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EXHIBIT 2.0
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October ,
1996, by and among NATIONAL TECHTEAM, INC., a Delaware corporation ("Parent"),
TECHTEAM TRAINING, INC., a Delaware corporation, a direct wholly-owned
subsidiary of Parent ("Acquisition"), WEBCENTRIC COMMUNICATIONS, INC., a
Nebraska corporation (the "Company"), and DANIEL L. KEMP ("Shareholders'
Representative") acting for and on behalf of the shareholders of the Company
(collectively, the "Shareholders").
The parties desire to provide for the merger of the Company with and into
Acquisition upon the terms and subject to the conditions of this Agreement.
In consideration of the respective representations, warranties, covenants,
agreements and indemnities, the parties agree as follows:
ARTICLE 1. THE MERGER
1.1 The Merger. Upon terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DCL"), at the Effective Time (as defined in Section 1.2) the
Company and Acquisition shall consummate a merger (the "Merger") in which;
1.1.1 the Company shall be merged within and into Acquisition and
the separate existence of the Company shall thereupon cease,
1.1.2 Acquisition shall be the surviving corporation in the
Merger and shall continue to be governed by the DCL, and
1.1.3 the separate corporate existence of Acquisition with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, and the Merger shall have all the effects specified in the DCL.
1.2 Effective Time. The Company and Acquisition shall cause
Certificate of Merger to be filed with the Delaware and Nebraska Secretaries of
State. The Certificate of Merger shall be filed as soon as practicable after
the receipt by the Company of the Shareholders' approval of the Merger pursuant
to Section 8.8. The Merger shall become effective January 2, 1997, the date on
which the Certificate of Merger has been duly filed and shall become effective
with the Delaware Secretary of State. The time at which the Merger becomes
effective is referred to as the "Effective Time". Acquisition, as the surviving
corporation, may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf of
either
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the Company or Acquisition in order to carry out and effectuate the
transactions contemplated by this Agreement.
1.3 The Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Parent at such date and time as may be mutually
agreeable to Parent and the Shareholders' Representative (but in no event later
than January 15, 1997) following the satisfaction or waiver of all conditions to
the obligations of the parties to consummate the transactions contemplated
(other than conditions with respect to actions the respective parties will take
at the Closing itself) or at such other place, time and date as the parties may
mutually determine.
1.4 Actions at the Effective Time. At the Effective Time;
1.4.1 the Shareholders' Representative will deliver to Parent and
Acquisition the various certificates, instruments, and documents referred to in
Section 11.1,
1.4.2 Parent and Acquisition will deliver to the Shareholders'
Representative the various certificates, instruments, and documents referred to
in Section 11.2,
1.4.3 the Company and Acquisition will file with the Delaware
Secretary of State the Certificate of Merger, and
1.4.4 Parent will deliver the Stock Merger Exchange Fund (as defined
in Section 2.2) to the Shareholders' Representative in the manner provided in
Section 2.2.
ARTICLE 2. EFFECT ON CAPITAL STOCK; PAYMENT
2.1 Effect on Capital Stock; Payment of Share Consideration. Upon
the Effective Time, by virtue of the Merger and without any action on the part
of Parent, Acquisition, the Company or the holders of any of the following
securities, the following shall occur:
2.1.1 Conversion of Company Shares. Each share of the common
stock, $0.001 par value, of the Company ("Company Share") issued and outstanding
immediately prior to the Effective Time, except those Company Shares owned by
Parent or Acquisition, shall, by reason of the merger and without any action on
the part of the holder thereof, be converted into a cash payment (subject to any
required withholding) or the right to receive that number of shares of common
stock (rounded to the nearest whole number) of Parent ("Parent Common Stock")
converted on the basis of
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$2.00/share for Company Shares and $23.00/share for Parent Common Stock in
accordance with Schedule 2.1.1.
2.1.2 Conversion of Capital Stock of Acquisition. Each share of
common, $0.001 par value per share, of Acquisition issued and outstanding
immediately prior to the Effective Time shall, by reason of the Merger and
without any action on the part of the Parent, be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock,
$0.001 par value per share, of Parent.
2.1.3 Cancellation. Each Company Share that is held in the
treasury of the Company shall automatically be canceled and retired and cease to
exist and no consideration shall be paid or delivered in exchange therefor.
