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) August 19, 1997
APAC TELESERVICES, INC.
(Exact name of registrant as specified in charter)
Illinois 0-26786 36-2777140
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
One Parkway North Center, Suite 510, Deerfield, IL 60015
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code 847/945-0055
N/A
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
Registrant acquired all of the common and preferred stock of Paragren
Technologies, Inc., a Delaware corporation, with its principal place of business
in Reston, Virginia ("Paragren"), on August 19, 1997. The acquisition was
effected by a merger of PTI Merger Corp., a Delaware corporation that is a
wholly-owned subsidiary of Registrant, into Paragren with Paragren being the
surviving corporation. Paragren s principal assets are its rights in software
that it has developed. Paragren was owned by 25 stockholders, principally
employees and an outside investment firm.
In consideration for the common stock of Paragren, Registrant issued to Paragren
stockholders 1,991,385 shares of its common stock, par value $0.01, and
converted existing Paragren stock options into stock options for an additional
189,195 shares of Registrant's common stock. If certain performance measures
are achieved by Paragren between August 19, 1997, and February 28, 1998,
Registrant may be obligated to issue up to an additional 499,989 shares of
Registrant's common stock to the selling stockholders of Paragren. The number
of shares of Registrant's common stock issued and to be issued in connection
with the merger was determined by an arms-length negotiation between Registrant
and the principal stockholders of Paragren. Registrant intends to continue to
operate the business conducted by Paragren.
Paragren is a specialist in software-based marketing products that help its
clients maximize their customer relationships. Its software helps its clients
analyze market, customer and sales data on a real time basis so that they can
respond more effectively to rapidly changing opportunities and competitive
challenges. Paragren's One-By-OneTM suite of customer intelligence software
applications allows marketers to develop strategic insights into their marketing
plans and make real-time tactical decisions. It enables users to retrieve and
analyze information from multiple sources for customer profiling and potential;
marketing segmentation and targeting; and full campaign execution and
evaluation.
In addition to its software solutions, systems integration and consulting
services, Paragren designs, develops and manages consumer-panel research. This
research helps businesses learn more about their competition, customer
preferences and marketplace environment through actual purchase and behavioral
data collected over time. Panels are dedicated to specific industries, such as
telecommunications, to ensure relevance to each client s opportunities and
issues.
Paragren employs approximately 75 people, primarily at its Reston, Virginia
headquarters.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
Financial statements of Paragren required to be filed with this report
on Form 8-K will be filed by way of an amendment to this Form 8-K within
sixty (60) days of this Report (by November 2, 1997).
(b) Pro Forma financial information
Pro forma financial information required to be filed with this report on
Form 8-K, if any, will be filed by way of an amendment to this Form 8-K
within sixty (60) days of this Report (by November 2, 1997).
(c) Exhibits
(2) Merger Agreement dated August 19, 1997, with description of omitted
schedules. CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS
DOCUMENT. PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED
ARE NOTED.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 3, 1997 APAC TELESERVICES, INC.
By: /s/ Marc S. Simon
Marc S. Simon, Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Page Number
(2) Merger Agreement dated August 19, 1997, with
description of omitted schedules. CONFIDENTIAL
TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.
PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS
REQUESTED ARE NOTED.
Exhibit 2
CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT. PORTIONS FOR
WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE NOTED.
MERGER AGREEMENT
BY AND BETWEEN
APAC TELESERVICES, INC. AND
PARAGREN TECHNOLOGIES, INC.
TABLE OF CONTENTS
ARTICLE 1
THE MERGER; CLOSING
1.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Consideration; Effect of Merger . . . . . . . . . . . . . . . . . 2
1.4 Filing of Merger Documents; Effective Time . . . . . . . . . . . 2
1.5 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Procedure at the Closing . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF APAC
2.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . . 5
2.3 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Reports and Financial Statements . . . . . . . . . . . . . . . . 6
2.7 No Commissions . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Recent Changes . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 APAC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
PARAGREN AND THE SHAREHOLDERS
3.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 Shareholders of Paragren . . . . . . . . . . . . . . . . . . . . 8
3.6 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Records of Paragren . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 9
3.10 Changes Since the Current Balance Sheet Date . . . . . . . . . . 10
3.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 11
3.14 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Business; Good Title to and Condition of Assets . . . . . . . . 15
3.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 15
3.17 Labor and Employment Matters . . . . . . . . . . . . . . . . . . 16
3.18 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 17
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.20 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.22 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.23 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . 20
3.24 Relationships with Customers and Suppliers; Affiliated
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.25 Intellectual Property . . . . . . . . . . . . . . . . . . . . . 20
3.26 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.27 Software and Information Systems . . . . . . . . . . . . . . . . 21
3.28 Accuracy of Information Furnished . . . . . . . . . . . . . . . 24
3.29 No Commissions . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.30 Securities Matters . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Compliance with Covenants . . . . . . . . . . . . . . . . . . . . 25
4.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 Paragren Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.5 Confidentiality; Publicity . . . . . . . . . . . . . . . . . . . 25
4.6 Restrictive Covenants . . . . . . . . . . . . . . . . . . . . . . 26
4.7 Trading in APAC Common Shares . . . . . . . . . . . . . . . . . . 28
4.8 Registration of Resales of Shares . . . . . . . . . . . . . . . . 29
4.9 Shareholder and Director Vote . . . . . . . . . . . . . . . . . . 29
4.10 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.11 Appointment of Seller Representative . . . . . . . . . . . . . . 30
ARTICLE 5
SECURITIES LAWS MATTERS
ARTICLE 6
INDEMNIFICATION
6.1 Agreement by the Shareholders for Indemnification . . . . . . . . 31
6.2 Survival of Representations and Warranties . . . . . . . . . . . 31
6.3 Security for Indemnification Obligations . . . . . . . . . . . . 31
6.4 Voting of and Dividends on the Held Back Shares . . . . . . . . . 31
6.5 Indemnity Basket and Limitation . . . . . . . . . . . . . . . . . 32
6.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7
DEFINITIONS
7.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . 34
ARTICLE 8
GENERAL PROVISIONS
8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . 36
8.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Governing Law; Interpretation . . . . . . . . . . . . . . . . . . 37
8.9 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 Arm's Length Negotiations . . . . . . . . . . . . . . . . . . . . 38
MERGER AGREEMENT
This MERGER AGREEMENT (this "Agreement") is entered into as of August 19,
1997, by and among APAC TeleServices, Inc., an Illinois corporation ("APAC"),
PTI Merger Corp., a Delaware corporation and wholly-owned subsidiary of APAC
("Merger Sub"); Paragren Technologies, Inc., a Delaware corporation ("Paragren")
and Magid Abraham, Linda Boland and Cognizant Corporation (collectively, the
"Shareholders").
RECITALS
A. APAC desires to acquire all of the outstanding stock and stock
interests in Paragren.
B. APAC and Paragren have determined that it is in the best interests of
their respective shareholders for APAC to acquire all of the issued and
outstanding equity interests of Paragren as provided herein. APAC has organized
Merger Sub as a wholly owned subsidiary, and the parties have agreed, subject to
the terms and conditions set forth in this Agreement, to merge Merger Sub with
and into Paragren so that Paragren will continue as the surviving corporation of
the merger and as a wholly owned subsidiary of APAC. In consideration for the
acquisition of the outstanding equity interests of Paragren, the holders of
stock and stock interests in Paragren will be issued Shares of APAC as provided
herein.
TERMS OF AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER; CLOSING
1.1 THE CLOSING. Subject to the terms and conditions of this Agreement,
the deliveries required for the consummation of the Merger (as defined below)
(the "Closing") shall take place as promptly as practicable after the execution
and delivery of this Agreement, at the offices of McDermott, Will & Emery in
Chicago, Illinois, or such other place and time as the parties may otherwise
agree, and the date of the Closing is referred to herein as the "Closing Date."
1.2 THE MERGER. Subject to the terms and conditions of this Agreement, and
in accordance with the Delaware General Corporation Law (the "Corporation Code")
at the Effective Time (as defined below): Merger Sub will be merged with and
into Paragren (the "Merger"), with Paragren being the surviving corporation and
becoming a wholly-owned subsidiary of APAC, and the separate corporate existence
of Merger Sub shall cease.
1.3 CONSIDERATION; EFFECT OF MERGER. (a) For purposes of this
Agreement, "Aggregate Consideration" means two million one hundred eighty
thousand five hundred eighty-four (2,180,584) Common Shares, par value $.01 per
share, of APAC (the "APAC Common Shares") (plus $161 to be used to pay the cash
value of fractional shares at a value of $14.625 per share).
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of Paragren, APAC, Merger Sub or the shareholders of
Paragren, the outstanding shares of capital stock of Paragren shall be converted
into the right to receive that portion of the Aggregate Consideration determined
as provided on Schedule 1.3 hereto.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of Paragren, APAC or Merger Sub, all outstanding options to
purchase stock of Paragren (and options issued pursuant to commitments or
employment offers of Paragren)(collectively, "Paragren Options") shall be
converted into options to purchase that portion of the Aggregate Consideration
described on Schedule 1.3, with the aggregate exercise price and other terms of
such options to remain unchanged.
(d) Each share of common stock of Merger Sub issued and outstanding
at the Effective Time shall be converted into one share of the voting common
stock of the Surviving Corporation.
1.4 FILING OF MERGER DOCUMENTS; EFFECTIVE TIME. At or promptly following
the Closing and in any event, within two business days after the execution and
delivery of this Agreement, the parties shall cause the Merger to be consummated
by executing and filing duly executed Articles of Merger with respect to Merger
with the Secretary of State of Delaware in such form as is required by and in
accordance with the relevant provisions of the Corporation Code (the date and
time of the effectiveness of such filing is referred to herein as the "Effective
Date" or the "Effective Time").
1.5 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided under the Corporation Code. Without limiting the
generality of the foregoing, at the Effective Time:
(a) All property, rights, privileges, policies and franchises of
Paragren shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Paragren shall become the debts, liabilities and duties of the
respective Surviving Corporation.
(b) The Articles of Incorporation and the By-Laws of Merger Sub, as
in effect immediately prior to the Effective Time or as amended by the Articles
of Merger, shall become the Articles of Incorporation and By-Laws of the
Surviving Corporation thereafter, unless and until amended in accordance with
their terms and as provided by law; and
(c) The officers and directors of the Surviving Corporation shall be
those persons set forth on Schedule 1.5 attached hereto, each to hold an office
or directorship in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation until his or her successor is elected and qualified.
1.6 TAX TREATMENT. The parties hereto acknowledge and agree that the
Merger is intended to be treated for tax purposes as a tax-free reorganization
under Section 368(a) of the Code.
