject to Title IV of ERISA, the present value of "benefit
liabilities" (within the meaning of Section 4001(a)(16) of ERISA) under such
Plan, based upon the actuarial assumptions currently used by the Plan for IRS
funding purposes did not, as of its latest valuation date, exceed the then
current value of the assets of such Plan allocable to such accrued benefits, and
there has been no "accumulated funding deficiency" (whether or not waived), (iv)
no Plan provides benefits, including without limitation death, medical or other
benefits (whether or not insured), with respect to current or former employees
of the Company, any of its Subsidiaries or any ERISA Affiliate beyond their
retirement or other termination of service, other than (u) coverage mandated by
applicable law, (v) life insurance death benefits payable in the event of the
death of a covered employee, (w) disability benefits payable to disabled former
employees, (x) death benefits or retirement benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA, (y) deferred
compensation benefits accrued as liabilities on the books of the Company, any of
its Subsidiaries or any ERISA Affiliate or (z) benefits the full cost of which
is borne by the current or former employee (or his beneficiary), (v) with
respect to each Plan subject to Title IV of ERISA no liability under Title IV of
ERISA has been incurred by the Company, any of its Subsidiaries or any ERISA
Affiliate that has not been satisfied in full, no condition exists that presents
a material risk
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to the Company, any of its Subsidiaries or any ERISA Affiliate of incurring a
material liability to or on account of such Plan, and there has been no
"reportable event" (within the meaning of Section 1013 of ERISA and the
regulations thereunder), (vi) none of the Company, any of its Subsidiaries or
any ERISA Affiliate has ever maintained or contributed to a "multiemployer
pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all
contributions or other amounts payable by the Company as of the Effective
Time with respect to each Plan in respect of current or prior plan years have
been paid or accrued in accordance with GAAP and Section 412 of the Code,
(viii) none of the Company, any of its Subsidiaries or any ERISA Affiliate
has engaged in a transaction in connection with which the Company, any of its
Subsidiaries or any ERISA Affiliate has any material liability for either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, (ix) consummation of
the transactions contemplated hereby will not cause any amounts payable under
any of the Plans to fail to be deductible for federal income tax purposes
under Sections 280G or 162(m) of the Code, and (x) there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the Plans or any trusts related thereto.
(d) With respect to any Plan that is a welfare plan (within the
meaning of Section 3(l) of ERISA) (i) no such Plan is funded through a "welfare
benefit fund," as such term is defined in Section 419(a) of the Code, and (ii)
each such Plan complies in all material respects with the applicable
requirements of Section 4980B(f) of the Code, Part 6 of Subtitle B of Title I of
ERISA and any applicable state continuation coverage requirements ("COBRA").
(e) Except as prohibited by law (including Section 411(d)(6) of
the Code), each Plan may be amended, terminated, modified or otherwise revised
by the Company, any of its Subsidiaries or its ERISA Affiliates as of the
Effective Time to eliminate, without material effect, any and all future benefit
accruals under any Plan (except claims incurred under any welfare plan).
(f) Except as set forth on SCHEDULE 3.09, neither the Company
nor any of its Subsidiaries has entered into, adopted or amended in any respect
any collective bargaining agreement or adopted or amended any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
insurance or other similar plan, agreement, trust, fund or arrangement for the
benefit of employees (whether or not legally binding).
3.10 COMPLIANCE WITH APPLICABLE LAW; CERTAIN AGREEMENTS; LICENSING.
Except as set forth in SCHEDULE 3.10(i) hereto, each of the Company and its
Subsidiaries holds all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of its business under and pursuant to all, and
has complied with and is not in conflict with, or in default or violation of any
(a) statute, code, ordinance, law, rule, regulation, order, writ, judgment,
injunction or decree, published policies and guidelines of any Governmental
Entity, applicable to the Company or any Subsidiary or by which any property or
asset of the Company or Subsidiary is bound or affected or (b) any note, bond,
mortgage, indenture, deed of trust, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or any Subsidiary or any property or asset of the Company
or Subsidiary is bound or affected; and neither the Company nor any Subsidiary
knows
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of, or has received notice of, any violations of any the above. SCHEDULE
3.10(ii) hereto contains a list of all federal and state licenses,
franchises, permits and authorizations necessary for the lawful conduct of
the Company's or any of its Subsidiaries' respective businesses.
3.11 CERTAIN CONTRACTS.
(a) Except as set forth in SCHEDULE 3.11(a) hereto, neither the
Company nor any of its Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or oral): (i) with
respect to the employment of any director, officer or employee, or with respect
to the employment of any consultant which cannot be terminated without payment,
(ii) which, upon the consummation of the transactions contemplated by this
Agreement, will result in any payment (whether of severance pay or otherwise)
becoming due from the Company or any of its Subsidiaries to any officer or
employee thereof, (iii) which is a material contract (as defined in Item
601(b)(10) of Regulation S-K promulgated by the Securities and Exchange
Commission) ("SEC") to be performed after the date of this Agreement that has
not otherwise been disclosed in writing to Parent, (iv) which is a consulting or
other agreement (including agreements entered into in the ordinary course and
data processing, software programming and licensing contracts) not terminable on
ninety (90) days or less notice, (v) which restricts the conduct of any line of
business by the Company or any of its Subsidiaries, (vi) with or to a labor
union or guild (including any collective bargaining agreement), or (vii) any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. The Company has previously delivered to Parent
true and complete copies of all employment, consulting and deferred compensation
agreements which are in writing and to which the Company is a party. Each
contract, arrangement, commitment or understanding of the type described in this
section is referred to herein as a "Company Contract".
(b) Except as set forth in SCHEDULE 3.11(b) hereto, (i) each
Company Contract is legal, valid and binding upon the Company or any of its
Subsidiaries, as the case may be, assuming due authorization of the other party
or parties thereto, and in full force and effect, (ii) the Company has performed
all obligations required to be performed by it to date under each such Company
Contract, and (iii) no event or condition exists which constitutes or, after
notice or lapse of time or both, would constitute, a material default on the
part of the Company or Subsidiary, as the case may be, under any such Company
Contract.
(c) Neither the Company nor its Subsidiaries has made any
express warranty to any person or entity with respect to any services or
products it provides or delivers or has made or agreed to make any
indemnification payment with respect to any warranty claim, except for (i) the
warranties and/or agreement(s) to indemnify of which true and correct copies
have been delivered to Parent, and (ii) any warranties under other state or
federal laws generally.