2.2 Procedure for Payment.
2.2.1 At the Effective Time: Parent will have available a
sufficient number of certificates representing Parent Common Stock required to
effect the delivery of the aggregate Cash and Share Consideration required to be
issued pursuant to Section 2.1 (the certificates representing Parent Common
Stock comprising such aggregate Share Consideration being the "Stock Merger
Exchange Fund"). Parent shall deliver the Parent Common Stock contemplated to
be issued pursuant to Section 2.1 out of the Stock Merger Exchange Fund, less
the amount set forth in Section 8.7 (the "Escrow Fund").
2.2.2 At Closing, the Shareholders shall deliver to Acquisition a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Company Shares (the "Certificates"). Upon surrender of
Certificates for cancellation to Acquisition and any other required documents,
the holder of such Certificates shall be entitled to receive the Share
Consideration for each of the Company Shares represented by such Certificates,
and the Certificates so surrendered shall forthwith be cancelled. Until so
surrendered, such Certificates shall represent solely the right to receive the
Share Consideration with respect to each of the Company Shares represented
thereby. No dividends or other distributions that are declared after the
Effective Time on Parent Common Stock and payable to the holders of record
thereof after the Effective Time will be paid to persons entitled by the reason
of the Merger to receive Parent Common Stock until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the person in whose
name the Parent Common Stock are issued any dividends or other distributions
having a record date after the Effective Time and payable with respect to such
Parent Common Stock between the Effective Time and the time of such surrender.
After such surrender there shall be paid to the person in whose name and Parent
Common Stock are issued any dividends or other distributions on such Parent
Common Stock which shall have a record date after the Effective Time and prior
to such surrender and a payment date after such surrender and such payment shall
be made on
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such payment date. In no event shall the persons entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any certificate representing Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to Acquisition any transfer or other taxes required by
reason of the issuance of certificates for such Parent Common Stock in a name
other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of Acquisition that such tax has been paid
or is not applicable. Notwithstanding the foregoing, no party shall be liable
to a holder of Company Shares for any Parent Common Stock or dividends thereon,
or, in accordance with Section 2.3, cash in lieu of fractional Parent Common
Stock, delivered to a public official pursuant to applicable escheat law.
2.3 Fractional Company Shares. No fractional shares of Parent Common
Stock shall be issued in the Merger.
ARTICLE 3. CERTAIN EFFECTS OF THE MERGER
3.1 Articles of Incorporation. The Articles of Incorporation of
Acquisition, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, without change or
amendment until further amended in accordance with the provisions thereof and
applicable law.
3.2 By-Laws. The By-Laws of Acquisition, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation,
without change or amendment until further amended in accordance with the
provisions thereof and applicable law.
3.3 Directors and Officers. The officers of the Company shall, after
the Effective Time, be the officers of the Surviving Corporation. The directors
of the Surviving Corporation shall be the directors of Acquisition (appointed by
the Parent prior to the Effective Time).
3.4 No Further Ownership Rights in Company Shares. From and after the
Effective Time, the holders of shares of Company Shares which were outstanding
immediately prior to the Effective Time, other than the Parent or Acquisition,
shall cease to have any rights with respect to such shares of Company Shares
except as otherwise provided in this Agreement or by applicable law. All Cash
or Share Consideration paid upon the surrender of Company Shares in accordance
with the terms hereof shall be
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deemed to have been issued in full satisfaction of all rights pertaining to
Company Shares.
3.5 Authorized Capital Stock of the Surviving Corporation. The
authorized capital stock of Acquisition at the Effective Time shall consist of
1,000 Company Shares, with such preferences, voting powers, qualifications and
special rights as are described in its Articles of Incorporation, as amended.
The issued and outstanding capital stock of the Surviving Corporation at the
Effective Time shall consist of 1,000 Company Shares.
3.6 Effects of the Merger. When the Merger becomes effective, Company
shall be merged into Acquisition, Acquisition shall have the powers and status
of a surviving corporation under the DCL, and the separate existence of Company
shall cease.
[ARTICLE 4 - RESERVED]
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
The Shareholders jointly and severally make the following representations
and warranties to Parent and Acquisition.
5.1 Corporate Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nebraska and has all requisite corporate power and authority to own,
operate or lease the properties it purports to own, operate or lease and to
carry on its business as presently conducted. The Company has delivered to
Parent complete and correct copies of its Articles of Incorporation and By-Laws.