1.7 PROCEDURE AT THE CLOSING. At the Closing, the parties agree that the
following shall occur:
(a) Paragren and the Shareholders shall deliver to APAC:
(i) (A) copies of the Articles of Incorporation of Paragren
certified by the Delaware Secretary of State no more than 15 days prior to
the Closing Date and copies of the By-Laws of Paragren as in effect
immediately prior to the Closing Date, (B) copies of resolutions adopted by
the Board of Directors and shareholders of Paragren with respect to the
Merger, and (C) a certificate of good standing of Paragren issued by the
state of its incorporation and each other state in which it is qualified to
do business as of a date not more than five (5) days prior to the Closing
Date, and all of such documents shall be certified as of the Closing Date
by the Secretary of Paragren as being true, correct and complete;
(ii) consents to the Merger and the other transactions
contemplated hereby and/or necessary waivers of rights to terminate or
modify any material rights or obligations of Paragren, from any person from
whom such consent or waiver is required, including without limitation,
under any Material Contract listed or required to be listed in
Schedule 3.26, or who as a result of the transactions contemplated hereby,
would have such rights to terminate or modify such contracts or
instruments, either by the terms thereof or as a matter of law, or as
necessary under any applicable law or regulation;
(iii) an Employment Agreement with Magid Abraham in the form of
Exhibit A hereto;
(iv) Employment Agreements with Linda Boland, Gregory Bouvee and
Daniel Lackner in the form of Exhibits B, C and D hereto;
(v) an escrow agreement in the form of Exhibit D hereto (the
"Escrow Agreement"), signed by the Shareholders;
(vi) an opinion, dated as of the Closing Date, from counsel for
Paragren and the Shareholders, in form and substance reasonably acceptable
to APAC; and
(vii) evidence of the termination of the Stock Purchase
Agreement, the Stock Restriction Agreement and the Registration Rights
Agreement between Paragren and The Dun & Bradstreet Corporation.
(b) APAC shall deliver:
(i) to the Shareholders (a) certificates for the APAC Shares
issued by APAC pursuant to this Agreement, other than the Held Back Shares
and the shares to be issued upon exercise of the Paragren Options and (b)
copies of certificates representing the Held Back Shares;
(ii) to the escrow agent under the Escrow Agreement,
certificates representing the Held Back Shares;
(iii) to the Shareholders, copies of all APAC Reports filed by
APAC since December 31, 1996;
(iv) an opinion, dated as of the Closing Date, from counsel for
APAC, addressed to Paragren and the Shareholders and in form and substance
reasonably acceptable to Paragren; and
(v) (A) copies of resolutions adopted by the Board of Directors
of APAC with respect to the Merger and (B) certificates of good standing
for APAC and Merger Sub issued by their respective states of incorporation
as of a date not more than five (5) days prior to the Closing Date, and all
of such documents shall be certified as of the Closing Date by the
Secretary or an Assistant Secretary of APAC as being true, correct and
complete.
(c) APAC shall issue the APAC Common Shares issuable pursuant to
Section 1.3 and shall deliver such shares in the following manner: (i) APAC
shall set aside and hold in accordance with Section 6.3 an amount equal to ten
percent (10%) of the shares of APAC Common Shares issued pursuant to Section 1.3
(the "Held Back Shares"), and (ii) at the Closing, APAC shall deliver stock
certificates representing the balance of the APAC Common Shares issuable in
accordance with Section 1.3 to the shareholders of Paragren. The APAC Common
Shares issuable pursuant to Section 1.3, including the Held Back Shares and the
shares issuable upon exercise of Paragren Options, are referred to herein as the
"APAC Shares."
1.8 Consideration Adjustment. (a) The Aggregate Consideration shall be
adjusted as described in Section 1.8(b) in the event that all of the following
conditions are satisfied:
(i) The total revenues of Paragren for the period July 1, 1997
through February 28, 1998 (the "Measurement Period") exceed
$*; for these purposes, total revenues will (x) exclude any
revenues from * during the period July 1, 1997 through
December 31, 1997 which are in excess of $* in the aggregate
and (y) include * percent (*%) of the first year's annual revenue
from services provided or receivable under binding commitments from
call center services to be provided by APAC to any new customer as a
result of material marketing efforts on the part of Paragren
personnel;
(ii) The total expenses of Paragren for the period July 1, 1997
through December 31, 1997 do not exceed $* or operating profit
for such period shall equal or exceed $*; for these purposes,
the determination of total expenses and operating profit will exclude
(x) APAC corporate overhead allocations or charges and (y)
extraordinary charges or expenses (including, without limitation, due
diligence fees paid to Advent International or fees paid to Furman
Selz); and
(iii) The average of the high and low trading price for APAC
Common Shares, as reported in the NASDAQ National Market for the ten
(10) trading days prior to February 28, 1998 (the "APAC Adjustment
Value"), is less than $*.
(b) If all of the conditions in Section 1.8(a) are satisfied, then
the Aggregate Consideration shall be increased to the sum (the "Adjusted
Consideration") equal to (x) $* divided by (y) the APAC Adjustment
Value; provided, however, that the Adjusted Consideration shall not exceed
2,680,584 APAC Common Shares. The conversion ratios on Schedule 1.3 shall
be appropriately adjusted to reflect the Adjusted Consideration and APAC
shall deliver to the Shareholder Representatives, for distribution to the
now current shareholders of Paragren, certificates to represent the
additional APAC Common Shares to be issued to reflect the Adjusted
Consideration (the "Adjustment Shares"). The Adjustment Shares shall be
included in "APAC Shares" for purposes of this Agreement, other than with
respect to the deliveries described in Section 1.7(b).
[FN]
*CONFIDENTIAL TREATMENT REQUESTED - MATERIAL OMITTED HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
</FN>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF APAC
As a material inducement to Paragren and the Shareholders to enter into
this Agreement and to consummate the transactions contemplated hereby, APAC
makes the following representations and warranties to Paragren and the
Shareholders:
2.1 CORPORATE STATUS. APAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois, and has
the requisite power and authority to own or lease its properties and to carry on
its business as presently conducted. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is a wholly owned subsidiary of APAC. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of APAC or Merger Sub.
2.2 CORPORATE POWER AND AUTHORITY. Each of APAC and Merger Sub has the
corporate power and authority to execute and deliver this Agreement, to perform
its respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of APAC and Merger Sub has taken all corporate action
necessary to authorize its execution and delivery of this Agreement, the
performance of its respective obligations hereunder, and the consummation of the
transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by each of APAC and Merger Sub and constitutes its legal, valid and binding
obligation enforceable against such entity in accordance with its terms, except
as the same may be limited by the terms of this Agreement or by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
2.4 CAPITALIZATION. As of the date hereof, the authorized capital stock
of APAC consists of 200,000,000 APAC Common Shares and 50,000,000 Preferred
Shares. As of July 31, 1997, (i) approximately 48,000,000 APAC Common Shares
were validly issued and outstanding, (ii) no Preferred Shares were issued or
outstanding, and as of June 29, 1997. there are outstanding options to purchase
2,722,471 APAC Common Shares.
2.5 NO VIOLATION. The execution and delivery of this Agreement by APAC
and Merger Sub, the performance by APAC and Merger Sub of their respective
obligations hereunder and the consummation by APAC and Merger Sub of the
transactions contemplated by this Agreement will not (a) contravene any
provision of the Certificate of Incorporation, Articles of Incorporation, By-
Laws, or other governing document of APAC or Merger Sub, (b) violate or conflict
with any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment, ruling or order of any Governmental Authority or of any arbitration
award which is either applicable to, binding upon, or enforceable against APAC
or Merger Sub, (c) conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against APAC or Merger Sub, (d)
result in or require the creation or imposition of any Lien upon or with respect
to any of the property or assets of APAC or Merger Sub, (e) give to any
individual or entity a right or claim against APAC or Merger Sub which would
have a Material Adverse Effect on APAC; or (f) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person, except (i) pursuant to the
Exchange Act and the Securities Act and applicable inclusion requirements of the
NASDAQ National Market, (ii) filings required under the securities or blue sky
laws of the various states, or (iii) any filings or consents required to be made
or obtained by Paragren or the Shareholders.
2.6 REPORTS AND FINANCIAL STATEMENTS. From October 16, 1995 to the date
hereof, APAC has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements (collectively, the "APAC Reports"). As of their respective dates
(but taking into account any amendments filed prior to the date of this
Agreement), the APAC Reports complied in all material respects with all the
rules and regulations promulgated by the SEC and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2.7 NO COMMISSIONS. Neither APAC nor Merger Sub has incurred any
obligation for any finders' or brokers' or agents' fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
2.8 LITIGATION. There is no material action, suit or other legal or
administrative proceeding or governmental investigation pending, or, to the
knowledge of APAC, threatened (i) against, by or affecting APAC or APAC's
properties or assets, or (ii) which questions the validity or enforceability of
this Agreement or the transactions contemplated hereby.
2.9 APAC SHARES. The APAC Shares are duly authorized and upon issuance
pursuant to the Merger (including upon due exercise of a Paragren Option), will
be validly issued, fully paid and nonassessable APAC Common Shares, free and
clear of all Liens, restrictions and claims, other than restrictions under
applicable securities laws and restrictions set forth in this Agreement. No
preemptive rights or rights of first refusal or similar rights exist with
respect to the APAC Common Shares. The APAC Shares to be issued upon the
exercise of a Paragren Option and the options to be issued pursuant to Section
4.12 following the Effective Date are registered under the Securities Act
pursuant to a registration statement on Form S-8.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
PARAGREN AND THE SHAREHOLDERS
As a material inducement to APAC and Merger Sub to enter into this
Agreement and to consummate the transactions contemplated hereby, Paragren and
the Shareholders (other than Cognizant Corporation), jointly and severally, make
the following representations and warranties to APAC and Merger Sub:
3.1 CORPORATE STATUS. Paragren is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own or lease its properties and to carry on
its business as now being conducted. Except as set forth on Schedule 3.1,
Paragren is not required to qualify to do business as a foreign entity in any
jurisdiction. From its formation in July 1995, until March 1997, Paragren had
the corporate name "Cornerstone Technologies, Inc." Paragren has not had or used
any other name. There is no pending or threatened proceeding for the
dissolution, liquidation, insolvency or rehabilitation of Paragren.
3.2 POWER AND AUTHORITY. Paragren has the corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby. Paragren has taken all
corporate action necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder, and the consummation of
the transactions contemplated hereby. Each Shareholder is resident in the state
indicated as his, her or its address on Schedule 3.5, each has the requisite
competence and authority to execute and deliver this Agreement, to perform his,
her or its obligations hereunder and to consummate the transactions contemplated
hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by Paragren and each of the Shareholders, and constitutes the legal, valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
3.4 CAPITALIZATION. Schedule 3.4 sets forth, as of the date hereof, with
respect to Paragren, (a) the number of authorized shares of each class of its
capital stock, and (b) the number of issued and outstanding shares of each class
of its capital stock and (c) all outstanding options, warrants or other rights
to acquire any equity interest in Paragren. All of the issued and outstanding
shares of capital stock of Paragren (i) have been duly authorized and validly
issued and are fully paid and nonassessable, (ii) were issued in compliance with
all applicable state and federal securities laws and (iii) were not issued in
violation of any preemptive rights or rights of first refusal or similar rights.