3.12 AGREEMENTS WITH REGULATORY AGENCIES. Neither the Company nor any
of its Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written
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agreement, consent agreement or memorandum of understanding, commitment
letter, suspension order, or similar undertaking (each, a "Regulatory
Agreement") with any regulatory agency or any other Governmental Entity that
restricts the conduct of its business in any material respect, nor has the
Company been notified by any regulatory agency or any other Governmental
Entity that it is considering issuing or requesting any Regulatory Agreement.
3.13 ENVIRONMENTAL MATTERS.
(a) The Company and its Subsidiaries are, and have been, in
compliance with all applicable environmental laws and with all rules,
regulations, standards and requirements of the United States Environmental
Protection Agency (the "EPA") and of state and local agencies with jurisdiction
over pollution or protection of the environment.
(b) There is no suit, claim, action or proceeding pending or
threatened, before any Governmental Entity or other forum in which the Company
or any of its Subsidiaries has been or, with respect to threatened proceedings,
may be named as a defendant, responsible party or potentially responsible party
in any way relating to any environmental law, rule, regulation, standard or
requirement.
3.14 PROPERTIES.
(a) SCHEDULE 3.14 hereto contains a true, complete and correct
list and a brief description of all real properties owned by the Company or any
of its Subsidiaries. Except as set forth in SCHEDULE 3.14 hereto, the Company
or its Subsidiaries has good and marketable title to all real property and other
property owned by it and included in the balance sheet of the Company at
September 30, 1999, and owns such property subject to no encumbrances, liens,
security interests, pledges or title imperfections except for (i) those items
that secure liabilities that are reflected in such balance sheet or the notes
thereto, (ii) statutory liens for amounts not yet delinquent or which are being
contested in good faith, and (iii) those items that do not, individually or in
the aggregate, have a Material Adverse Effect on the Company or which do not and
will not interfere with the use of the property as currently used or
contemplated to be used by the Company or its Subsidiaries, or the conduct of
the business of the Company or its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries has
received any notice of a violation of any applicable zoning or environmental
regulation, ordinance or other law, order, regulation or requirement relating to
its operations or its properties and there is no such violation. Except as set
forth in SCHEDULE 3.14 hereto, all buildings and structures owned and used by
the Company or any of its Subsidiaries conform with all applicable ordinances,
codes or regulations. Except as set forth in SCHEDULE 3.14 hereto, all
buildings and structures leased and used by the Company or any of its
Subsidiaries conform in all material respects with all applicable ordinances,
codes or regulations.
(c) SCHEDULE 3.14 contains a true, complete and correct list of
all leases pursuant to which the Company or any of its Subsidiaries leases any
real or personal property,
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either as lessee or as lessor (the "Company Leases"). Assuming due
authorization of the other party or parties thereto, each of the Company
Leases is valid and binding on the Company or Subsidiary, and, to the best of
the Company's knowledge, valid and binding on and enforceable against all
other respective parties to such leases, in accordance with their respective
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), moratorium or similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). There are not under such
Company Leases any existing breaches, defaults or events of default by the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries received notice of, or made a claim with respect to, any breach
or default by any other party to such Company Leases. Each of the Company
and its Subsidiaries enjoys quiet and peaceful possession of all such leased
properties occupied by it as lessee.
3.15 INSURANCE. The Company has made available to Parent true and
complete copies of all material policies of insurance of the Company or any of
its Subsidiaries currently in effect. All of the policies relating to insurance
maintained by the Company with the respect to its material properties and the
conduct of its business in any material respect (or any comparable policies
entered into as a replacement thereof) are in full force and effect and the
Company has not received any notice of cancellation with respect thereto. All
life insurance policies on the lives of any of the current and former officers
of the Company which are maintained by the Company or any of its Subsidiaries or
which are otherwise included as assets on the books of the Company (i) are, or
will at the Effective Time be, owned by the Company or any of its Subsidiaries,
free and clear of any claims thereon by the officers or members of their
families, except with respect to the death benefits thereunder, as to which the
Company agrees that there will not be an amendment prior to the Effective Time
without the consent of Parent, and (ii) are accounted for properly on the books
of the Company in accordance with GAAP. The Company does not have any material
liability for unpaid premium or premium adjustments not properly reflected on
the Company's September 30, 1999 balance sheet. The Company and its
Subsidiaries have been and are adequately insured with respect to its respective
property and the conduct of its business in such amounts and against such risks
as are substantially similar in kind and amount to that customarily carried by
parties similarly situated who own properties and engage in businesses
substantially similar to that of the Company (including without limitation
liability insurance and blanket bond insurance). All claims under any policy or
bond have been duly and timely filed.
3.16 LABOR MATTERS. Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining or other labor union or guild contract nor
has the Company or any of its Subsidiaries been approached by any collective
bargaining or other labor union or guild seeking to enter into a contract with
the Company or any of its Subsidiaries. There is no pending or threatened,
labor dispute, strike or work stoppage against the Company or any of its
Subsidiaries which may interfere with the business activities of the Company or
any of its Subsidiaries. None of the Company or any of its Subsidiaries or
their respective representatives or employees has committed any unfair labor
practices in connection with the operation of the business of the Company or any
of its Subsidiaries, and there is no pending or threatened charge or complaint
against the Company or any of its Subsidiaries by the National Labor Relations
Board or any
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comparable state agency. Except as set forth on SCHEDULE 3.16 hereto,
neither the Company nor its Subsidiaries has hired any illegal aliens as
employees. Neither the Company nor its Subsidiaries has discriminated on the
basis of race, age, sex or otherwise in its employment conditions or
practices with respect to its employees. There are no race, age, sex or
other discrimination complaints pending, or threatened against the Company or
any of its Subsidiaries by any employee, former or current, before any
domestic (federal, state or local) or foreign board, department, commission
or agency nor, to the knowledge of the Company, does any basis therefor exist.
3.17 INTELLECTUAL PROPERTY. The Company and its Subsidiaries own or
possess valid and binding licenses and other rights to use without payment of
any material amount all material patents, copyrights, trade secrets, trade
names, service marks, trademarks, domain names, software and other intellectual
property used in its business, which are set forth in SCHEDULE 3.17 hereto;
neither the Company nor any of its Subsidiaries has received any notice of
conflict with respect thereto that asserts the right of others. The Company and
its Subsidiaries have performed in all material respects all the obligations
required to be performed by it with respect to the items of intellectual
property set forth in SCHEDULE 3.17 hereto and are not in material default under
any contract, agreement, arrangement or commitment relating to any of the
foregoing.
