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AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF REORGANIZATION
This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION
("Amendment No. 1") is made as of December 13, 2000, by and among Predictive
Systems, Inc. ("Acquiror"), Grape Acquisition Corporation ("Merger Sub"), Global
Integrity Corporation ("Target") and Science Applications International
Corporation (the "Principal Stockholder").
WHEREAS, Acquiror, Merger Sub, Target and the Principal Stockholder
entered into that certain Agreement and Plan of Reorganization, dated as of
October 17, 2000 (the "Agreement"); and
WHEREAS, Acquiror, Merger Sub, Target and the Principal Stockholder
desire to amend certain provisions of the Agreement as provided below;
NOW THEREFORE, for good and valuable consideration and in consideration
of the promises and conditions contained herein, the parties hereby agree as
follows:
1. The following shall be added to Section 1.6(a)(i) to the last
sentence of said section:
", or the cash to be paid to the stockholders of Target Common Stock
pursuant to Sections 1.6 and 5.25 collectively, at any time, exceed $31,460,270.
The 5,791,323 shares of Acquiror Common Stock referred to in (A) above shall be
referred to herein as the "Initial Shares and Options".
2. The following shall be added to the last sentence of Section
1.6(a)(ii):
"after effecting the termination of Target Options subject to Option
Cancellation Agreements as contemplated by Section 4.2(b)."
3. The following shall replace the last sentence of Section
1.6(a)(iv):
"Notwithstanding the foregoing, the amount of Cash Consideration paid
to the Principal Stockholder pursuant to this Section 1.6 in exchange for its
Target Common Stock shall be deemed reduced by the amount of debt (the "Debt")
greater than three million dollars ($3,000,000) repaid to the Principal
Stockholder by or on behalf of Target pursuant to Section 5.25."
4. The following shall be added as Section 1.6(a)(viii):
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"Notwithstanding anything to the contrary herein, in the event (1) the
sum of (a) the Initial Shares and Options plus (b) the Maximum Amount of
Additional Options (such sum, the "Total Sum"), divided by (2) the total shares
of Acquiror Common Stock outstanding at the Effective Time, equals or exceeds
twenty percent (20%), the Initial Shares and Options set forth in this Section
1.6(a) shall be reduced by an amount such that the Total Sum, as so adjusted,
shall be less than twenty percent (20%) of the total shares of Acquiror Common
Stock outstanding at the Effective Time, and the amount of Cash Consideration
set forth in Section 1.6(a)(i)(B) and 1.6(a)(iii) shall be increased by an
amount equal to the Closing Price multiplied by such reduction in the number of
shares constituting the Initial Shares and Options. The "Maximum Amount of
Additional Options" shall equal (A)(I) the number of Target Options outstanding
at the Effective Time, divided by the sum of (x) the number of shares of Target
Common Stock outstanding at the Effective Time, plus (y) the number of Target
Options outstanding at the Effective Time, (II) multiplied by $14,012,500, (B)
divided by the Closing Price."
5. The proviso in Section 4.2(b) shall be replaced by the
following:
"..., provided that the Principal Stockholder may offer cash
settlements or other consideration, payable by on or after the Effective Date by
the Surviving Corporation (and funded by the Principal Stockholder) as
contemplated by the Option Cancellation Agreements (as defined below), to
directors of Target and employees of Target who will not be employed by the
Surviving Corporation after the Effective Date in consideration of such persons
terminating their existing Target Options."
6. The following shall replace the last sentence of Section
4.2(b):
"Target and the Principal Stockholder shall deliver Schedule 4.2(b) to
Acquiror prior to the Effective Time, such schedule to list all directors and
employees of Target that have elected to accept such settlement in consideration
of the termination of such person's Target Options. All of such persons so
electing shall have executed an Option Cancellation Agreement substantially in
the form previously provided to Acquiror (the "Option Cancellation Agreements").
Schedule 4.2(b) shall set forth the name of such person, the number of Target
Options so terminated and the aggregate consideration to be paid to such person
in connection with the termination of such Target Options."