The Company is duly qualified, licensed or registered as a foreign corporation
to do business, and is in good standing in each of the jurisdictions in which
the nature of the business is now being conducted by it or the property owned or
leased by it makes such qualification, licensing or registration necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not reasonably be expected to have a Material Adverse Effect (any
change, effect or circumstance that, individually or when taken together with
all other like changes, effects or circumstances that have occurred prior to the
date of determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be, taken as a whole, materially adverse to the business,
assets (including intangible assets) financial condition or results of
operations of the Company or on the ability of the Company to perform its
obligations under this Agreement). Except as set forth in Schedule 5.1, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or any similar interest in, any corporation, partnership, joint venture or other
business association or entity.
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5.2 Capitalization of the Company. The authorized capital stock of the
Company consists of 10,000,000 shares of common stock, $.001 par-value, of which
4,510,435 shares have been duly authorized, validly issued and are fully paid
and nonassessable and owned by the Shareholders as set forth in Schedule 2.1.1,
free and clear of all liens, encumbrances, restrictions and claims of any kind
except as set forth in that Schedule. Except as set forth in Schedule 2.1.1,
there are no preemptive or similar rights on the part of any holder of any class
of securities of the Company, and there are no options, warrants, conversion or
other rights, agreements or commitments of any kind obligating the Company,
contingently or otherwise, to issue or sell any shares of its capital stock of
any class or any securities convertible into or exchangeable for any such
shares. All such shares were issued in accordance, in all material respects,
with the federal, Nebraska (and other applicable states) securities laws and
regulations.
5.3 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations and to consummate the transactions contemplated. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent, constitutes a legal, valid and
binding obligation of the Seller.
5.4 No Conflict. Except as set forth in Schedule 5.4, the execution
and delivery of this Agreement by the Company does not, and the performance of
this Agreement by the Company will not, (i) conflict with or violate the
Articles of Incorporation and By-Laws of the Company, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or by which its or any of its properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default), or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company pursuant to, any contract, agreement, license, permit, or other
instrument or obligation to which the Company is a party or by which the Company
or its properties is bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
5.5 Financial Statements. The unaudited financial statements of the
Company for the period ending September 30, 1996, attached to Schedule 5.5, were
taken from
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its management accounts, and fairly present the Company's financial condition
and reflect in all material respects the results of the Company for the periods
presented, and were prepared in accordance with GAAP and the Company's
historical practices, except for normal year-end adjustments and the absence of
footnotes and other presentation items so as to fairly present the Company's
financial condition and the results of its operations.
5.6 No Undisclosed Liabilities. The Company has no material liabilities or
obligations, whether accrued, absolute, contingent or otherwise except;
5.6.1 to the extent reflected or reserved for on the Financial
Statements,
5.6.2 disclosed in Schedule 5.6.2 or in the other Schedules,
5.6.3 liabilities or obligations incurred in connection with this
Agreement, or
5.6.4 where they constitute commitments under contracts entered
into in the ordinary course of business and are set forth in Schedule 5.6.4.
5.7 Absence of Certain Changes. Since August 1, 1996, except as set
forth in Schedule 5.7, the Company has conducted its business in the ordinary
course and there has not occurred with respect to the Company:
5.7.1 any Material Adverse Effect;
5.7.2 any payment, discharge or satisfaction of any liabilities or
obligations (whether accrued, absolute, contingent or otherwise) in excess of
$1,000, other than the payment, discharge or satisfaction, in the ordinary
course of business, of liabilities or obligations incurred in the ordinary
course of business;
5.7.3 except in the ordinary course of business, any assets
(whether real, personal or mixed, tangible or intangible) becoming subject to
any mortgage, pledge, lien, security interest, encumbrance, restriction or
charge of any kind;
5.7.4 any cancellation or waiver of any claims or rights of value;
5.7.5 any sale, lease, transfer, assignment, distribution or other
disposition of any material assets, except in the ordinary course of business,
or any disposal of any material assets for any amount to affiliates;
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5.7.6 any disposal or lapse of any rights in, to or for the use of
any patent, trademark, service mark, trade name, brand name, or copyright, or
any disclosure to any person not an employee, or other disposition of, any
customer lists;
5.7.7 any increase in the base compensation or other payment to any
director, officer or employee, whether now or hereafter payable or granted
(other than increases in base compensation in the ordinary course consistent in
timing and amount with past practices), or entry into or variation of the terms
of any employment or incentive agreement with any such person or any general
increase in the base compensation or other payment to continuing employees not
in the ordinary course consistent in timing and amount with past practices;
5.7.8 any capital expenditure or commitment for additions to
property, plant or equipment, exceeding $5,000 individually or $15,000 in the
aggregate, or lease agreement to lease any assets which, if purchased, would be
reflected in the property, plant or equipment accounts;
5.7.9 any material change in any method of accounting or keeping
their respective books of account or accounting practices;
5.7.10 any material damage, destruction or loss of any asset,
whether or not covered by insurance;
5.7.11 any elimination of any reserves established on their
respective books or any changing of the method of accrual unless there is any
change of significant facts or circumstances pertaining to any reserves which
would justify their elimination;
5.7.12 any material obligation or liability, including, without
limitation, any liability for nonperformance or termination of any contract;
5.7.13 any authorization for issuance, delivery or sale of any
equity securities of the Company, or alteration of the terms of any outstanding
securities issued by it; or
5.7.14 the declaration or payment of any dividend or other
distribution (whether in cash, stock or property or otherwise) in respect of any
Company Shares, or the redemption, purchase or other acquisition of any Company
Shares, any securities convertible into or exchangeable for any Company Shares,
or any options, warrants or other rights to purchase or subscribe to any of the
foregoing (and no dividends are or will be owed to any holder of Company
Shares).