3.18 BROKER'S FEES. Neither the Company nor any of its officers or
directors, has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement, except as set forth in SCHEDULE
3.18.
3.19 BANK ACCOUNTS. The Company has provided or made available to
Parent complete and current summaries of information regarding all accounts,
lock boxes and safe deposits maintained by the Company at banks, trust
companies, securities firms or other brokers or other financial institutions.
3.20 YEAR 2000. The hardware and software utilized by and relied on by
the Company and its Subsidiaries in the conduct of their respective business (i)
are designed to be used prior to, during and after December 31, 1999 ("Year
2000") and such hardware and software will operate during each such time period
without error relating to date data, specifically including any error relating
to, or the conduct of, date data which represents or references different
centuries or more than one century, (ii) will not abnormally end or provide
invalid or incorrect results as a result of date data, and (iii) have been
designed to ensure Year 2000 compatibility, including date data, century
recognition, leap year, calculations which accommodate same century and
multicentury formulas and date values, and date data interface values that
reflect the century. Other than as indicated in Schedule 3.20, the Company has
no liability, obligation or commitment to any third party relating to Year 2000
compatability for any services performed or goods sold, including but not
limited to, any obligation to indemnify any third party for work performed if
such party incurs any damages as a result of the Company's services.
3.21 DISCLOSURE. To the best of the Company's and the Shareholder's
knowledge, no representation or warranty contained in this Agreement or any
schedule to this Agreement
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contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances in which they are made, not misleading. Each of the
Company and the Shareholder acknowledges and agrees that it has been
represented by its own counsel and has been able to confer with and ask
questions of its counsel in connection with the terms and conditions of this
Agreement and the preparation of the schedules hereto. Accordingly, each of
the Company and the Shareholder acknowledges and agrees that it is solely
responsible for the preparation, correctness, accuracy and truthfulness of
the schedules set forth in this Article 3 to this Agreement, notwithstanding
that counsel to Parent and Sub may have aided the Company and Shareholder by
typing any schedules pursuant to, in accordance with and based upon the
instructions and information provided by the Company and the Shareholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby, jointly and severally, represent and warrant to
the Company as follows:
4.01 CORPORATE ORGANIZATION AND QUALIFICATION. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Parent and Sub has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary. The Certificate of
Incorporation and Bylaws of each of Parent and Sub, copies of which have
previously been delivered to the Company, are true and complete copies of such
documents as in effect as of the date of this Agreement.
4.02 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of
20,000,000 shares of Parent Common Stock and 5,000,000 shares of preferred
stock, par value $0.001 per share ("Parent Preferred Stock"). As of September
30, 1999, 3,500,000 shares of Parent Common Stock and no shares of Parent
Preferred Stock were issued and outstanding. All of the issued and outstanding
shares of Parent Common Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof.
(b) The authorized capital stock of Sub consists of 10,000
shares of common stock, par value $0.01 per share ("Sub Common Stock"). As of
the date hereof, 1,000 shares of Sub Common Stock are outstanding. All of the
issued and outstanding shares of capital stock of Sub are owned by Parent, have
been duly authorized and validly issued and are fully paid, non-assessable and
free of preemptive rights with no personal liability attaching to the ownership
thereof.
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4.03 AUTHORITY; NO VIOLATIONS.
(a) Each of Parent and Sub have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action on the part of each of Parent and Sub. Except for the filing
of the Certificate of Merger and the approval of the shareholders of Sub, no
other corporate proceedings on the part of Parent or Sub are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Parent and
Sub and (assuming the due authorization, execution and delivery by the Company)
constitutes a valid and binding obligation of Parent and Sub, enforceable
against Parent and Sub in accordance with its terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers), moratorium or similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by
each of Parent and Sub, nor the consummation by either Parent or Sub, as the
case may be, of the transactions contemplated hereby, nor compliance by either
Parent or Sub with any of the terms or provisions hereof, will (i) violate,
conflict with or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of Parent, or Sub, as the case may be, or (ii)(x)
violate any statute, code, ordinance, rule, regulations, judgment, order, writ,
decree or injunction applicable to Parent or Sub or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provisions of or the loss of any benefit under, constitute a default (or any
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance upon any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Parent or Sub is a party, or by which they or any of their respective properties
or assets may be bound or affected.
4.04 CONSENTS AND APPROVALS. Except for (a) the filing of the
Certificate of Merger with the Delaware Secretary and the Connecticut Secretary,
respectively, pursuant to the DGCL and the CBCA, respectively, to effect the
Merger, (b) such filings as may be necessary as a result of any facts or
circumstances related solely to the Company, and (c) the consent of the
shareholders of Sub to the Merger, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
in connection with the execution and delivery by Parent and Sub of this
Agreement and the consummation by Parent and Sub of the Merger and the other
transactions contemplated hereby.
4.05 BROKER'S FEES. Neither Parent nor Sub, nor any of their
respective officers or directors, has employed any broker or finder or incurred
any liability for any broker's fee,
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commission or finder's fee in connection with any of the transactions
contemplated by this Agreement, except as set forth in SCHEDULE 4.05 hereto.
4.06 SEC REPORTS. Parent has previously delivered to the Company an
accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement of Parent filed since May 1,
1999 with the SEC pursuant to the Exchange Act or the Securities Act
(collectively, the "Parent SEC Reports"). Parent has timely filed (either by
the required filing date or pursuant to Rule 12b-25 promulgated under the
Exchange Act) all Parent SEC Reports and other documents required to be filed by
it under the Securities Act and the Exchange Act and, as of their respective
dates and all Parent SEC Reports complied with all of the rules and regulations
of the SEC with respect thereto.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
Parent, the Company shall (and shall cause its Subsidiaries to) carry on its
business in the ordinary course consistent with past practice. The Company
shall (and shall cause its Subsidiaries to) use all reasonable efforts to (x)
preserve its business organization, (y) keep available the present services of
its employees and (z) preserve for itself and Parent the goodwill of the
customers of the Company and its Subsidiaries and others with whom business
relationships exist, including, but not limited to all material contracts.