Except as set forth on Schedule 3.4, no preemptive rights or rights of first
refusal or similar rights exist with respect to any shares of capital stock of
Paragren and no such rights arise by virtue of or in connection with the
transactions contemplated hereby; except as described on Schedule 3.4, there are
no outstanding or authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other agreements or
commitments of any kind that could require Paragren to issue or sell any shares
of its capital stock (or securities convertible into or exchangeable for shares
of its capital stock); there are no outstanding stock appreciation, phantom
stock, profit participation or other similar rights with respect to Paragren;
there are no proxies, voting rights or other agreements or understandings with
respect to the voting or transfer of the capital stock of Paragren; and Paragren
is not obligated to redeem or otherwise acquire any of its outstanding shares of
capital stock.
3.5 SHAREHOLDERS OF PARAGREN. Schedule 3.5 sets forth, with respect to
Paragren (i) the name, address and federal taxpayer identification number of,
and the number of outstanding shares of each class of its capital stock owned
by, each shareholder of record as of the close of business on the date of this
Agreement (to be updated by Paragren as of the Closing); and (ii) the name,
address and federal taxpayer identification number of, and number of shares of
each class of its capital stock beneficially owned by, each beneficial owner of
outstanding shares of capital stock as of the close of business on the date of
this Agreement (to be updated by Paragren as of the Closing) (to the extent that
record and beneficial ownership of any such shares are different). The
Shareholders are the record and beneficial holders of the issued and outstanding
shares of capital stock of Paragren as are set forth on Schedule 3.5 opposite
their names, and own such shares free and clear of all Liens, restrictions and
claims of any kind.
3.6 NO VIOLATION. Except for any approvals or consents required with
respect to those Material Contracts (as defined in Section 3.26) identified on
Schedule 3.26 as requiring the consents of third parties and except as set forth
on Schedule 3.6, the execution and delivery of this Agreement by Paragren and
the Shareholders, the performance by Paragren and the Shareholders of their
obligations hereunder and the consummation by them of the transactions
contemplated by this Agreement will not (a) contravene any provision of the
Articles of Incorporation or By-Laws or other organizational or governing
document of Paragren, (b) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against Paragren or any Shareholder, (c)
conflict with, result in any breach of, or constitute a default (or an event
which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right of payment under or the
right to terminate, amend, modify, abandon or accelerate, any Material Contract
which is applicable to, binding upon or enforceable against Paragren or any
Shareholder, (d) result in or require the creation or imposition of any Lien
upon or with respect to any of the properties or assets of Paragren or any
Shareholder, (e) give to any individual or entity a right or claim against
Paragren or any Shareholder or (f) require the consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person.
3.7 RECORDS OF PARAGREN. The Articles of Incorporation, By-Laws and other
documents and agreements of Paragren which have been provided to APAC are
accurate, and complete and reflect all amendments thereto. The minute books and
other records of corporate actions for Paragren made available to APAC for
review were correct and complete as of the date of such review, no further
entries have been made to such minute books and records, such minute books and
records contain the true signatures of the persons purporting to have signed
them, and such minute books and records contain an accurate record of all
corporate actions of the shareholders and directors (and any committees thereof)
of Paragren, taken by written consent or at a meeting or otherwise since
incorporation. All corporate actions by Paragren have been duly authorized or
ratified. All accounts, books, ledgers and official and other records of
Paragren are accurate and substantially complete, and there are no material
inaccuracies or discrepancies of any kind contained therein. The stock ledgers
of Paragren, as previously made available to APAC, contain accurate and complete
records of all issuances, transfers and cancellations of shares of the capital
stock of Paragren.
3.8 SUBSIDIARIES. Paragren does not own any outstanding voting securities
of or other interests in, or control, any other corporation, partnership, joint
venture or other entity.
3.9 FINANCIAL STATEMENTS. Paragren has delivered to APAC the audited
financial statements of Paragren for the fiscal year ended June 30, 1996 (the
"Audited Financial Statements") and the unaudited financial statements of
Paragren for the period ended June 30, 1997 (the "Unaudited Financial
Statements" and together with the Audited Financial Statements, the "Financial
Statements"), copies of which are attached to Schedule 3.9(a) hereto. The
balance sheet of Paragren dated as of June 30, 1997 included in the Unaudited
Financial Statements attached to Schedule 3.9(a), is referred to herein as the
"Current Balance Sheet." The Financial Statements fairly present, in all
material respects, the financial position of Paragren at each of the balance
sheet dates and the results of operations for the periods covered thereby, and,
except for the Unaudited Financial Statements and as set forth on Schedule
3.9(b), have been prepared in accordance with GAAP consistently applied
throughout the periods indicated.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Since the date of the
Current Balance Sheet, except as set forth on Schedule 3.10, Paragren has not
(except as expressly permitted or required by the terms of this Agreement): (a)
issued, sold, pledged, disposed of, encumbered, or authorized the issuance,
sale, pledge, disposition, grant or encumbrance of any shares of its capital
stock or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of such capital stock or any other ownership interest
in Paragren; (b) declared, set aside, made, or paid any dividend or other
distribution payable in cash, stock, property or otherwise of or with respect to
its capital stock or other securities, or reclassified, combined, split,
subdivided or redeemed, purchased or otherwise acquired, directly or indirectly,
any of its capital stock or other securities; (c) paid any bonus to or increased
the rate of compensation of any of its officers or employees or amended any
other terms of employment or engagement of such persons except in the ordinary
course of business consistent with past practice; (d) sold, leased or
transferred any of its properties or assets or acquired any interest in any
corporation, partnership or other business, business organization or division
thereof or properties or assets other than in the ordinary course of business
consistent with past practice; (e) made or obligated itself to make expenditures
in excess of $100,000; (f) made any payment in respect of, or otherwise
discharged or satisfied, any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise) other than in the
ordinary course of business consistent with past practice; (g) except in the
ordinary course of business incurred any obligations or liabilities (including,
without limitation, any indebtedness for borrowed money, issuance of any debt
securities, or the assumption, guarantee, or endorsement of the obligations of
any Person), or entered into any transaction or series of transactions involving
in excess of $50,000, except for this Agreement and the transactions
contemplated hereby; (h) suffered any theft, damage, destruction or casualty
loss in excess of $50,000; (i) suffered any extraordinary losses (whether or not
covered by insurance) in excess of $50,000; (j) waived, canceled, compromised or
released any rights having a value in excess of $50,000; (k) made or adopted any
change in its accounting practices or policies; (l) made any adjustment to its
books and records other than in respect of the conduct of its business
activities in the ordinary course consistent with past practice; (m) entered
into any transaction with any shareholder or any Affiliate of Paragren or of any
shareholder of Paragren, or of any shareholder of Paragren; (n) entered into any
employment or consulting agreement that is not terminable at Closing without any
liability or obligation; (o) terminated, amended or modified any agreement
involving an amount in excess of $50,000 in the aggregate; (p) imposed any
security interest or other Lien on any of its assets; (q) delayed paying any
account payable beyond 60 days following the date on which it is due and
payable; (r) made or pledged any charitable contributions in excess of $10,000;
(s) entered into any other transaction or been subject to any event which has or
is expected to have a Material Adverse Effect on Paragren; or (t) agreed to do
or authorized any of the foregoing.
3.11 LIABILITIES. Paragren has no liabilities or obligations, whether
accrued, absolute, contingent or otherwise, except (a) to the extent reflected
on the Current Balance Sheet and not paid or discharged, (b) liabilities
incurred in the ordinary course of business consistent with past practice since
the date of the Current Balance Sheet (none of which relates to (i) any breach
of contract or breach of warranty other than in the ordinary course of business
consistent with past practice or (ii) any tort, infringement or violation of
law, or which arose out of any action, suit, claim, governmental investigation
or arbitration proceeding), (c) liabilities incurred in the ordinary course of
business prior to the date of the Current Balance Sheet which, in accordance
with GAAP consistently applied, were not required to be recorded thereon and
which, in the aggregate, are not material, and (d) those liabilities set forth
on Schedule 3.11(d). Schedule 3.11 lists all indebtedness, other than trade
accounts payable (including the outstanding principal amount and accrued but
unpaid interest and the name of the lender) owed by Paragren, including without
limitation, indebtedness for borrowed money (including principal) and deferred
compensation. Schedule 3.11 also lists the account numbers and names of each
bank, broker or other depository institution, and the names of all persons
authorized to withdraw funds from each such account for Paragren.
3.12 LITIGATION. Except as listed on Schedule 3.12, there is no action,
suit or other legal or administrative proceeding or governmental investigation
pending, or, to the knowledge of Paragren or any Shareholder, threatened (i)
against, by or affecting Paragren or any Shareholder (which, in the case of
Shareholders, relates to or concerns Paragren or for which Paragren may be
responsible), or Paragren's properties or assets, or (ii) which question the
validity or enforceability of this Agreement or the transactions contemplated
hereby. There are no outstanding orders, decrees or stipulations issued by any
Governmental Authority in any proceeding to which Paragren is or was a party
which have not been complied with in full or which continue to impose any
obligations on Paragren.
3.13 ENVIRONMENTAL MATTERS.
(a) Paragren is and has at all times been in full compliance with all
Environmental Laws governing its business, operations, properties and assets,
including, without limitation: (i) all requirements relating to the Discharge
and Handling of Hazardous Substances; (ii) all requirements relating to notice,
recordkeeping and reporting; (iii) all requirements relating to obtaining and
maintaining Licenses for the ownership of its properties and assets and the
operation of its business as presently conducted; and (iv) all applicable writs,
orders, judgments, injunctions, governmental communications, decrees,
informational requests or demands received by Paragren issued pursuant to, or
arising under, any Environmental Laws.
(b) There are no non-compliance orders, warning letters, notices of
violation (collectively "Notices"), claims, suits, actions, judgments,
penalties, fines, or administrative or judicial investigations of any nature or
proceedings (collectively "Proceedings") pending or threatened against or
involving Paragren, its business, operations, properties or assets, or issued by
any Governmental Authority or third party with respect to any Environmental Laws
or Licenses issued to Paragren in connection with, related to or arising out of
the ownership by Paragren of its properties or assets or the operation of its
businesses, which have not been resolved to the satisfaction of the issuing
Governmental Authority or third party in a manner that would not impose any
obligation, burden or continuing liability on APAC or Paragren in the event that
the transactions contemplated by this Agreement are consummated.
(c) Paragren has not at any time Discharged, or allowed or arranged
for any third party to Discharge, Hazardous Substances to, at or upon: (i) any
location other than a site lawfully permitted to receive such Hazardous
Substances; (ii) any parcel of real property owned or leased at any time by
Paragren, except in compliance with applicable Environmental Laws; or (iii) any
site which, pursuant to CERCLA or any similar state law has been placed on the
National Priorities List or its state equivalent, or which the Environmental
Protection Agency or any relevant state agency has notified Paragren that it has
proposed or is proposing to place on the National Priorities List or its state
equivalent. There has not occurred, nor is there presently occurring, a
Discharge, or threatened Discharge of any Hazardous Substance on, into or
directly beneath the surface of any real property owned or leased at any time by
Paragren.