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5.8 Insurance. Schedule 5.8 sets forth a description of the policies
of insurance currently in effect covering the assets and operations of the
Company together with complete and correct information with respect to coverage,
insurers, premiums, expiration dates, and deductibles in respect of such
policies. Except as set forth in Schedule 5.8, there are no claims pending or,
to the Shareholders' best knowledge, threatened, under any of said policies, or
disputes with insurers, and all premiums due and payable thereunder have been
paid, and all such policies are in full force and effect in accordance with
their terms. The Company has not been denied insurance or suffered the
cancellation of any insurance with respect to the Company in the past five
years.
5.9 Litigation. Except as set forth in Schedule 5.9, there is no
claim, action, suit, proceeding, or investigation pending or, to the best
knowledge of the Company or the Shareholders, threatened against the Company or
the directors, officers, agents or employees of the Company (in their capacity
as such), or any properties or rights of the Company, before any court
arbitrator or administrative, governmental or regulatory authority, that would
reasonably be expected to have a Material Adverse Effect. Except as set forth
in Schedule 5.9, there are no orders, writs, injunctions or decrees currently in
force against the Company or the directors, officers, agents or employees of the
Company (in their capacity as such) with respect to the conduct of the Company's
business.
5.10 Compliance with Laws; Licenses and Permits. Except as disclosed in
Schedule 5.10, the Company is not in conflict with, or in default or violation
of, any law, rule, regulation, order, judgment or decree applicable to the
Company or by which its properties are bound or affected, except for any such
conflicts, defaults or violations which would not reasonably be expected to have
a Material Adverse Effect. Except as set forth in Schedule 5.10, the Company
owns, holds or possesses in its own name, all licenses (including, specifically,
a FCC214 license - if needed), permits, approvals and other governmental
authorizations (federal, state and local) (collectively, "Licenses and Permits")
to own or lease, operate and use its assets and properties and to carry on and
conduct its business and operations as presently conducted, except for such
Licenses and Permits, the absence of which would not have a Material Adverse
Effect. All Licenses and Permits are listed on Schedule 5.10. The Company is
not in violation of or default under any Licenses or Permits in any case which
could reasonably be expected individually or in the aggregate to have a Material
Adverse Effect or which could reasonably be expected to interfere materially
with the consummation of the transactions contemplated herein.
5.11 Tax Matters. Except as set forth on Schedule 5.11, the Company has
(i) timely filed or will file when due (or has filed and has paid all assessed
penalties and interest), including extensions thereof, all federal, foreign,
state and local tax returns
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required to be filed by or with respect to the Company (including those relating
to any sales or use tax) prior to the Effective Time; and (ii) paid in full or
accrued on the Financial Statements all taxes, and any interest or penalties
with respect thereto for all period ending on or prior to the Effective Time.
Except as set forth on Schedule 5.11 the Company is not a party to any pending
action or proceeding, nor, to the best knowledge of the Shareholders, is any
such action or proceeding threatened by any governmental authority, for the
assessment or collection of any taxes, and no claim for the assessment or
collection of any taxes has been asserted against the Company, which has not
been settled with all amounts due having been paid or contested in good faith.