Without limiting the generality of the foregoing, and except as otherwise
contemplated by this Agreement or consented to in writing by Parent, the Company
shall not (and shall cause its Subsidiaries not to):
(a) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock;
(b) (i) split, combine or reclassify any shares of its capital
stock; or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock except
upon the exercise or fulfillment of rights or options issued or existing
pursuant to employee benefit plans, programs or arrangements, all to the extent
outstanding and in existence on the date of this Agreement, or (ii) repurchase,
redeem or otherwise acquire, any shares of the capital stock of the Company, or
any securities convertible into or exercisable for any shares of the capital
stock of the Company;
(c) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing;
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(d) amend its Certificate or Articles of Incorporation or
Bylaws;
(e) make any capital expenditures;
(f) enter into any new line of business;
(g) (i) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof or (ii) otherwise acquire any assets, other than in the ordinary course
of business, which would be material to the Company and its Subsidiaries, taken
as a whole;
(h) take any action that is intended or would 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 VII not
being satisfied, or in breach of any provision of this Agreement except, in
every case, as may be required by applicable law;
(i) change its methods of accounting in effect at December 31,
1998, except as required by changes in GAAP or regulatory accounting principles
as concurred to by the Company's independent auditors;
(j) (i) enter into, adopt, amend, renew or terminate any Plan
or any agreement, arrangement, plan or policy between the Company or any of its
Subsidiaries and one or more of its current or former directors, officers or
employees or (ii) increase in any manner compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan or
agreement as in effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares); or (iii) enter into,
modify or renew any employment, severance or other agreement with any director,
officer or employee of the Company or any of its Subsidiaries or establish,
adopt, enter into, or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement providing for any benefit to any
director, officer or employee (whether or not legally binding);
(k) incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity except in the
ordinary course of business consistent with past practice of the Company;
(l) sell, lease, encumber, assign or otherwise dispose of, or
agree to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements;
(m) make any Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
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(n) pay, discharge or satisfy any claim, liability or
obligation, other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice or as incurred in
connection with the Merger and the transactions expressly contemplated hereby,
of liabilities reflected or reserved against in the balance sheet at September
30, 1999, or subsequently incurred in the ordinary course of business and
consistent with past practice;
(o) enter into or renew, amend or terminate, or give notice of
a proposed renewal, amendment or termination, or make any commitment with
respect to, regardless of whether consistent with past practices, any lease,
contract, agreement or commitment having a term of one year or more from the
time of execution or outside of the ordinary course of business consistent with
past practices;
(p) waive any material right, whether in equity or at law; or
(q) agree to do any of the foregoing.
5.02 NO SOLICITATION; NON-DISCLOSURE.
(a) None of the Company, any of its Subsidiaries, the
Shareholder or any of their respective directors, officers, employees,
representatives, agents and advisors or other persons controlled by the Company
shall solicit or hold discussions or negotiations with, or assist or provide any
information to, any person, entity or group (other than Parent, Sub and their
affiliates and representatives) concerning (i) any merger, consolidation,
business combination, share exchange, or other similar transaction involving the
Company; (ii) any sale, lease, exchange, mortgage, pledge, license transfer or
other disposition of any shares of Company Common Stock or significant assets of
the Company; or (iii) the issuance of any new shares of capital stock of the
Company or any options, warrants or other rights to acquire shares of capital
stock of the Company. The Company will promptly communicate to Parent, Sub and
their affiliates and representatives the terms of any proposal, discussion,
negotiation or inquiry relating to a merger or disposition of a significant
portion of its capital stock or assets or similar transaction involving the
Company and the identity of the party making such proposal or inquiry, which it
may receive with respect to any such transaction.
(b) No party (or its representatives, agents, counsel,
accountants or investment bankers) hereto shall disclose to any third party,
other than either party's representatives, agents, counsel, accountants or
investment bankers any confidential or proprietary information about the
business, assets or operations of the other parties to this Agreement or the
transactions contemplated hereby, except as may be required by applicable law.
The parties hereto agree that the remedy at law for any breach of the
requirements of this subsection will be inadequate and that any breach would
cause such immediate and permanent damage as would be impossible to ascertain,
and, therefore, the parties hereto agree and consent that in the event of any
breach of this subsection, in addition to any and all other legal and equitable
remedies available for such breach, including a recovery of damages, the
non-breaching parties shall be entitled to obtain preliminary or permanent
injunctive relief without the necessity of proving actual damage by
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reason of such breach and, to the extent permissible under applicable law, a
temporary restraining order may be granted immediately on commencement of
such action.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 REGULATORY MATTERS. The parties hereto shall cooperate with each
other and use all reasonable efforts promptly to prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). The Company and Parent
shall have the right to review in advance, and to the extent practicable each
will consult with the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to the Company,
Parent or Sub, as the case may be, which appear in any filing made with or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. Parent (or Sub as the case
may be) and the Company shall promptly furnish each other with copies of written
communications received by Parent, Sub or the Company, as the case may be, from
or delivered by any of the foregoing to, any Governmental Entity in respect of
the transactions contemplated hereby.
6.02 SECURITIES LAWS MATTERS.
(a) During the two-year period following the Closing Date,
Parent shall use its reasonable best efforts to make current public information
available in accordance with Rule 144(c) under the Securities Act.
(b) On the Closing Date, Parent shall execute and deliver to
the Shareholder of the Company a Registration Rights Agreement in the form
attached hereto as EXHIBIT B.
6.03 SHAREHOLDER APPROVAL. In order to consummate the Merger, each of
the parties hereto shall take all steps necessary to obtain the approval of this
Agreement and the transactions contemplated hereby by its respective
shareholders, if applicable, and shall use all reasonable efforts to obtain such
approval and adoption.
6.04 ACCESS TO INFORMATION. The Company shall afford to Parent, and
shall cause its independent accountants to afford to Parent and Parent's
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the
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Closing to all of the Company's assets, properties, books, Company Contracts
and records. The Company shall permit Parent and its representatives to make
abstracts from and copies of such books and records. During such period, the
Company shall use its reasonable best efforts to furnish promptly to Parent
all other information concerning the business, properties and personnel of
the Company as Parent may reasonably request.
6.05 LEGAL CONDITIONS TO MERGER. Each of Parent, Sub and the Company
shall use all reasonable efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party with respect to the Merger and, subject to
the conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by Parent, Sub or the Company in connection with the
Merger and the other transactions contemplated by this Agreement.