(d) Except as provided in Schedule 3.13, Paragren does not use, nor
has it used, any Aboveground Storage Tanks or Underground Storage Tanks, and to
the knowledge of Paragren or any Shareholder, there are not now nor have there
ever been any Underground Storage Tanks on any real property owned or leased at
any time by Paragren and there has been no Discharge from or rupture of any
Aboveground Storage Tanks or Underground Storage Tanks on any real property
owned or leased at any time by Paragren.
(e) To the knowledge of Paragren or any Shareholder, Schedule 3.13
identifies (i) all environmental audits, assessments or occupational health
studies undertaken during the period of Paragren's lease thereof and during the
prior five years by (A) any Governmental Authority, (B) Paragren agents or
representatives, or (C) any third party, relating to or affecting Paragren or
any property or assets owned or leased at any time by Paragren; (ii) the results
of all ground, water, soil, air or asbestos monitoring undertaken by Paragren or
its agents or representatives thereof or undertaken by any Governmental
Authority or any third party, relating to or affecting any real property owned
or leased at any time by Paragren; (iii) all relevant written communications
between Paragren and any Governmental Authority arising under or relative to
Environmental Laws including, but not limited to, all Notices issued to Paragren
and pertaining to any property owned or leased at any time by Paragren; and (iv)
all outstanding citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes, rules, regulations, orders, rulings or decrees,
relating to or affecting Paragren or its business or any real property owned or
leased at any time by Paragren.
(f) For purposes of this Section, the following terms shall have the
meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing, migrating or emitting, as any of such terms may
further be defined in any Environmental Law, into or through any medium
including, without limitation, ground water, surface water, land, soil or
air.
"Environmental Laws" means all federal state, regional or local
statutes, laws, rules, regulations, codes, ordinances, orders, plans,
injunctions, decrees, rulings, licenses, and changes thereto, or judicial
or administrative interpretations thereof, or similar laws, currently in
existence, any of which govern, or relate to pollution, protection of the
environment, public health and safety, air emissions, water discharges,
waste disposal, hazardous or toxic substances, solid or hazardous waste,
occupational, health and safety, as any of these terms are defined in such
statutes, laws, rules, regulations, codes, orders, ordinances, plans,
injunctions, decrees, rulings, licenses, and changes thereto, or judicial
or administrative interpretations thereof, including, without limitation:
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of
1986, 42 U.S.C. Section 9601, et seq. (herein, collectively, "CERCLA"); the
Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and subsequent Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. Section 6901 et seq. (herein, collectively, "RCRA"); the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801,
et seq., (the "Hazardous Materials Transportation Act"); the Clean Water
Act, as amended, 33 U.S.C. Section 1311, et seq. (the "Clean Water Act");
the Clean Air Act, as amended, 42 U.S.C. Section 7401-7642, (the "Clean Air
Act"); the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601
et seq. (the "Toxic Substances Control Act"); the Federal Insecticide,
Fungicide, and Rodenticide Act as amended, 7 U.S.C. Section 136-136y
("FIFRA"); the Emergency Planning and Community Right-to-Know Act of 1986
as amended 42 U.S.C. Section 11001, et seq. (Title III of SARA) ("EPCRA");
and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
Section 651, et seq. ("OSHA").
"Handle" (and "Handling") means any manner of generating,
accumulating, storing, treating, disposing of, transporting, transferring,
labeling, handling, manufacturing or using, as any of such terms may
further be defined in any Environmental Law.
"Hazardous Substances" shall mean any toxic or hazardous substance,
material or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous,
including without limitation, chemicals, compounds, by-products,
pesticides, asbestos containing materials, petroleum or petroleum products,
and polychlorinated biphenyls, the presence of which requires investigation
or remediation under any Environmental Laws or which are regulated, listed
or controlled by, under or pursuant to any Environmental Laws, or which has
been or shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"Licenses" means, all licenses, certificates, permits, approvals,
decrees and registrations required under the Environmental Laws.
"Underground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA.
3.14 REAL ESTATE.
(a) Paragren does not own and has never owned any real property.
Schedule 3.14(a) sets forth a list of all leases, licenses or similar agreements
currently in effect to which Paragren is a party, which are for the use or
occupancy of real estate owned by a third party ("Leases") (accurate and
complete copies of which have previously been furnished to APAC), in each case,
setting forth: (i) the lessor and lessee thereof and the commencement date,
term and renewal rights under each of the Leases; (ii) the street address or
legal description of each property covered thereby; and (iii) a brief
description (including approximate size and function) of the premises leased by
Paragren thereunder (the "Leased Premises"). The Leases are in full force and
effect and have not been amended except as disclosed in Schedule 3.14(a), and
Paragren is not, and to the knowledge of Paragren or any Shareholder, no other
party is in default or breach under any such Lease. With respect to each such
Leased Premises, Paragren has a valid leasehold interest in the Leased Premises,
which leasehold interest is free and clear of any Liens, covenants and easements
or title defects of any nature whatsoever and, to the knowledge of Paragren or
any Shareholder: (i) the portions of the buildings located on the Leased
Premises that are used in the business of Paragren are each in operating
condition adequate for the operation of Paragren's business and are in the
aggregate sufficient to satisfy Paragren's current and reasonably anticipated
business activities as conducted thereat; (ii) each of the Leased Premises (a)
has rights of ingress and egress provided under the applicable lease, sufficient
to satisfy the current and reasonably anticipated normal transportation
requirements of Paragren's business presently conducted thereat; and (b) is
served by utilities sufficient to satisfy the current business activities
conducted by Paragren thereat; and (iii) neither Paragren nor any Shareholder
has received notice of (a) any condemnation proceeding with respect to any
portion of the Leased Premises or any access thereto, and to the knowledge of
Paragren or any Shareholder, no such proceeding is contemplated by any
Governmental Authority; or (b) any special assessment which may affect any of
the Leased Premises, and, to the knowledge of Paragren or any Shareholder, no
such special assessment is contemplated by any Governmental Authority.
(b) The Leased Properties collectively constitute all of the real
property and interests in real property used in connection with the operation of
Paragren and its business.
3.15 BUSINESS; GOOD TITLE TO AND CONDITION OF ASSETS.
(a) Paragren's sole business is the development, marketing,
licensing, installation and maintenance of software-based marketing tools and
databases and the provision of consulting and other services in connection
therewith (the "Business"). Except as set forth on Schedule 3.15 hereto,
Paragren owns or has the right to use, (pursuant to a Contract listed on
Schedule 3.26), all of the assets used in the conduct of its business. Paragren
has good and marketable title to all of the assets and properties owned by it
free clear of any Liens.
(b) The fixed assets currently in use or necessary for the business
and operations of Paragren are in operating condition, normal wear and tear
excepted, adequate for the operation of Paragren's business. For purposes of
this Agreement, the term "fixed assets" means all vehicles, computers,
machinery, equipment, tools, supplies, leasehold improvements, furniture and
fixtures, owned, used by or located on the premises of Paragren or set forth on
the Current Balance Sheet or acquired by Paragren since the date of the Current
Balance Sheet.
3.16 COMPLIANCE WITH LAWS. Paragren and each Shareholder (pertaining to
the business of Paragren with respect to any Shareholders Affiliate) has been
and is in compliance with all laws, regulations and orders applicable to it, its
business and operations (as conducted by it now and in the past) or assets or
the Leased Premises. Paragren has not been cited, fined or otherwise notified
of any asserted past or present failure to comply with any laws, regulations or
orders and no proceeding with respect to any such violation is pending or
threatened. Except for the agreements described on Schedule 3.16, a correct and
completed copy of which has been delivered to APAC, Paragren, is not subject to
any Contract, decree or injunction which restricts the continued operation of
any business or the expansion thereof to other geographical areas, customers and
suppliers or lines of business. Neither Paragren, nor any of its employees or
agents, has made any payment of funds in connection with its business which is
prohibited by law, and no funds have been set aside to be used in connection
with its business for any payment prohibited by law. Neither Paragren nor any
Shareholder is engaged in or has engaged in any course of conduct that could
subject any of Paragren's properties to any Lien, seizure or other forfeiture
under any criminal law, racketeering influenced and corrupt organizations law,
civil or criminal, or other similar laws.
3.17 LABOR AND EMPLOYMENT MATTERS. (a) Paragren is not a party to or
bound by any collective bargaining agreement or any other agreement with a labor
union, and there has been no labor union prior to the date hereof organizing any
employees of Paragren into one or more collective bargaining units. There is
not now, and there has not been prior to the date hereof, any actual or
threatened labor dispute, strike or work stoppage which affects or which may
affect the business of Paragren or which may interfere with its continued
operations. Neither Paragren nor any employee or agent thereof has, since the
date of incorporation or formation of Paragren committed any unfair labor
practice as defined in the National Labor Relations Act, as amended, and there
is no pending or threatened charge or complaint against Paragren by or with the
National Labor Relations Board or any representative thereof. To the knowledge
of Paragren or any Shareholder, no executive or employee has any plans to
terminate his or her employment with Paragren as a result of the transactions
contemplated hereby or otherwise. Paragren has complied with applicable laws,
rules and regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of 1964, the
Fair Labor Standards Act, and the Americans with Disabilities Act, all as
amended.
(b) Paragren is and at all times has been in full compliance with the
terms and provisions of the Immigration Reform and Control Act of 1986, as
amended (the "Immigration Act"). With respect to each Employee (as defined in 8
C.F.R. 274a.1(f)) of Paragren for whom compliance with the Immigration Act is
required, Paragren has on file a true, accurate and complete copy of (i) each
Employee's Form I-9 (Employment Eligibility Verification Form) and (ii) all
other records, documents or other papers prepared, procured and/or retained
pursuant to the Immigration Act. Paragren has not been cited, fined, served
with a Notice of Intent to Fine or with a Cease and Desist Order, nor has any
action or administrative proceeding been initiated or threatened against
Paragren, by the Immigration and Naturalization Service by reason of any actual
or alleged failure to comply with the Immigration Act.
3.18 EMPLOYEES. Schedule 3.18 is an accurate and complete schedule
containing:
(a) a list of all employees of Paragren (including name, title and
position);
(b) the employee's length of service;
(c) a list of all agreements, arrangements or understandings, written
or oral, regarding services to be rendered, terms and conditions of employment,
confidentiality and assignment of inventions, developments and copyrights (with
respect to such items listed on Schedule 3.18, accurate and complete copies have
been delivered to APAC the "Employment Contracts"); and
(d) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each
employee.
3.19 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.19 contains a list setting forth each employee
benefit plan or arrangement of Paragren, including but not limited to employee
pension benefit plans, as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), multiemployer plans, as
defined in Section 3(37) of ERISA, employee welfare benefit plans, as defined in
Section 3(1) of ERISA, deferred compensation plans, stock option plans, bonus
plans, stock purchase plans, hospitalization, disability and other insurance
plans, severance or termination pay plans and policies, whether or not described
in Section 3(3) of ERISA, in which employees, their spouses or dependents of
Paragren participate ("Employee Benefit Plans") (true and accurate copies of
which, together with the most recent annual reports on Form 5500 and summary
plan descriptions with respect thereto, has been furnished to APAC).