7. The following shall be added as the last sentence of Section
4.1(c):
"Notwithstanding the foregoing, Acquiror may increase the number of
shares of Acquiror Common Stock reserved for issuance under the Acquiror Stock
Option Plan by an aggregate of 3,000,000 shares."
8. All references to Sections 7.02(c) and 7.02(d) contained in
Section 5.24(b) shall hereafter be deemed references to
Section 6.1(d).
9. Section 5.25 shall be amended and restated as follows:
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"5.25 Repayment of Debt. Schedule 5.25 sets forth the amount of
outstanding debt estimated to be owed by Target to the Principal Stockholder on
the date hereof, which estimated debt is in excess of three million dollars
($3,000,000). Acquiror shall cause the Surviving Corporation to repay three
million dollars ($3,000,000) of this debt immediately after the Effective Time.
Principal Stockholder shall use its best efforts to deliver to Acquiror by
January 5, 2001, and in no event later than January 10, 2001, a balance sheet of
Target as of the Closing Date setting forth, among other things, the actual
amount of outstanding debt owed by Target to the Principal Stockholder at the
Effective Time. In the event the amount of actual debt owed by Target to the
Principal Stockholder at the Effective Time was less than three million dollars
($3,000,000), the Principal Stockholder shall, within five (5) days of delivery
of the revised Schedule 5.25, remit to Acquiror an amount equal to the
difference between three million dollars ($3,000,000) and the actual debt set
forth on revised Schedule 5.25, plus interest on such difference at the prime
rate of interest on the Closing Date as published by the Wall Street Journal. In
the event the amount of actual debt owed by Target to the Principal Stockholder
at the Effective Time was more than three million dollars ($3,000,000), the Cash
Consideration paid to the Principal Stockholder pursuant to Section 1.6 shall be
deemed reduced by the amount of actual debt owed to the Principal Stockholder
greater than three million dollars ($3,000,000) and the amount by which the Cash
Consideration shall be deemed reduced shall be deemed repayment of debt owed by
Target to the Principal Stockholder. After application of the foregoing, the
actual debt owed to the Principal Stockholder reflected on the revised Schedule
5.25 shall be deemed to have been repaid and satisfied in full as of the
Effective Time without any further obligation by Target or Acquiror to the
Principal Stockholder with respect to such debt. Any amount of actual debt owed
to the Principal Stockholder by Target in excess of $31,460,270 reflected on
revised Schedule 5.25 shall be cancelled without any further obligation by
Target or Acquiror to the Principal Stockholder and shall be deemed converted
into paid in capital on the books and records of Target immediately prior to the
Effective Time; provided that no shares of capital stock of Target shall be
issued to Principal Stockholder in connection with such deemed conversion of
debt, if any."
10. The following shall be added as Section 5.26:
"5.26 Remission and Reimbursement. Fifteen (15) days after the last day
of each month after the Closing Date, the Principal Stockholder shall deliver to
the Surviving Corporation and Acquiror a statement detailing for such month all
payments it or its affiliates received ("Receipts") from any third parties on
behalf of Target or the Surviving Corporation, and all payments ("Payments") to
any third parties made by the Principal Stockholder or its affiliates on behalf
of Target or the Surviving Corporation not otherwise reimbursed to the Principal
Stockholder or such affiliates. If no such Receipts have been received and no
such Payments have been made for a particular month, the Principal Stockholder
shall not be obligated to deliver the statement referred to above. In the event
gross Receipts exceed gross Payments for a particular month, the Principal
Stockholder shall submit to Acquiror with such statement an amount equal to the
difference between such month's Receipts and Payments. In the event gross
Payments exceed gross Receipts for a particular month, Acquiror shall, within
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five (5) business days of receipt of the statement, deliver to the Principal
Stockholder an amount equal to the difference between such month's Payments and
Receipts. In the event the parties disagree as to any amounts set forth on the
statement delivered hereunder for any particular month, the parties shall use
their best efforts to resolve such dispute as quickly as possible. In the event
that no agreement can be reached within thirty (30) days, the matter shall be
resolved in accordance with the procedures set forth in Sections 8.8(b) and (c),
and if any party shall default on its obligations as determined by the
arbitration procedures of such Sections, such amounts shall be considered
"Damages" for purposes of this Agreement and the Escrow Agreement.