6.06 ADDITIONAL AGREEMENTS. If at any time after the Effective Time
any further action is necessary or desirable to carry out the purpose of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement shall take all such necessary action as may be reasonably requested by
the Company or Parent (without additional cost to them).
6.07 DISCLOSURE SUPPLEMENTS. Prior to the Effective Time, each party
will supplement or amend the Schedules hereto delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set forth
or described in such Schedules or which is necessary to correct any information
in such Schedules which has been rendered inaccurate thereby. No supplement or
amendment to such Schedules shall have any effect for the purposes of
determining satisfaction of the conditions set forth in Sections 7.02(a) hereof
or the compliance by the Company with the covenants set forth in Section 5.01
hereof (unless Parent consents in writing to such satisfaction of conditions or
compliance) or for the purposes of determining satisfaction of the conditions
set forth in Sections 7.03(a) hereof (unless the Company consents to such
satisfaction of conditions).
6.08 NO INCONSISTENT ACTIONS. Prior to the Effective Time, except as
otherwise permitted by this Agreement, no party will enter into any transaction
or make any agreement or commitment and will use reasonable efforts not to
permit any event to occur, which could reasonably be anticipated to result in
(x) a denial of the regulatory approvals referred to in Section 7.01(a) or (y)
the imposition of any condition or requirement that would materially adversely
affect the economic or business benefits to the Surviving Corporation of the
transactions contemplated by this Agreement.
6.09 TAX MATTERS. The parties shall not, before or after the Effective
Time, purposefully take any action or fail to take any action that would
prevent, or would be reasonably
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likely to prevent, the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
6.10 EMPLOYMENT AGREEMENT. On the Closing Date, the Company shall
enter into the Employment Agreement with Shareholder in the form attached as
EXHIBIT C hereto.
6.11 COMPANY SHAREHOLDER REPRESENTATION LETTER. On the Closing Date,
the Company shall cause the Shareholder to execute and deliver to Parent the
Representation Letter in the form attached hereto as EXHIBIT D.
6.12 RETENTION BONUSES. Parent shall pay to each employee of the
Company listed on EXHIBIT E hereto a bonus (the "Retention Bonus") in cash or in
shares of Parent Common Stock, on the first anniversary of the Closing Date
provided that such employee has remained in the employ of Parent at all times
during such period. This Section 6.12 shall be construed as an agreement as to
which such employees designated by Parent and the Company are intended to be
third party beneficiaries and shall be enforceable by such persons and their
heirs and representatives.
6.13 PUBLICITY. The parties acknowledge that Parent, as a publicly
held company, is subject to certain disclosure requirements under federal
securities laws. Accordingly, the Company and the Shareholder agree that they
(a) will make no public comment concerning or announcement regarding the Merger;
(b) will institute procedures to restrict knowledge of the Merger to those who
need to know; and (c) will notify Parent of any external rumor of the Merger
received by the Company. Notwithstanding the foregoing, Parent reserves the
right to disclosure the Merger, including financial information regarding the
Company and the status of negotiations, at any time it decides that such
disclosure is appropriate under the securities laws or the rules of any stock
exchange.
Except as otherwise required by law or the rules of The Nasdaq SmallCap
Market System or the Boston Stock Exchange, Inc. and notwithstanding anything in
this Agreement to the contrary, so long as this Agreement is in effect, none of
Parent, Sub, the Shareholder or the Company shall, or shall permit any of their
Subsidiaries, if applicable, to issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by this Agreement
without the consent of the other party.
ARTICLE VII
CONDITIONS PRECEDENT
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
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(a) REGULATORY APPROVALS. All necessary approvals,
authorizations and consents of all Governmental Entities required to consummate
the transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired or been terminated (all such approvals and the expiration of
all such waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other transactions contemplated by this
Agreement shall be in effect and no proceeding initiated by any Governmental
Entity seeking an injunction shall be pending. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger, or any of the other transactions contemplated by
this Agreement.
(c) DISCHARGE OF AUTOMOBILE LEASE. Parent and Shareholder
shall each pay one-half of such amount that is required to discharge
Shareholder's automobile lease.
7.02 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligation of
Parent and Sub to effect the Merger is also subject to the satisfaction or
waiver by Parent or Sub, at or prior to the Effective Time, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date. Parent shall have received a certificate
signed on behalf of the Company by an authorized officer to the foregoing
effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by an
authorized officer to such effect.
(c) CONSENTS UNDER AGREEMENTS. The consent, approval, waiver
or amendment (with financial covenants) of each person (other than the
Governmental Entities referred to in Section 7.01(a)) whose consent or approval
shall be required in order to permit the succession by the Surviving Corporation
pursuant to the Merger to any obligation, right or interest of the Company under
any material loan or credit agreement, note, mortgage, indenture, lease, license
or other agreement or instrument shall have been obtained and shall be
reasonably satisfactory to Parent.
(d) ESCROW AGREEMENT. The Company and the Shareholder shall
each have executed and delivered to each of Parent and Sub the Escrow Agreement
in the form attached as EXHIBIT A hereto.
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(e) EMPLOYMENT AGREEMENT. Shareholder shall have executed and
delivered to Parent the Employment Agreement in the form attached as EXHIBIT C
hereto.
(f) COMPANY SHAREHOLDER REPRESENTATION LETTER. The Company
shall have caused the Shareholder to execute and deliver to Parent the
Representation Letter in the form attached as EXHIBIT D hereto.
(g) FIRPTA. The Company shall have delivered to Parent and Sub
an affidavit, dated as of the Effective Date, pursuant to Sections 897 and 1445
of the Code in substantially the form set forth in EXHIBIT F hereto.
(h) DISSENTERS' RIGHTS. The Shareholder of the Company shall
not have any right to exercise dissenters', appraisal or similar rights under
the CBCA by virtue of the Merger.
(i) OPINION OF COUNSEL FOR COMPANY. The Parent and Sub shall
have received an Opinion of Counsel of the Company in substantially the form set
forth on EXHIBIT G hereto.
(j) EMPLOYEE CONFIDENTIALITY AGREEMENTS. Each employee of the
Company who will become an employee of Parent or Sub on the Closing Date shall
execute and deliver to Parent the confidentiality agreement in the form attached
hereto as EXHIBIT I.
(k) INDEMNIFICATION LETTER. Each of the Company and the
Shareholder shall execute and deliver to Parent and Sub the indemnification
letter in the form attached hereto as EXHIBIT J.