(b) With respect to each Employee Benefit Plan (i) each has been
administered in all respects in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"); (ii) no actions, suits, claims or
disputes are pending, or threatened; (iii) no audits, inquiries, reviews,
proceedings, claims, or demands are pending with any governmental or regulatory
agency; (iv) there are no facts which could give rise to any liability in the
event of any such investigation, claim, action, suit, audit, review, or other
proceeding; (v) all reports, returns and similar documents required to be filed
with any governmental agency or distributed to any plan participant have been
duly or timely filed or distributed; and (vi) no "prohibited transaction" has
occurred within the meaning of the applicable provisions of ERISA or the Code.
(c) With respect to each Employee Benefit Plan intended to qualify
under Code Section 401(a) or 403(a), (i) the Internal Revenue Service has issued
a favorable determination letter, true and correct copies of which have been
furnished to APAC, that such plans are qualified and exempt from federal income
taxes; (ii) no such determination letter has been revoked nor has revocation
been threatened, nor has any amendment or other action or omission occurred with
respect to any such plan since the date of its most recent determination letter
or application therefor in any respect which would adversely affect its
qualification or materially increase its costs; (iii) no such plan has been
amended in a manner that would require security to be provided in accordance
with Section 401(a)(29) of the Code; (iv) no reportable event (within the
meaning of Section 4043 of ERISA) has occurred, other than one for which the 30-
day notice requirement has been waived; (v) as of the Effective Date, the
present value of all liabilities that would be "benefit liabilities" under
Section 4001(a)(16) of ERISA if benefits described in Code Section 411(d)(6)(B)
were included will not exceed the then current fair market value of the assets
of such plan (determined using the actuarial assumptions used for the most
recent actuarial valuation for such plan); (vi) all contributions to, and
payments from and with respect to such plans, which may have been required to be
made in accordance with such plans and, when applicable, Section 302 of ERISA or
Section 412 of the Code, have been timely made; and (vii) all such contributions
to the plans and all payments under the plans (except those to be made from a
trust qualified under Section 401(a) of the Code) and all payments with respect
to the plans (including without limitation PBGC (as defined below) and insurance
premiums) for any period ending before the Effective Date that are not yet, but
will be, required to be made are properly accrued and reflected on the Current
Balance Sheet.
(d) Paragren is not nor has been obligated with respect to any
multiemployer plan as described in Section 4001(a)(3) of ERISA ("MPPA Plan").
Paragren does not maintain any Employee Benefit Plan which is subject to the
requirements of Title IV of ERISA.
(e) (i) Paragren is not obligated under any employee welfare
benefit plan as described in Section 3(1) of ERISA ("Welfare Plan") to provide
medical or death benefits with respect to any employee or former employee of
Paragren or any predecessor thereof after termination of employment; (ii)
Paragren has complied with the notice and continuation coverage requirements of
Section 4980B of the Code and the regulations thereunder with respect to each
Welfare Plan that is, or was during any taxable year for which the statute of
limitations on the assessment of federal income taxes remains open, by consent
or otherwise, a group health plan within the meaning of Section 5000(b)(1) of
the Code; and (iii) there are no reserves, assets, surplus or prepaid premiums
under any Welfare Plan which is an Employee Benefit Plan. The consummation of
the transactions contemplated by this Agreement will not entitle any individual
to severance pay, and, will not accelerate the time of payment or vesting, or
increase the amount of compensation due to any individual.
(f) Neither Paragren nor any entity that would be aggregated with
Paragren under Code Section 414(b), (c), (m) or (o): (i) has ever terminated or
withdrawn from an employee benefit plan under circumstances resulting (or
expected to result) in liability to the Pension Benefit Guaranty Corporation
("PBGC"), the fund by which the employee benefit plan is funded, or any employee
or beneficiary for whose benefit the plan is or was maintained (other than
routine claims for benefits); (ii) has any assets subject to (or expected to be
subject to) a lien for unpaid contributions to any employee benefit plan; (iii)
has failed to pay premiums to the PBGC when due (iv) is subject to (or expected
to be subject) an excise tax under Code Section 4971; (v) has engaged in any
transaction which would give rise to liability under Section 4069 or Section
4212(c) of ERISA; or (vi) has violated Code Section 4980B or Section 601 through
608 of ERISA.
(g) (i) Except for the Paragren Technologies, Inc. Restated
Employee Non-Qualified Stock Option Plan and the Paragren Technologies, Inc.
Directors Option Plan and as otherwise described on Schedule 3.19, none of the
Employee Benefit Plans obligates Paragren to pay separation, severance,
termination or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change of control"
(as such term is defined in Section 280G of the Code); (ii) all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods ending prior to or as
of the Effective Date shall have been made or properly accrued on the Current
Balance Sheet or will be properly accrued on the books and records of Paragren
as of the Effective Date; and (iii) none of the Employee Benefit Plans has any
unfunded liabilities which are not reflected on the Current Balance Sheet.
3.20 TAX MATTERS. Except as set forth on Schedule 3.20, all Tax Returns
required to be filed prior to the date hereof with respect to Paragren or any of
its income, properties, franchises or operations have been timely filed, each
such Tax Return has been prepared in compliance with all applicable laws and
regulations, and all such Tax Returns are true and accurate in all respects.
Except as set forth on Schedule 3.20, all Taxes due and payable by or with
respect to Paragren have been paid or are accrued on the Current Balance Sheet.
Except as set forth on Schedule 3.20, (i) no returns of Paragren have been
audited and the time for assessing or collecting Taxes with respect to each
taxable period of Paragren has not closed and each taxable period is subject to
review by the relevant taxing authority; (ii) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any amount of
Taxes has been asserted or assessed by any taxing authority against Paragren;
(iii) Paragren has not consented to extend the time in which any Taxes may be
assessed or collected by any taxing authority; (iv) Paragren has not requested
or been granted an extension of the time for filing any Tax Return to a date
later than the Closing; (v) there is no action, suit, taxing authority
proceeding, or audit or claim for refund now in progress, pending or threatened
against or with respect to Paragren regarding Taxes; (vi) there are no Liens for
Taxes upon any assets of Paragren; (vii) Paragren has not been a member of an
affiliated group (as defined in Section 1504 of the Code) or filed or been
included in a combined, consolidated or unitary income Tax Return; (x) Paragren
is not a party to or bound by any tax allocation or tax sharing agreement and
has no current or potential contractual obligation to indemnify any other Person
with respect to Taxes; (ix) no taxing authority will claim or assess any
additional Taxes against Paragren for any period for which Tax Returns have been
filed; (x) Paragren has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code (or any
corresponding provision of state, local or foreign law) during the applicable
period specified in Section 897(c)(l)(a)(ii) of the Code (or any corresponding
provision of state, local or foreign law); (xi) no claim has ever been made by a
taxing authority in a jurisdiction where Paragren does not file Tax Returns that
Paragren is or may be subject to Taxes assessed by such jurisdiction; and (xii)
true, correct and complete copies of all income and sales Tax Returns filed by
or with respect to Paragren have been furnished or made available to APAC.
3.21 INSURANCE. Paragren is covered by the policies of insurance
described on Schedule 3.21 hereto (the "Insurance Policies"). Such Insurance
Policies are in full force and effect, and all premiums due thereon have been
paid through the date of this Agreement and will be paid through the Effective
Date. Paragren has complied with the provisions of such Insurance Policies
applicable to it, and has made available to APAC copies of all Insurance
Policies and all amendments and riders thereto. Paragren has not failed to
give, in a timely manner, any notice required under any of the Insurance
Policies to preserve its rights thereunder. Schedule 3.21 contains (i) a
complete and correct list of all Insurance Policies and all amendments and
riders thereto (copies of which have been provided to APAC) and (ii) a detailed
description of each pending claim under any of the Insurance Policies that
relates to loss or damage to the properties, assets or businesses of Paragren or
an employee thereof.
3.22 RECEIVABLES. All of the accounts receivable of Paragren
("Receivables") represent bona fide transactions and arose in the ordinary
course of business of Paragren. To the knowledge of Paragren or any
Shareholder, there are not facts in existence which give rise to a set off or
counterclaim available to any obligor under any of the Receivables.
3.23 LICENSES AND PERMITS. Paragren possesses all licenses, approvals,
permits or authorizations from Governmental Authorities (collectively, the
"Permits") for its business and operations, including with respect to the
operations of each of the Leased Premises. Schedule 3.23 sets forth a true,
complete and accurate list of all such Permits or applications for such Permits.
All such Permits are valid and in full force and effect, Paragren is in
compliance with the respective requirements thereof, and no proceeding is
pending or threatened to revoke or amend any of them. None of such Permits is
or will be impaired or in any way affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
3.24 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS; AFFILIATED TRANSACTIONS.
No current supplier to Paragren has threatened to terminate its business
relationship with Paragren for any reason. Paragren has no direct or indirect
interest in any customer, supplier or competitor of Paragren or in any person
from whom or to whom Paragren leases real or personal property. Except as set
forth on Schedule 3.24, no officer, director or shareholder of Paragren, nor any
person related by blood or marriage to any such person, nor any entity in which
any such person owns any beneficial interest, is a party to any Contract or
transaction with Paragren or has any interest in any property used by Paragren.
3.25 INTELLECTUAL PROPERTY. Except as set forth on Schedule 3.25,
Paragren has full and exclusive legal right, title and interest in and to all
trademarks, service marks, trade names, copyrights, know-how, patents, trade
secrets, licenses, and other intellectual property used in the conduct of its
business (the "Intellectual Property"). All Intellectual Property is either (a)
an original creation of an employee of Paragren within his scope of employment
with Paragren as "work made for hire" or (b) has been duly licensed and assigned
to Paragren. The conduct of the business of Paragren as presently conducted,
and the unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property, does not infringe or misappropriate any rights held or
asserted by any Person and, to the knowledge of Paragren or any Shareholder, no
Person is infringing on any Intellectual Property. Except as set forth on
Schedule 3.25, no payments are required for the continued use of the
Intellectual Property (other than maintenance fees in the ordinary course of
business). None of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any pending or, to the knowledge of Paragren
or any Shareholder, threatened action for opposition, cancellation, declaration,
infringement, or invalidity, unenforceability or misappropriation or like claim,
action or proceeding.