Notwithstanding the foregoing, nothing in this Section 5.26 shall be read as
limiting the rights of the parties to indemnification as provided in Article
VIII herein."
11. The following shall be added as Section 5.27:
"The Principal Stockholder shall deliver to Target, no later than five
(5) business days prior to the date on which payments are required to be made
under the Option Cancellation Agreements, an amount sufficient to satisfy all of
Target's and Acquiror's obligations under the Option Termination Agreements
entered into by Target pursuant to Section 4.2(b). The amount delivered to
Target hereunder shall include payments required to be made to Target's
directors and employees terminating their Target Options and any and all
withholding or other Taxes required to be paid by the Surviving Corporation or
Acquiror in connection with such termination."
12. The following shall be added as Section 5.28:
"The Acquiror shall cause the Surviving Corporation to comply on a
timely basis with all of Surviving Corporation's obligations under those
subleases relating to real property and leases relating to equipment and other
personal property listed on Schedule 5.28."
13. The following shall replace 6.3(l) in its entirety:
"(l) Licenses and Assignments. At the Effective Time, Acquiror, Target
and the Principal Stockholder shall have entered into an Assignment and
Cross-License Agreement (the "Cross License Agreement") in the form attached
hereto as Exhibit A-1."
14. The following shall be added as Section 6.3(m):
"(m) Target Options subject to Option Cancellation Agreements and set
forth on Schedule 4.2(b) shall be terminated in accordance with such
agreements."
15. The following shall be added to the end of the second sentence
of Section 8.1:
"and Section 5.28 shall survive until the expiration of the applicable
statute of limitations period with respect to the contracts described in such
Section."
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16. Section 8.2 shall be amended and restated as follows:
"8.2 Indemnity. From and after the Effective Time of the Merger, and
subject to the provisions of Section 8.1, Acquiror and the Surviving Corporation
(on or after the Closing Date) shall be indemnified and held harmless by the
Principal Stockholder against, and reimbursed for, any liability, damage, loss,
obligation, demand, judgment, fine, penalty, cost or expense, including
reasonable attorneys' fees and expenses, and the costs of investigation incurred
in defending against or settling such liability, damage, loss, cost or expense
or claim therefor and any amounts paid in settlement thereof, imposed on or
reasonably incurred by Acquiror or the Surviving Corporation as a result of or
in connection with (i) any breach of any representation, warranty, agreement or
covenant on the part of Target or the Principal Stockholder under this Agreement
or the Cross License Agreement, (ii) any of the matters listed on Schedule 2.8,
(iii) the failure by the Principal Stockholder to transfer or assign to Target
prior to the Effective Time all of Principal Stockholder's right, title and
interest in and to the licenses or agreements listed on Schedule 2.2 of the
Cross License Agreement, (iv) the failure by the Principal Stockholder to obtain
prior to the Effective Time any required consents to transfer or assignment from
parties to Material Agreements set forth on Schedule 2.3(b) and the primary
landlords for the real property identified on Schedule 4.2, and (v) the Option
Cancellation Agreements entered into pursuant to Section 4.2(b) (including any
Taxes incurred in connection therewith), the breach or threatened breach by an
employee or director of Target thereof, the solicitation thereof, and any
documentation provided to or executed by any employee or director of Target in
connection with such solicitation (for this subsection (iv), only to the extent
greater than the amount delivered to Target by the Principal Stockholder
pursuant to Section 5.27)(collectively the "Damages"). "Damages" as used herein
is not limited to matters asserted by third parties, but includes Damages
incurred or sustained by Acquiror in the absence of claims by a third party. The
Principal Stockholder may satisfy any claim for which it is required to
indemnify the Acquiror and/or the Surviving Corporation pursuant to this Section
8.2 with, at the Principal Stockholder's sole discretion: (A) cash; (B) Acquiror
Common Stock; or (C) shares from the Escrow Fund. For purposes of compensating
the Acquiror for its damages pursuant to this Agreement, the Acquiror Common
Stock and/or shares from the Escrow Fund delivered or to be delivered to
Acquiror to satisfy the claim for indemnification hereunder shall be valued at
the weighted average closing price of the Acquiror Common Stock on the Nasdaq
National Market for the five (5) trading days immediately preceding the date of
payment of such claim."