7.03 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the Merger is also subject to the satisfaction, or waiver by
the Company, at or prior to the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Sub set forth in this Agreement shall be true and
correct of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. The Company shall have
received a certificate signed on behalf of Parent and Sub by an authorized
officer of each company to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and
Sub shall have each performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the Closing Date,
and the Company shall have received a certificate signed on behalf of Parent and
Sub by an authorized officer of each company to such effect.
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(c) ESCROW AGREEMENT. Parent and Sub shall each have executed
and delivered to the Company and the Shareholder the Escrow Agreement in the
form attached as EXHIBIT A hereto.
(d) REGISTRATION RIGHTS AGREEMENT. Parent shall have executed
and delivered to the Shareholder the Registration Rights Agreement attached as
EXHIBIT B hereto.
(e) EMPLOYMENT AGREEMENT. Parent shall have executed and
delivered to Shareholder the Employment Agreement.
(f) OPINION OF COUNSEL FOR THE PARENT AND SUB. The Company
shall have received an opinion of counsel of Parent and Sub in substantially the
form set forth on EXHIBIT H hereto.
(g) PAYMENT OF MERGER CONSIDERATION. Parent shall have paid
the Merger Consideration to the Shareholder.
(h) ASSUMPTION OR DISCHARGE OF BANK INDEBTEDNESS. Parent or
Sub shall assume or discharge the indebtedness of the Company due to Citizens
Bank in the amount of $__________ as of the date hereof and the Company and the
Shareholder, as the case may be, shall receive a release from Citizens Bank of
their respective obligations, if any, under the line of credit.
(i) TAX TREATMENT. The Shareholder shall have received a
letter from counsel to the Parent to the effect that the Merger shall be treated
as a tax free reorganization at least with respect to the Parent Common Stock
portion of the Merger Consideration.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.01 TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual consent of Parent and the Company in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Parent or the Company (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, covenants or
agreements set forth in this Agreement on the part of the other party, (i) which
breach (if susceptible to cure) is not cured within twenty (20) business days
following written notice to the party committing such breach, or (ii) which
breach, by its nature, cannot be cured; or
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(c) by either Parent or the Company if the Closing shall not
have occurred by January 31, 2000, unless the Closing is delayed solely because
the Requisite Regulatory Approvals have not been obtained and the party
responsible for obtaining such Requisite Regulatory Approvals is diligently
undertaking such efforts required to obtain the same.
8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect except Section 5.02(b)
shall survive any termination of this Agreement, and there shall be no further
obligation on the part of Parent, Sub, the Company, or their respective officers
or directors or the Shareholder except for the obligations under such
provisions. Notwithstanding anything to the contrary contained in this
Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its intentional breach of any provision of this
Agreement.
8.03 EXPENSES. Each party shall bear its own costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, regardless of whether or not the Merger is consummated.
8.04 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
8.05 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver shall nor operate as a waiver of, or estoppel with respect
to, any subsequent or other failure.
ARTICLE IX
INDEMNIFICATION
9.01 AGREEMENT TO INDEMNIFY. Following the Closing and subject to the
limitations set forth herein,
(a) the Company and the Shareholder, jointly and severally,
shall indemnify and agree to defend and hold harmless Parent and the Surviving
Corporation (and their respective affiliates, officers, directors, employees,
representatives and agents) against and in respect of any and all claims, costs,
losses, expenses, liabilities or other damages, including interest penalties
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(collectively "Damages"), by reason of or otherwise arising out of a breach by
the Company of a representation, warranty or covenant contained in this
Agreement, and
(b) Parent shall indemnify and agrees to defend and hold
harmless the Company (and its respective affiliates, representatives and agents)
against and in respect of any and all Damages by reason of or otherwise arising
out of a breach by Parent or Sub of a representation, warranty or covenant
contained in this Agreement. The amounts for which Parent, the Surviving
Corporation and the Company may seek indemnification under this Article IX shall
extend to, and as used herein the term "Damages" shall include, reasonable
attorneys' fees and disbursements, reasonable accountants' fees and
disbursements, costs of litigation and other expenses incurred by them (or their
respective affiliates, officers, directors or employees) in the defense of any
claim asserted against them (or their respective affiliates, officers, directors
or employees) and any amounts paid in settlement or compromise of any claim
asserted against them to the extent that the claim asserted is or would have
been subject to the indemnification provisions hereof, subject to the
limitations on indemnification set forth in Sections 9.02 and 9.03. "Damages"
shall not include any amount for which reimbursement is received by Parent, the
Surviving Corporation or the Company, as the case may be, pursuant to insurance
policies or third-party payments by virtue of indemnification or subrogation
received by such party.
9.02 SURVIVAL OF INDEMNITY. The indemnification obligations of each
indemnifying party pursuant to Section 9.01 shall survive the Closing for a
period of twelve (12) months, except for Damages arising out of a breach of any
of the representations or warranties in either Section 3.08 or Section 3.13,
which shall survive indefinitely. Upon expiration of such periods, no
indemnifying party shall have any liability for Damages under such
indemnification obligations unless it has received written notice from an
indemnified party claiming indemnification prior to the expiration of the
applicable period as required.
9.03 ADDITIONAL PROVISIONS.
(a) LIMITATIONS ON INDEMNIFIED AMOUNTS OF THE COMPANY AND THE
SHAREHOLDER. Except as otherwise provided herein, the Company and the
Shareholder shall not have any obligation to indemnify any parties under this
Article IX until the Company's and the Shareholder's aggregate indemnity
obligations shall exceed $50,000.00, whereupon such parties shall be entitled to
receive Damages from the first dollar; PROVIDED, HOWEVER, that in no event shall
the Company's and the Shareholder's aggregate indemnity obligations exceed the
Merger Consideration. The liability of the Company and the Shareholder
collectively for indemnification under this Article IX by reason of or arising
out of any breach by the Company or the Shareholder of any covenant or of any
representation or warranty shall not be modified, waived or diminished by any
examination or investigation conducted by Parent of the books, records or
operations of the Company.
(b) LIMITATIONS ON INDEMNIFIED AMOUNTS OF PARENT. Parent shall
have no obligation to indemnify the Company under this Article IX until the
indemnified parties' aggregate indemnity obligations shall exceed $50,000.00,
whereupon such parties shall be entitled to receive Damages from the first
dollar; PROVIDED, HOWEVER, that in no event shall Parent's aggregate
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indemnity obligations exceed the Merger Consideration. The liability of
Parent for indemnification under this Article IX by reason of or arising out
of any breach by Parent or Sub of any covenant or of any representation or
warranty shall not be modified, waived or diminished by any examination or
investigation conducted by the Company of the books, records or operations of
Parent and Sub.