The Company has withheld, and will withhold prior to the Effective Time, proper
and accurate amounts from its employees in compliance in all material respects
with all withholding and similar provisions of any and all applicable federal,
foreign, state, and local laws, statutes, codes, ordinances, rules and
regulations. The Company has filed proper and accurate federal, foreign, state
and local tax returns and estimates with respect to employee income tax
withholding, social security taxes and unemployment insurance premiums for all
years and periods (and portions thereof) ending on or prior to the Effective
Time for which tax returns were due, and any and all amounts shown on such tax
returns to be due and payable have been paid in full.
5.12 Brokers, Finders. The Company has not retained any broker or
finder in connection with the transactions contemplated nor is obligated nor has
agreed to pay any brokerage or finder's commissions, fee or similar
compensation.
5.13 Real Property; Leased Premises. The Company does not have any
ownership interests in any real property. Schedule 5.13 sets forth a complete
and correct list of all leases pursuant to which the Company leases real
property as lessee or lessor ("Leased Premised"). The Company has or will have
at the Effective Time valid leasehold interests in all Leased Premises, in each
case free and clear of all mortgages, liens, charges, encumbrances, easements,
security interests or title imperfections other than (i) those listed in
Schedule 5.13, (ii) liens for current taxes, assessments or governmental charges
not yet due and delinquent, (iii) those which do not, individually or in the
aggregate, materially interfere with the use of the real properties or
materially detract from their value, (iv) liens of mechanics, materialmen,
laborers, warehousemen, carriers and other similar common law or statutory liens
arising in the ordinary course of business which are not yet due or payable or,
if due and payable, have been adequately bonded or are being contested in good
faith, and (v) zoning, entitlement and other land use and environmental
regulations by governmental agencies. The Company enjoys peaceful and
undisturbed possession under all real property leases listed in Schedule 5.13
(the "Real Property Leases"). The Company is not in violation of or in
noncompliance with any covenant, condition, restriction, order or easement
affecting the Leased Premises where such violation or noncompliance would have a
Material Adverse Effect. Each of the buildings, improvements and structures
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located upon any of the Leased Premises and their operating systems are in
reasonably good repair and operating condition so as to be adequate for the
operation of the business of the Company, except as would not reasonably be
expected to have a Material Adverse Effect.
5.14 Material Contracts. Schedule 5.14 sets forth a complete and
correct list of all of the Material Contracts to which the Company is a party as
of the date of this Agreement. As used in this Agreement, "Material Contracts"
means (a) all leases or other agreements under which the Company is lessee of,
or holds or operates, any tangible personal property owned by a third party and
used in the business of the Company and which entails annual payments, in the
case of any such lease or agreement, in excess of $10,000, (b) all contracts and
agreements to which the Company is a party and which are (i) outstanding
contracts with its officers, employees, agents, consultants, advisors, salesmen,
sales representatives, distributors, sales agents or dealers of the Company
other than contracts which by their terms are cancelable by the Company with
notice of not more than 30 days and without cancellation penalties or severance
payments, in the case of any such contract, in excess of $5,000, or do not
involve an amount in excess of $10,000 on an annual basis, and (ii)
profit-sharing, bonus, retirement, stock option or employee benefit plans or
other similar plans or arrangements of any of the Company to the extent not
included in any other Schedule, (c) all mortgages, security agreements, pledges,
notes, loan agreements or guarantees relating to the Company, (d) all customer
contracts relating to the business of the Company which are expected to result
in a loss to the Company, and (e) all customer or vendor contracts relating to
the business of the Company which involve purchases or payments in an amount in
excess of $5,000, which were not entered into in the ordinary course of
business. The Company has furnished or will furnish to Parent true and correct
copies of all Material Contracts prior to the Effective Time. All Material
Contracts and all other contracts and agreements of the Company (collectively,
the "Commitments") are legal, valid and binding obligations of the Company
enforceable (except as enforcement may be limited by equitable principles
limiting the right to obtain specific performance or other equitable remedies or
by applicable bankruptcy or insolvency laws and related decisions affecting
creditors' rights generally) against the Company and, to the best knowledge of
the Shareholders, against the other party in accordance with their respective
terms, are fully transferable without the consent of any third party except as
listed on Schedule 5.14. The Shareholders, to the best of their knowledge, have
no knowledge of any default or claimed or purported or alleged default or state
of facts which, with notice or lapse of time or both, would constitute a default
on the part of any party in the performance of any obligation to be performed or
paid by any party under the Commitments, and have not received or given notice
of any default or claimed or purported or alleged default or state of facts
which, with notice or lapse of time or both, would constitute a default on the
part of any party in the performance or payments under the Commitments.