17. The first sentence of Section 8.4 shall be replaced by the
following:
"Acquiror may not receive any payment from the Escrow Fund unless and until an
Officer's Certificate (as defined in Section 8.6 below) identifying Damages, the
aggregate amount of which exceeds $750,000 (the "Basket"), has been delivered to
the Escrow Agent as provided in Section 8.5 below and such amount is determined
pursuant to this Article VIII to be payable, in which case Acquiror shall
receive payment equal in value to the full amount of Damages; provided, however,
that notwithstanding the foregoing, any Damages resulting from those matters set
forth in Sections 8.2(iii), 8.2(iv) and 8.2(v) shall not be subject to the
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Basket and shall be paid when such Damages are determined pursuant to this
Article VIII to be payable in an amount equal to the full amount of such
Damages, notwithstanding that the aggregate of such Damages may be less than
$750,000."
18. The following shall be added to the end of Section 8.6:
"Notwithstanding anything in this Agreement to the contrary, no
Acquiror Common Stock shall be delivered to Acquiror or the Surviving
Corporation hereunder unless a final determination has been made with respect to
the amount of Additional Target Stockholder Consideration earned and Additional
Cash (as defined in Annex A hereto) payable to the Principal Stockholder
pursuant to Section 1.6(a)(vi) and Annex A. After such final determination has
been made, any Damages otherwise recoverable by Acquiror or the Surviving
Corporation hereunder shall first offset the amount of Additional Cash payable
to the Principal Stockholder such that the Additional Cash to be paid to the
Principal Stockholder shall be reduced by the amount of Damages determined to be
incurred by Acquiror or the Surviving Corporation. In the event the amount of
Damages incurred exceeds the Additional Cash payable to the Principal
Stockholder, the Principal Stockholder shall not receive any Additional Cash and
any Damages in excess thereof shall be delivered to Acquiror or the Surviving
Corporation as contemplated by this Article VIII."
19. The following shall be added to the beginning of the second
sentence of Section 8.7:
"Subject to Section 8.6,"
20. The following shall be added to the end of the first sentence
of Section 8.13(a):
"or any breach of or default under Section 5.28 by Acquiror."
21. The following shall be added to the end of Section 8.13(b):
"provided, however, that notwithstanding the foregoing, any Target
Damages resulting from any breach of or default under Section 5.28 by Acquiror
shall not be subject to the Target Basket and shall be paid when such Target
Damages are determined pursuant to this Article VIII to be payable in an amount
equal to the full amount of such Target Damages, notwithstanding that the
aggregate of such Target Damages may be less than $750,000."
22. The following shall be added to the end of Section 8.13(c):
"; and provided further, that claims made resulting from any breach of
or default under Section 5.28 by Acquiror shall not terminate until the
expiration of the applicable statute of limitations period with respect to the
subleases and leases listed on Schedule 5.28."
23. No Other Modification. Except as expressly provided herein,
this Amendment does not in any way change, modify, delete or
amend any of the provisions of the Agreement, and all such
provisions shall remain in full force and effect.
24. Governing Law. This Amendment shall be governed by and
construed in accordance with the law of the State of Delaware.
25. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, Target, Acquiror, Merger Sub and the Principal
Stockholder have caused this Amendment No. 1 to be executed and delivered by
their respective officers thereunto duly authorized, all as of the date first
written above.
PREDICTIVE SYSTEMS, INC.
By: /s/ Robert Belau
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Name: Robert Belau
Title: President
GRAPE ACQUISITION CORPORATION
By: /s/ Robert Belau
--------------------------------------
Name: Robert Belau
Title: President
GLOBAL INTEGRITY CORPORATION
By: /s/ Douglas E. Scott
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Name: Douglas E. Scott
Title: Secretary
PRINCIPAL STOCKHOLDER:
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION:
/s/ Douglas E. Scott
-----------------------------------------
Name: Douglas E. Scott
Title: Senior Vice President and General
Counsel
SIGNATURE PAGE TO AMENDMENT NUMBER 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