(c) NO LIMITATION IN EVENT OF FRAUD. Notwithstanding any other
provision hereof, nothing in this Article IX (including the provisions of
paragraphs (a) and (b) of this Section 9.03) or otherwise shall limit, in any
manner, any remedy at law or equity, to which any party may be entitled as a
result of fraud by any indemnifying party or its employees, officers or
directors.
(d) EXCLUSIVITY OF REMEDY; SURVIVAL OF COVENANTS. Following
the Closing, except in respect of claims based upon fraud, the indemnification
accorded by this Section shall be the sole and exclusive remedy of the parties
indemnified under this Article IX in respect of any misrepresentation or
inaccuracy in, or breach of, any representation or warranty or any breach or
failure in performance of any covenant or agreement made in this Agreement or in
any document or certificate delivered pursuant hereto. Notwithstanding the
foregoing, in the event of any breach or failure in performance after the
Closing of any covenant or agreement, a non-breaching party shall also be
entitled to seek specific performance, injunctive or other equitable relief.
The covenants of any party shall terminate according to the terms of such
covenant and the expiration of the applicable statutes of limitations.
(e) SUBROGATION. Upon making any payment to an indemnified
party for any indemnification claim pursuant to this Article IX, an indemnifying
party shall be subrogated, to the extent of such payment, to any rights that the
indemnified party may have against any other persons with respect to the subject
matter underlying such indemnification claim and the indemnified party shall
take such actions as the indemnifying party may reasonably require to perfect
such subrogation or to pursue such rights against such other persons as the
indemnified party may have.
(f) PARENT'S RIGHT OF SET-OFF. Upon written notice to the
Company or the Shareholder specifying in detail its good faith justification
therefor, for a period of one (1) year from the Closing Date, Parent may set off
the amount of any Damages for which the Company or the Shareholder are liable
under Section 9.01 against the Escrowed Consideration. Neither the exercise of
nor the failure to exercise such right of set-off shall constitute an election
of remedies nor limit Parent or Sub in any manner in the enforcement of any
other remedies that may be available to it.
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ARTICLE X
GENERAL PROVISIONS
10.01 CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall be held at the offices of
Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C., One Riverfront Plaza,
Newark, New Jersey 07102 at 10:00 a.m. on January 3, 2000, or at such other
date, time and place as is mutually agreed by the parties (the "Closing Date").
10.02 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally or telecopied
(with confirmation from recipient), three (3) days after mailed by registered or
certified mail (return receipt requested) or on the day delivered by an express
courier (with confirmation from recipient) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to:
Perificient, Inc.
7600-B North Capital of Texas Highway
Suite 220
Austin, Texas 78731
Attn: John T. McDonald, Chief Executive Officer
Phone: (512) 306-7337
Facsimile: (512) 306-7331
with a copy to:
Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C.
125 West 55th Street
New York, New York 10019-5369
Attn: Jeffrey A. Baumel, Esq.
Phone: (212) 649-4700
Facsimile: (212) 333-5980
(b) if to the Company, to:
LoreData, Inc.
271 Pequot Avenue
New London, Connecticut 06320
Attn: John Gillespie
Phone: (860) 437-7632
Facsimile: (860) 437-7642
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with a copy to:
Law Offices of Michael F. Dowley
116 Washington Street
P.O. Box 1235
Middletown, CT 06457
Phone: (860) 347-9987
Facsimile: (860) 347-3597
10.03 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
10.04 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.05 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
10.06 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law principles thereof.
10.07 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
Sections 5.02 or 6.04 of this Agreement were not performed in accordance with
its specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of Sections 5.02 or 6.04 of this Agreement and to enforce specifically
the terms and provisions thereof in any court of the United States or any court
located in the State of New York, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.08 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
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deemed to be so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.09 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Except as otherwise expressly
provided herein, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
PERFICIENT, INC.
By: /s/ John T. McDonald
----------------------------------
Name: John T. McDonald
Title: Chief Executive Officer
PERFICIENT ACQUISITION CORP.
By: /s/ John T. McDonald
----------------------------------
Name: John T. McDonald
Title: Chief Executive Officer
LOREDATA, INC.
By: /s/ John Gillespie
----------------------------------
Name: John Gillespie
Title: President
SHAREHOLDER
/s/ John Gillespie
-------------------------------------
John Gillespie, individually
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EXHIBIT 10.14
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Amendment") dated as of
January 3, 2000, by and among Perficient, Inc., a Delaware corporation
("Parent"), Perficient Acquisition Corp., a Delaware corporation ("Sub"),
LoreData, Inc., a Connecticut corporation (the "Company"), and the sole
Shareholder of the Company set forth on the signature page hereto (the
"Shareholder").
WHEREAS, Parent, Sub, the Company and the Shareholder entered into that
certain Agreement and Plan of Merger dated as of December 10, 1999 (the
"Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement to ensure that
the Merger (as defined in the Agreement) constitutes a tax-free reorganization
and to make such other changes as described herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The reference to Exhibit I on page iii of the Table of Contents of the
Agreement is hereby amended and restated to read as follows:
EXHIBIT I - CONFIDENTIALITY AGREEMENT
2. Section 1.06 of the Agreement is hereby amended and restated in its
entirety as follows:
1.06 ESCROWED CONSIDERATION. Such number of shares of Parent Common
Stock equal to the Stock Price less $385,000 divided by the Average Closing
Price (the "Escrowed Shares") plus the cash portion of any fractional shares
upon conversion (calculated in accordance with Section 1.05(d)) (the "Escrowed
Cash") shall be held in escrow (the Escrowed Shares and the Escrowed Cash are
herein collectively referred to as the "Escrowed Consideration") for a period of
one (1) year from the Closing Date, subject to Section 2.02 and Section 2.03 and
subject to Article IX, pursuant to the terms and subject to the conditions set
forth in the Escrow Agreement.