3.26 CONTRACTS. Schedule 3.26 sets forth a list of each Material Contract
(as defined below), accurate and complete copies of which have been made
available to APAC. Schedule 3.26 identifies all Material Contracts that require
the consents of third parties to the transactions contemplated hereby. Except
as set forth on Schedule 3.26, Paragren has not violated any of the terms or
conditions of any Material Contract or any term or condition which would permit
termination or material modification of any Material Contract, to the knowledge
of Paragren or any Shareholder, all of the covenants to have been performed by
any other party thereto have been fully performed or waived, and there are no
claims for breach or indemnification or notice of default or termination under
any Material Contract. No event has occurred which constitutes, or after notice
or the passage of time, or both, would constitute, a default by Paragren under
any Material Contract, and, to the knowledge of Paragren or any Shareholder, no
such event has occurred which constitutes or would constitute a default by any
other party. As used in this Section 3.26, "Material Contracts" shall mean
written or oral, (a) loan agreements, indentures, mortgages, pledges,
hypothecations, deeds of trust, conditional sale or title retention agreements,
security agreements, equipment financing obligations or guaranties, or other
sources of contingent liability in respect of any indebtedness or obligations to
any other Person, or letters of intent or commitment letters with respect to
same (other than those which provide for annual payments of less than $50,000);
(b) contracts obligating Paragren to provide or obtain products or services for
a period of one year or more; (c) leases of real property; (d) leases of
personal property; (e) distribution, sales agency or franchise or similar
agreements, or agreements providing for an independent contractor's services, or
letters of intent with respect to same; (f) employment agreements, management
service agreements, consulting agreements, confidentiality agreements, non-
competition agreements, employee handbooks, policy statements and any other
agreements relating to any employee, officer or director of Paragren; (g)
licenses, assignments or transfers of trademarks, trade names, service marks,
patents, copyrights, trade secrets or know how, or other agreements regarding
proprietary rights or intellectual property; (h) contracts relating to pending
capital expenditures by Paragren in excess of $50,000; (i) contracts obligating
Paragren to purchase computers, services, supplies, equipment of any kind; (j)
non-competition agreements, (k) any contracts obligating Paragren to make
payments in excess of $50,000, over the remaining term of such contract; (l)
software licenses, consulting services, marketing, support services and
maintenance agreements, and (m) all other Contracts or understandings which are
material to Paragren, or its businesses, assets or properties, irrespective of
subject matter and whether or not in writing.
3.27 SOFTWARE AND INFORMATION SYSTEMS.
(a) Paragren has all necessary right, title and interest, in the form
of ownership or licenses, in and to all electronic data processing systems,
information systems, computer software programs, program specifications, charts,
procedures, source codes, input data, routines, data bases and report layouts
and formats, record file layouts, diagrams, functional specifications and
narrative descriptions, flow charts and other related material used by Paragren
(collectively the "Software"). Schedule 3.27 sets forth a correct, and complete
list and summary description of all Software and identifies (i) Software which
is owned by Paragren and any licenses thereof; (ii) Software which is licensed
to Paragren and whether any copies of such licensed Software have been made;
(iii) any other Software in which Paragren has any use, possessory or
proprietary rights; (iv) all pending Software development projects, together
with an identification of the persons undertaking such projects and (v) Software
which is a component or is incorporated in or is specifically required to
deliver, develop or support any products or services sold, licensed or rendered
by Paragren, including without limitation, "RACER" and the "One-by-One Decision
Support System" ("Product Software").
(b) With respect to the Product Software:
(i) all Product Software documentation is current, accurate and
sufficient in detail and content to identify and explain the nature
thereof, and to allow its full and proper use by competent computer
personnel of Paragren without reliance on the special knowledge or memory
of others; and
(ii) except as described on Schedule 3.27, no proprietary rights in
any Product Software have been transferred by Paragren whether by sale,
assignment or license, or have been lost for any reason;
(c) All Product Software is presently protectible to the extent
permitted under applicable copyright laws, and, except as described on Schedule
3.27, is not part of the public knowledge or literature, nor, to the knowledge
of Paragren or any Shareholder, has any Product Software been used, divulged or
appropriated for the benefit of any other person, or to the detriment of
Paragren.
(d) The Company has taken appropriate measures to protect the
secrecy, confidentiality and value of the Product Software.
(e) All source codes, object codes and source code comments included
in the Product Software are sufficient to the extent reasonably necessary to
enable Paragren to maintain and modify the Product Software.
(f) Paragren has sufficient rights in the Software to enable it to
operate its business as currently operated, free and clear of any royalties,
license fees, liens, claims, encumbrances and adverse rights, except as
described on Schedule 3.27.
(g) Paragren is in actual and sole possession of all copies of the
source code, source code comments and object code (except for copies of object
code held by licensees and copies disclosed to the persons listed on Schedule
3.27) and other proprietary rights included in the Product Software.
(h) Schedule 3.27 lists all current and former employees of Paragren
who were authors of the Product Software and to the best knowledge of Paragren
or any Shareholder, any other person or entity who materially participated in
the development of the Product Software or any portion thereof or performed any
work related to the Product Software (such authors and other persons or entities
are collectively referred to as the "Software Authors"). Each Product Software
Author identified as "internal" made his contribution to the Product Software
within the scope of employment with Paragren as "work made for hire". Except as
set forth on Schedule 3.23, the Product Software and every portion thereof is an
original creation of the Software Authors (or other persons not having any
rights thereto) and does not contain any source code or portions of source code
(including any "canned program") created by any parties other than the Software
Authors.
(i) All Product Software is functional in all material respects,
meets the relevant application requirements, has no defects or errors which
could materially and adversely affect Paragren's or any licensee's use of the
Product Software or the functioning of the Product Software in accordance with
the specifications for the Product Software published by Paragren or provided to
customers, the Product Software has all the features described in the Paragren
user manuals or advertisements and materials made available to Paragren's
customers; and, to the best knowledge of Paragren or any Shareholder, the
Product Software does not contain any "back door", "time bomb," "Trojan horse,"
"work," "drop dead device," "virus" (as these terms are commonly used in the
computer software industry), or other software routines or hardware components
designed to permit unauthorized access, to disable or erase software, hardware,
or data in a manner unauthorized by, and contrary to the intentions of, the
user, or to perform any other similar unauthorized destructive type of
functions.
(j) Except as set forth on Schedule 3.27, no person or entity other
than Seller has any interest in or with respect to the Product Software,
including the right to use, make, copy, sell, exploit, and no situation, matter,
or agreement exists that would preclude Paragren from making any change to the
Product Software or combining it with other software in any lawful manner.
(k) Except as set forth on Schedule 3.27, the Product Software has
been licensed for use by third parties only in connection with use of a product
sold by the Business.
(l) Paragren is the exclusive owner of the Product Software and no
Person has any interest therein except pursuant to the licenses granted by
Paragren listed on Schedule 3.27, accurate and complete copies of which have
been delivered to APAC. Paragren's use of any Software does not infringe or
violate the proprietary or intellectual property rights of any Person. Neither
Paragren nor any Shareholder has any knowledge that any third party is violating
or has violated any of Paragren's proprietary rights in the Software.
(m) Schedule 3.27 contains a complete list of all third party
software and patent rights which are a component of or incorporated in or
specifically required to develop or support any of the Software ("Incorporated
Products"), and a list of all restrictions on Paragren's unrestricted right to
use, incorporate or distribute the Incorporated Products. Paragren is not in
violation of any license, sublicense or agreement with respect to an
Incorporated Product.
(n) Except as described on Schedule 3.27, all actions and
modifications necessary for the continued effective use of the Software despite
the occurrence of the date January 1, 2000 have been taken or made.
3.28 ACCURACY OF INFORMATION FURNISHED. No representation, statement or
information contained in this Agreement (including, without limitation, the
various Schedules attached hereto) or any agreement executed in connection
herewith or in any certificate delivered pursuant hereto or thereto or made or
furnished to APAC or its representatives by Paragren or any Shareholder,
contains or shall contain any untrue statement of a material fact or omits or
shall omit any material fact necessary to make the information contained therein
not misleading. Paragren has made available to APAC correct and complete copies
of all documents listed or described in the various Schedules attached hereto.
The financial projections delivered by Paragren to APAC represent Paragren's
good faith estimate of future performance. Neither Paragren nor any Shareholder
has any basis to believe such projections are not reasonable.
3.29 NO COMMISSIONS. Neither Paragren nor any Shareholder has incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby,
except as described in Schedule 3.29.
3.30 SECURITIES MATTERS. Each Shareholder is an "accredited investor" as
that term is defined in Regulation D promulgated under the Securities Act. Each
Shareholder is obtaining the APAC Shares for his own account, for investment
purposes and not with a view to distribution. Each Shareholder has received the
APAC Reports and the opportunity to receive additional requested information
regarding APAC.
3.31 HSR. The ultimate parent of Paragren for purposes of the HSR Act does
not have $10 million or more of assets or income for purposes of the "size of
person" test under the HSR Act.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
4.2 COMPLIANCE WITH COVENANTS. The Shareholders, other than Cognizant,
shall cause Paragren to comply with all of the covenants of Paragren under this
Agreement.
4.3 COOPERATION. Each of the parties agrees to cooperate with the other
in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by this
Agreement and to use their respective best efforts to agree jointly on a method
to overcome any objections by any Governmental Authority to any such
transactions.
4.4 PARAGREN DEBT. Within 10 days after the Effective Date, APAC or the
Surviving Corporation shall pay to Magid Abraham the amount of $514,863.68, in
full payment of Paragren's indebtedness and deferred compensation payable to
Magid Abraham and/or Linda Boland, complete and accurate copies of all
documentation for which has been made available to APAC. Following the
Effective Date, APAC shall use commercially reasonable efforts to obtain a
prompt release of Magid Abraham's personal guarantee described on Schedule 3.11
hereto.
4.5 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement, the subject matter or terms hereof or any
confidential information or other proprietary knowledge concerning the business
or affairs of any other party which it may have acquired from such party in the
course of pursuing the transactions contemplated by this Agreement without the
prior consent of the other parties hereto; provided, that any information that
is otherwise publicly available, without breach of this provision, or has been
obtained from a third party without a breach of such third party's duties, shall
not be deemed confidential information. APAC may make such public disclosure as
it deems advisable; provided that APAC will utilize its reasonable best efforts
to consult with the Shareholder Representatives prior to any such disclosure.
No press release or other public announcement related to this Agreement or the
transactions contemplated hereby shall be issued by Paragren or any Shareholder
without the prior written approval of APAC.