3. Section 2.02(a) of the Agreement is hereby amended and restated in its
entirety as follows:
(a) In the event that the employment agreement (the "Employment
Agreement") between Parent and Shareholder is terminated by Shareholder prior to
the first anniversary of the Closing Date (as defined below) for any reason
other than death or Disability (as such term is defined in the Employment
Agreement) or a material breach by Parent of the Employment Agreement which is
not cured by Parent within 30 days of notice thereof by Shareholder, an amount
equal on the Closing Date to $845,000 of the Escrowed Consideration
<PAGE>
(the "Gillespie Termination Amount") shall be immediately returned in full to
Parent subject to the terms of the Escrow Agreement. In the event that the
Employment Agreement is terminated as a result of Shareholder's death or
Disability, the Escrowed Consideration shall be immediately paid to
Shareholder's heirs, successors or estate subject to the terms of the Escrow
Agreement. In the event that the Employment Agreement is terminated by
Parent pursuant to a Termination for Cause (as such term is defined in the
Employment Agreement), then Parent shall receive, subject to the terms of the
Escrow Agreement, from escrow the amount of Escrowed Consideration as is
equal to the harm done to Parent as a result of the action(s) or inaction(s)
by Shareholder giving rise to the Termination for Cause.
4. The following sentences shall be added to the end of Section 2.02(c):
Shareholder shall be responsible for the operation of the New
London, Connecticut office of Parent and may make recommendations to the
executive officers of Parent regarding the hiring or firing of employees at
the New London, Connecticut office. The executive officers of Parent shall
make all final decisions regarding, and shall ultimately control, the hiring
or firing of employees at the New London, Connecticut office of Parent.
5. Section 2.02(d) of the Agreement is hereby amended and restated in its
entirety as follows:
(d) In the event that any employee of the Company listed on EXHIBIT E
hereto on the Closing Date (other than Shareholder) leaves the employ of Parent
or the Surviving Corporation for any reason prior to the first anniversary of
the Closing other than due to a termination by Parent with the sole intent of
adding to the Employee Attrition Number (as defined hereunder) (each, a
"Terminating Employee"), Shareholder shall have an "Employee Attrition Number"
equal to the product of negative one (-1) multiplied by such number of
Terminating Employees.
6. The provisions of Section 2.02(e) of the Agreement prior to the
Examples are hereby amended and restated as follows:
(e) The "Reconciliation Number" shall be the sum of (i) the Initial
Employee Shortfall Number plus (ii) the Total Hiring Credit Number plus (iii)
the Employee Attrition Number all as calculated on the one year anniversary date
of the Closing. In the event that the Reconciliation Number is a negative
number, Shareholder shall forfeit to Parent on the first anniversary of the
Closing a number of shares of Parent Common Stock valued at the Average Closing
Price having an aggregate value equal to the product of the Reconciliation
Number multiplied by negative one (-1) divided by the Initial Employee Number
multiplied by one million five hundred thousand dollars ($1,500,000), subject to
the terms of the Escrow Agreement (the "Forfeiture Amount"); PROVIDED, HOWEVER,
that in no event shall the sum of (i) the Forfeiture Amount hereunder plus (ii)
the Gillespie Termination Amount under Section 2.02(a) of the Agreement plus
(iii) the Shortfall Amount under Section 2.03 of the Agreement exceed one
million thirty seven thousand five hundred dollars ($1,037,500). In the event
that the sum of the Forfeiture Amount plus the Gillespie Termination Amount plus
the Shortfall Amount exceeds
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<PAGE>
$1,037,500, the Gillespie Termination Amount shall be reduced until the sum
of the Forfeiture Amount plus the Gillespie Termination Amount plus the
Shortfall Amount equals $1,037,500. In the event that the Reconciliation
Number is zero or a positive number, then on the first anniversary of the
Closing, Shareholder shall receive, subject to the terms of the Escrow
Agreement, all Escrowed Consideration remaining at such time that is being
held in escrow and is not subject to a Dispute (as such term is defined in
the Escrow Agreement).
7. Section 3.22 "Employee Retention" is hereby added as follows:
3.22 EMPLOYEE RETENTION. Shareholder acknowledges and agrees that
Shareholder's use of best efforts to retain and hire employees of Parent and
Shareholder's employment with Parent for at least one year following the Closing
Date are material inducements to Parent entering into this Agreement and the
Employment Agreement with Shareholder. During the term of the Employment
Agreement, Shareholder represents, warrants and agrees that he shall utilize his
best efforts to retain and hire employees of Parent. In addition, Shareholder
represents, warrants and agrees that except for the death or Disability of
Shareholder or a material breach by Parent of the Employment Agreement which is
not cured by Parent within 30 days of notice thereof by Shareholder, Shareholder
shall not terminate his employment with Parent for any reason for the period
beginning on the Closing Date and continuing for one year therefrom.
8. Section 6.14 "Lock-Up" is hereby added as follows:
6.14 LOCK-UP. Notwithstanding the terms of the Registration Rights
Agreement, Shareholder agrees that in the event of a private or public offering
of Parent Common Stock, Shareholder shall be subject to the same restrictions on
transferability or lock-up of shares of Parent Common Stock as the underwriter
of any such offering or any officer of Parent shall require of the executive
officers of Parent.
9. Section 7.03(g) of the Agreement is hereby amended and restated in its
entirety as follows:
(g) PAYMENT OF NON-ESCROWED PORTION OF MERGER CONSIDERATION. Parent
shall have paid the non-escrowed portion of the Merger Consideration to the
Shareholder.
10. Section 7.03(h) of the Agreement is hereby amended and restated in its
entirety as follows:
(h) ASSUMPTION OR DISCHARGE OF BANK INDEBTEDNESS. Parent or Sub
shall assume or discharge the indebtedness of the Company due to Citizens Bank
in the amount of $39,993.79 as of the date hereof and the Company and the
Shareholder, as the case may be, shall receive a release from Citizens Bank of
their respective obligations, if any, under the line of credit.
11. Capitalized terms referred to herein but not otherwise defined shall
have the respective meanings ascribed to such terms in the Agreement.
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12. Except as herein amended, all terms and provisions of the Agreement
shall remain in full force and effect.
4
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Amendment
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
PERFICIENT, INC.
By: /s/ John T. McDonald
----------------------------------
Name: John T. McDonald
Title: Chief Executive Officer
PERFICIENT ACQUISITION CORP.
By: /s/ John T. McDonald
----------------------------------
Name: John T. McDonald
Title: Chief Executive Officer
LOREDATA, INC.
By: /s/ John Gillespie
----------------------------------
Name: John Gillespie
Title: President
SHAREHOLDER
/s/ John Gillespie
-------------------------------------
John Gillespie, individually