4.6 RESTRICTIVE COVENANTS. (a) In order to assure that APAC will realize
the benefits of the Merger, the Shareholders, other than Cognizant, agree with
APAC that they will not:
(i) during the period commencing on the Closing and ending on the
later of (x) five years after the Closing and (y) two years after the
termination of the Shareholder s employment with Paragren or APAC or any
Affiliate of APAC, directly or indirectly, alone or as a partner, joint
venturer, officer, director, member, employee, consultant, agent,
independent contractor or stockholder of, or lender to, any company or
business, engage in the business of (A) providing, soliciting to provide or
responding to any request to provide any services or products to any Person
that is or was a customer of Paragren, APAC or any Affiliate of APAC of the
same type or nature as are then provided by or can be provided by Paragren,
APAC or any Affiliate of APAC, (B) developing, marketing, selling,
licensing or providing any product or service that competes with any
product or service made or provided by Paragren, APAC or any Affiliate of
APAC, or (C) engaging in, or becoming involved with or assisting any Person
or business activity which is directly or indirectly engaged in,
competition with any of the products or services developed, licensed, sold
or otherwise provided or under development by Paragren, APAC or any
Affiliate of APAC at such time (each of (A), (B) and (C) being a
"Competitive Activity") anywhere in the United States;
(ii) during the period commencing on the Closing and ending five
years after the Closing, directly or indirectly, induce, request or advise
any customer or prospective customer of APAC (including Paragren) to
abstain from, withdraw, curtail or cancel any business with APAC (including
Paragren). For purposes of this Agreement, the term "prospective customer"
shall mean any person, corporation or other entity to which APAC (including
Paragren) has made a written or oral presentation or proposal within the
eighteen (18) month period prior to the Effective Date;
(iii) during the period commencing at the Closing Date and ending
five years after the Closing Date, directly or indirectly, as an employee,
agent, salesman or member of any person, corporation, firm or otherwise,
solicit any employee or agent of Paragren, APAC or any Affiliate of APAC or
make such other contact with such employee or agent, the product of which
contact will or may yield a termination of the employment or agency
relationship of such employee or agent with Paragren, APAC or such
affiliate of APAC; or
(iv) during the period commencing at the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce or retain in his
possession any of Paragren's or APAC's proprietary rights or records;
provided, however, that the beneficial ownership of less than five percent (5%)
of the shares of stock of any corporation having a class of equity securities
actively traded on a national securities exchange or over-the-counter market
shall not be deemed, in and of itself, to violate the prohibitions of this
Section.
(b) In order to assure that APAC will realize the benefits of the
Merger, Cognizant agrees with APAC that it will not:
(i) during the one-year period commencing on the Closing Date,
directly or indirectly, alone or as a partner, joint venturer, officer,
director, member, employee, consultant, agent, independent contractor or
stockholder of, or lender to, any company or business, engage in the
business of developing, marketing or licensing or providing consulting
services with respect to any customer acquisition, customer retention,
marketing database or call center products or services which are
competitive with products of services offered by Paragren as of the Closing
Date, anywhere in the United States; provided, however, that this provision
will not restrict Cognizant or any of its subsidiaries from developing,
marketing, licensing or providing products or services which Cognizant or
any of its subsidiaries offers or is developing as of the Closing Date;
(ii) during the one year period commencing on the Closing Date,
induce any Person which is a customer of Paragren on the Closing Date to
acquire or license a software-based marketing tool which is competitive
with products or services offered by Paragren as of the Closing Date,
excluding any such products or services that Cognizant or any of its
subsidiaries offers or is developing as of the Closing Date;
(iii) during the one-year period commencing on the Closing Date,
directly or indirectly solicit for employment, any person who was employed
by Paragren as of the Closing Date or within the prior six months, or in
any manner seek to induce any such person to leave his or her employment;
or
(iv) during the period commencing on the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce or retain in its
possession any of Paragren's proprietary rights or records;
provided, however, that the beneficial ownership of less than five percent (5%)
of the shares of stock of any corporation having a class of equity securities
actively traded on a national securities exchange or over-the-counter market
shall not be deemed, in and of itself, to violate the prohibitions of this
Section.
(c) The Shareholders agree and acknowledge that the restrictions
contained in this Section 4.6 are reasonable in scope and duration and are
necessary to protect APAC and Paragren after the Closing Date. If any provision
of this Section 4.6, as applied to any party or to any circumstance, is adjudged
by a court to be invalid or unenforceable, the same will in no way affect any
other circumstance or the validity or enforceability of the remainder of this
Agreement. If any such provision, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination shall have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced. The parties agree and acknowledge that the
breach of this Section 4.6, will cause irreparable damage to APAC and upon
breach of any provision of this Section 4.6, APAC shall be entitled to
injunctive relief, specific performance or other equitable relief, provided,
however, that the foregoing remedies shall in no way limit any other remedies
which APAC may have (including, without limitation, the right to seek monetary
damages).
4.7 TRADING IN APAC COMMON SHARES. Except as otherwise expressly consented
to by APAC in writing:
(a) Magid Abraham, Linda Boland and each of their Affiliates
(collectively, the "Abraham Family") shall not, directly or indirectly sell or
transfer with respect to any APAC Shares ("Abraham Family Shares") except that
they may transfer up to 20% of the Abraham Family Shares prior to the first
anniversary of the Effective Date and up to an additional 20% of the Abraham
Family Shares (on a cumulative basis) beginning on each of the first four
anniversaries of the Effective Date. The restrictions in this Section 4.7(a)
will terminate to the extent (if any) necessary to allow the Abraham Family to
sell the portion of the Abraham Family Shares equal to the portion of the APAC
Common Shares holdings beneficially owned by Theodore Schwartz and his spouse
(for purposes hereof, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act) sold during such period. The
restrictions in this Section 4.7(a) will terminate upon (i) the death of Magid
Abraham, (ii) the sale by APAC or Paragren of the Business accompanied by a
transfer of Magid Abraham's employment to the acquiror thereof or (iii) the
termination of Magid Abraham's employment with the Company due to his permanent
physical disability.
(b) Cognizant shall not, directly or indirectly, sell or transfer any
APAC Shares ("Cognizant Shares"), except that Cognizant may (i) sell or transfer
up to 50% of the Cognizant Shares prior to the expiration of a six-month period
after the Effective Date and (ii) thereafter may, with respect to the other 50%
of the Cognizant Shares, transfer up to 25,000 of such Cognizant Shares per five
trading day period ("Week") (on a cumulative basis), but in any event, not more
than 100,000 of such Cognizant Shares in any Week, until the first anniversary
of the Effective Date, upon which the restrictions in this Section 4.7(b) will
terminate.
(c) APAC shall promptly take any action required to permit the APAC
Shares to be traded on the NASDAQ National Market (as long as the APAC Common
Shares are traded thereon).
4.8 REGISTRATION OF RESALES OF SHARES. (a) Within thirty (30) days
following the Effective Date, APAC shall (i) cause to be filed with the SEC, a
registration statement (the "Registration Statement") under the Securities Act
of 1933 relating to the resale of the APAC Shares, (ii) use their reasonable
best efforts to cause such Registration Statement to become effective, (iii)
take any action (other than qualifying to do business in any jurisdiction in
which it is not now qualified) required to be taken under any applicable state
securities laws in connection with the resale of the APAC Shares; and (iv)
prepare all documents, notices and announcements required in connection with the
resale of the APAC Shares, including the prospectus included in the Registration
Statement (the "Prospectus"), and cause the Prospectus to be mailed to and
otherwise made available to the shareholders of Paragren. The Company shall
cause the Registration Statement relating to the resale of the Shares to be
continuously effective for a period of not less than two years.
(b) All expenses incurred by APAC in effecting the registration for
resale of APAC Shares including, without limitation, all registration and filing
fees with any governmental entity, printing expenses, and fees and disbursements
of counsel for APAC, shall be paid by and be the sole obligation of APAC. All
selling commissions applicable to sales of APAC Shares and all fees and
disbursements of counsel in connection therewith shall be paid by and be the
sole obligation of the shareholders of Paragren.
(c) The shareholders of Paragren shall timely furnish such
information as may reasonably be requested by APAC (including without limitation
a plan of distribution) for inclusion in, or necessary to the preparation of,
the Registration Statement or other filing ancillary thereto. The information
supplied by the shareholders of Paragren, for inclusion in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements in the light of the
circumstances under which they are made, not misleading.
(d) The Registration Statement and the Prospectus at the time the
Registration Statement becomes effective, shall not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, that APAC shall not be responsible for any
information provided by the shareholders of Paragren for inclusion in the
Registration Statement.
4.9 SHAREHOLDER AND DIRECTOR VOTE. Each Shareholder, in executing this
Agreement, consents as director and shareholder (as applicable) of Paragren, to
the Merger and other transactions contemplated hereby, waives notice of any
meeting in connection therewith, and hereby releases and waives all rights with
respect to the transactions contemplated hereby under any agreements relating to
the sale, purchase or voting of stock of Paragren.
4.10 TAX TREATMENT. APAC, Paragren and the Shareholders shall use their
respective reasonable best efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a)(2)(E) of the Code. All
parties hereto agree to file copies of the plan of merger for the Merger with
their respective Federal income tax returns for the year in which the Merger is
effective, and to comply with the reporting requirements of Treasury Regulation
1-368.3.
4.11 APPOINTMENT OF SELLER REPRESENTATIVE. Each of Paragren and the
Shareholders hereby appoints Magid Abraham and a designee appointed by
Cognizant, initially Greg Vereschagin, acting jointly, (the "Seller
Representatives") the attorneys-in-fact of such person, with full power and
authority, including power of substitution, acting in the name of and for and on
behalf of such person to amend or waive any provision of this Agreement, to
terminate this Agreement pursuant to the provisions hereof, and to take all
other action under or related to this Agreement, which in their discretion, they
may consider necessary or proper to effectuate the transactions contemplated
hereunder or thereunder and to resolve any dispute with APAC over any aspect of
this Agreement and on behalf of such person to enter into any agreement to
effectuate any of the foregoing which shall have the effect of binding such
person as if such person had personally entered into such an agreement;
provided, however, that all actions taken or decisions made by the Seller
Representatives on behalf of Paragren or the Shareholders shall be taken or made
in a manner which is ratable and equitable amongst all of them. This
appointment and power of attorney shall be deemed as coupled with an interest
and all authority conferred hereby shall be irrevocable and shall not be subject
to termination by operation of law, whether by the death or incapacity or
liquidation or dissolution of Paragren or any Shareholder or the occurrence of
any other event or events. The Seller Representatives may not terminate this
power of attorney with respect to Paragren or Shareholder, or such person's
successors or assigns without the consent of APAC. Paragren and the
Shareholders agree to hold the Seller Representatives harmless from any and all
loss, damage or liability and expenses (including legal fees) which such persons
may sustain as a result of any action taken in good faith by the Seller
Representatives.
4.12 NEW APAC OPTIONS. APAC shall make available for grant, prior to
December 31, 1998, to employees of Paragren, other than Magid Abraham and Linda
Boland, as identified by senior management of Paragren, options to purchase
250,000 APAC Common Shares, on APAC's customary terms. Such options will be
granted in part to satisfy bonus and commission commitments under Paragren's
1997 compensation arrangements, and any such options will be credited toward the
250,000 quantity.
ARTICLE 5
SECURITIES LAWS MATTERS
The parties agree that the APAC Shares will not be sold or otherwise
disposed of, except (a) pursuant to an exemption from the registration
requirements under the Securities Act, or (b) pursuant to an effective
registration statement filed by APAC with the SEC under the Securities Act. The
certificates for such shares will bear a legend to such effect.
ARTICLE 6
INDEMNIFICATION
6.1 AGREEMENT BY THE SHAREHOLDERS FOR INDEMNIFICATION. Each Shareholder
agrees, jointly and severally, to indemnify and hold APAC and its shareholders,
directors, officers, employees, attorneys, agents and Affiliates harmless from
and against, and APAC shall be entitled to recover by set off against the Held
Back Shares in accordance with Section 6.3, the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including, without
limitation, related counsel and paralegal fees and expenses, but excluding any
consequential damages or punitive damages suffered by APAC which do not reflect
amounts paid on third party claims) incurred or suffered by APAC, net of any
related insurance recoveries, arising out of, relating to, or resulting from (i)
any breach of a representation or warranty made by any of Paragren or the
Shareholders in or pursuant to this Agreement, (ii) any breach of the covenants
or agreements made by Paragren or the Shareholders in or pursuant to this
Agreement, or (iii) any inaccuracy in any certificate, instrument or other
document delivered by Paragren or the Shareholders as required by this Agreement
(collectively, "Indemnifiable Damages").
6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Paragren and the Shareholders in this
Agreement or pursuant hereto shall survive for a period of two years following
the Closing Date except that the representations and warranties of Paragren and
the Shareholders in Section 3.20 shall survive until expiration of the
applicable statute of limitations. No claim for the recovery of Indemnifiable
Damages may be asserted by APAC after such applicable period has expired;
provided, however, that claims for Indemnifiable Damages first asserted within
such period shall not thereafter be barred. Notwithstanding any knowledge of
facts determined or determinable by any party by investigation, each party shall
have the right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement.
Each of the representations and warranties of APAC shall survive for a period of
two years following the Closing Date.
6.3 SECURITY FOR INDEMNIFICATION OBLIGATIONS. As security for the
indemnification obligations contained in this Article 6, at the Closing, APAC
shall deliver to the Escrow Agent certificates representing the Held Back Shares
issued pursuant to this Agreement, to be held in accordance with the Escrow
Agreement.
6.4 VOTING OF AND DIVIDENDS ON THE HELD BACK SHARES. All Held Back Shares
held by the Escrow Agent under the Escrow Agreement shall be deemed to be owned
by the Shareholders and the Shareholder Representatives shall be entitled to
vote the Held Back Shares; provided, however, that there shall also be deposited
under the Escrow Agreement, all APAC Common Shares or other assets issued to or
paid upon Held Back Shares as a result of any stock or other dividend or
distribution or stock split with respect to the Held Back Shares.
6.5 INDEMNITY BASKET AND LIMITATION. APAC shall not have any right to
indemnification under Section 6.1 until the aggregate Indemnifiable Damages are
at least $500,000, but may then recover all Indemnifiable Damages in excess of
$100,000. Absent fraud on the part of Paragren or the Shareholders, APAC will
seek recovery of Indemnifiable Damages pursuant to Section 6.1 only from the
Held Back Shares (and any distributions thereon and proceeds therefrom) and
shall not bring any separate claim or action against the Shareholders; provided,
however, that this sentence shall no in any way restrict the right of APAC to
enforce Sections 4.1, 4.5, 4.6 or 4.7 or to recover damages from any person for
its breach thereof.
6.6 REMEDIES CUMULATIVE. Subject to Section 6.5, the remedies provided
herein shall be cumulative and shall not preclude APAC from asserting any other
right, or seeking any other remedies against any Shareholder. Each Shareholder
hereby waives any right to contribution or any other similar right he may have
against Paragren as a result of his agreement to indemnify in this Article 6.
ARTICLE 7
DEFINITIONS
7.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, license, instrument, purchase and sales order, commitment,
undertaking, obligation, whether written or oral, express or implied.
"Environmental Costs" shall mean any and all expenses, costs, damages,
liabilities, or obligations (including, without limitation, fees and
expenses of counsel) incurred by, under or pursuant to any Environmental
Laws or related to the Discharge, Handling, presence or clean up of
Hazardous Substances arising as a result of events occurring or facts or
circumstances arising or existing on or prior to the Closing Date (whether
or not in the ordinary course of business).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement any lease in the nature thereof,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code or comparable law or any jurisdiction in connection
with such mortgage, pledge, security interest, encumbrance, lien or
charge), other than statutory liens for taxes and materialmen, warehousemen
and landlord's payments incurred in the ordinary course of business and not
yet due.
"Litigation Costs" shall mean any and all reasonable expenses, costs,
damages, liabilities, or obligations (including, without limitation, fees
and expenses of counsel) incurred in connection with any action, suit, or
other legal or administrative proceeding or governmental investigation
arising as a result of events occurring or facts or circumstances arising
or existing on or prior to the Closing Date (whether or not in the ordinary
course of business).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, estate, trust,
unincorporated association, joint venture, Governmental Authority or other
entity, of whatever nature.
"Register," "registered" and "registration" refer to a registration of
the offering and sale of securities effected by preparing and filing a
registration statement in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such registration
statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Tax.
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, use, franchise, intangible,
payroll, withholding, social security and unemployment taxes imposed by any
federal, state, local or foreign government agency, and any interest or
penalties related thereto.
"Transaction Fees" means all legal, accounting, tax, consulting and
financial advisory and other fees and expenses, including any transfer
taxes, fees and expenses and the cost of title insurance and filing fees in
connection with the HSR Act, incurred, paid, or payable by Paragren in
connection with the transactions contemplated hereby, and not otherwise
paid by the Shareholders.
7.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with this
Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the masculine
and feminine, and the masculine gender shall also denote the neuter and
feminine, where the context so permits.
ARTICLE 8
GENERAL PROVISIONS
8.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage prepaid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage
prepaid) or guaranteed overnight delivery, to the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which any party
shall designate in writing to the other parties):
(a) IF TO APAC TO:
APAC TeleServices. Inc.
One Parkway North Center, Suite 510
Deerfield, IL 60015
Attn: Marc Simon
Fax: (847) 374-3215
With a copy to:
Helen R. Friedli, P.C.
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Fax: (312)984-3669
(b) IF TO PARAGREN AND/OR THE SHAREHOLDERS TO:
Mr. Magid Abraham
9898 Windy Hollow Road
Great Falls, VA 22066
Cognizant Corporation
200 Nayala Farms
Westport, CT 06880
Attention: Mr. Greg Vereschagin
Fax:(203) 222-4392
With copies to:
Barry Shkolnik, Esq.
Neal Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Fax: (312) 269-1747
Frederic J. Marx, Esq.
Hemenway & Barnes
60 State Street
Boston, Massachussets 02109
Fax: (617) 227-0781
8.2 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matters and supersedes all prior agreements and understanding (oral or
written) between or among the parties with respect to such subject matter. The
Schedules and Exhibits constitute a part hereof as though set forth in full
above.
8.3 EXPENSES. The Shareholders shall pay the fees and expenses of the
Shareholders and Paragren (including, without limitation, their counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby, and APAC shall pay APAC's fees and expenses (including, without
limitation, its counsel fees and the reasonable fees described on Schedule 3.29)
incurred in connection with this Agreement or any transaction contemplated
hereby.
8.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts.
8.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned or delegated by Paragren or the Shareholders
without the prior written consent of APAC. APAC may assign all or any portion
of its rights hereunder to one or more of its wholly owned subsidiaries.
8.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
8.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever, the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation". Time shall be of the essence in this Agreement.
8.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Illinois applicable to contracts executed and to be wholly performed with such
State.
8.9 DISPUTE RESOLUTION. (a) The parties shall attempt in good faith to
resolve any disputes or claims arising out of or relating to this Agreement
(including any dispute under Article 6), promptly by negotiations between
representatives who have the authority to settle the controversy. Any party may
give the other party written notice of any dispute not resolved in the normal
course of business. Within 20 days after delivery of said notice, such
executives or representatives of the parties shall meet at a mutually acceptable
time and place and thereafter as often as they reasonably deem necessary, to
exchange relevant information and to attempt to resolve the dispute. If the
matter has not been resolved within 30 days of the original notice, or if the
parties fail to meet within 20 days, any party may initiate arbitration of the
controversy or claim as provided in Section 8.9(b) by delivery of notice thereof
to the other party in the dispute.
(b) If a dispute is not resolved pursuant to Section 8.9(a), the
dispute shall then be submitted for final settlement by arbitration conducted in
accordance with the then current JAMS/Endispute Comprehensive Arbitration Rules
and Procedures except as listed within this section by a sole and independent
arbitrator who shall apply Illinois law, excluding its conflicts rules, and base
his or her decision solely on presentations by the parties and not by
independent review. The arbitrator shall be selected by agreement of the
parties; provided, that if the parties fail to agree upon an arbitrator within
ten (10) days of the notice of arbitration described above, any party may
petition JAMS for appointment of the arbitrator, which appointment shall be made
within ten (10) days of the petition therefor. The arbitration shall be
governed by the United States Arbitration Act and judgment upon the award by the
arbitration may be entered by any court having jurisdiction thereof.
The arbitrator shall hold a hearing within 60 days of his/her appointment
and shall render a written decision which contains a detail recital of the
arbitrator's reasoning within 30 days of the conclusion of such hearing. In
preparation for its presentation at such hearing, each party may depose a
maximum of two officers, directors, employees or representatives of the adverse
party. Each such deposition shall last no longer than six (6) hours, and shall
not be adjourned without the express written consent of all parties. Each party
must submit, to all parties and to the arbitrator, all documents that it wishes
to use during the hearing, at least five (5) business days prior to the
commencement of the hearing. In addition, each party may file with the
arbitrator one brief not in excess of 30 pages, excluding exhibits. Each party
shall have no more than eight hours to present its position to the arbitrator.
The hearing shall not have more than three (3) days in length, and once
commenced it shall not be adjourned without the express written consent of both
parties. Any decision made by such an arbitrator within the scope of his or her
authority shall be binding upon the parties. The costs of such arbitrator will
be borne equally between the parties, but all other costs involved in the
arbitration shall be borne separately by the parties. Each party agrees to
enter into an agreement providing reasonable protection to the arbitrator.
8.10 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions, and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek the advice of counsel before executing this
Agreement; (d) said party has acted voluntarily and of its own free will in
executing this Agreement; (e) said party is not acting under duress, whether
economic or physical, in executing this Agreement; and (f) this Agreement is the
result of arm's length negotiations conducted by and among the parties and their
respective counsel.
IN WITNESS WHEREOF, the parties have entered into this Merger Agreement as
of August __, 1997.
APAC TELESERVICES, INC. PARAGREN TECHNOLOGIES, INC.
BY: BY:
Title: Title:
PTI MERGER CORP.
BY:
Title:
Magid Abraham Linda Boland
COGNIZANT CORPORATION
BY:
Title:
APAC OMITTED SCHEDULES
1.3 Consumer Ratios
1.5 Listing of Officers & Directors
3.1 Foreign Qualifications
3.4 Capitalization
3.5 List of Shareholders
3.6 Required Consents
3.9(b) Exceptions to GAAP
3.10 Employment Arrangements
3.19(Q) Accounts Payable
3.11 Abraham Debt
3.12 Litigation
3.13 Environmental
3.14 Leases
3.15 Title Exceptions
3.16 Compliance with Laws
3.18 Employees
3.19 Employee Plans
3.20 Taxes
3.21 Insurance
3.23 Permits
3.24 Relationships with Customers & Supplier
3.25 Intellectual Property
3.26 Contracts
3.27 Software Licenses
3.29 Brokers Commission
Exhibits A, B, C and D - Employment Agreements
Exhibit E - Escrow Agreement