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5.15 Intellectual Property and Intellectual Property Rights.
5.15.1 Except as set forth in Schedule 5.15, the Company
solely owns or has the exclusive right to use, free and clear of any lien or
other encumbrance or restriction, all patents, trademarks (whether registered
or unregistered), service marks, trade names, service names, brand names, logos
and copyrights (collectively, "Intellectual Property Rights") owned or used by
it in the conduct of its business. Schedule 5.15 sets forth a complete and
correct list of all such Intellectual Property Rights and their respective
legal status (including whether such rights are the subject of a license).
There is no claim or demand of any person pertaining to, or any proceeding
pending or, to the best knowledge of the Company or the Shareholders,
threatened, which challenges the exclusive rights of the Company in respect of
the Intellectual Property Rights or the rights of the Company in respect of any
material trade secret owned or used by the Company in the conduct of its
business. To the best knowledge of the Company and the Shareholders, none of
the Intellectual Property Rights are being infringed upon by others or used by
others, whether or not such use constitutes infringement, or has been the
subject of dispute, whether or not resulting in litigation. Except as
disclosed in Schedule 5.15, the Company is not contractually obligated to pay
compensation to any third party in respect thereof to the use thereof or the
material covered thereby. To the knowledge of the Company, there is no and has
not been an unauthorized use, infringement or misappropriation of any of the
Intellectual Property Rights by any person, former employee or other third
party.
5.15.2 For the purpose of this Agreement, "Software" means the
computer programs known by the names as set out in Schedule 5.15, including all
versions thereof, and all related documentation, manuals, source code and
object code, program files, data files, computer-related data, field and data
definitions and relationships, data definition specifications, data models,
program and system logic, interfaces, program modules, routines, subroutines,
algorithms, program architecture, design concepts, system designs, program
structure, sequence and organization, screen displays and report layouts and
all other material related to the said computer program, all as they currently
exist and will exist at the Effective Time. The Software was written only by
the individuals (the "Developers") listed in Schedule 5.15 other than minor
components of the Software which, in the aggregate, do not compromise more than
5% of the source code for the current version of the Software:
5.15.2.1 Except as disclosed in Schedule 5.15, all
Developers, at the time they wrote the Software, were either full-time
employees of the Company employed as software programmers, or they were
contractors who assigned their intellectual property rights in the Software to
the Company pursuant to written agreements;
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5.15.2.2 The Developers have waived in writing all their
rights in the software;
5.15.2.3 Except for the third-party software ("Third
Party Programs") listed in Schedule 5.15, the Software neither contains nor
embodies nor uses nor requires any third-party software, including development
tools and utilities, and the Software, together with the Third Party Programs,
contains all materials necessary for the continued maintenance and development
of the Software;
5.15.2.4 Copies of all the license and maintenance
agreements for the Third Party Programs have been made available by the Company
to the Parent, except in respect of Third Party Programs that are shrinkwrapped
software and that are purchased off-the-shelf by the Company in order to be
passed through to its customers or be used by the Company;
5.15.2.5 Only object code versions of the Software
have been provided to those licensee customers of the Software listed in
Schedule 5.15 and no person except for such licensees have been provided with a
copy of the object code of the Software. All such customers have
nontransferable, nonexclusive, single-site licenses to use only object code
versions of the Software;
5.15.2.6 Except as disclosed in Schedule 5.15, the
source code for the current version of Software has not been delivered or made
available to any person nor under a duty of confidentiality, and the Company
has not agreed to or undertaken to or in any other way promised to provide such
source code to any person; and
5.15.2.7 Except as listed in Schedule 5.15 there are
no distributors, sales agents, representatives or any other persons, including
VARs, OEMs or resellers, who have or had rights to license the Software.
5.16 Environmental Compliance. Except as set forth in Schedule 5.16:
5.16.1 The Company is in compliance in all material respects
with all federal, state and local laws and regulations, relating to the
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air,
surface water, ground water or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or waste
(collectively, "Environmental Laws");
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5.16.2 Seller is not required to obtain any permits,
licenses, certificates or other authorizations and approvals to operate
Seller's business under any Environmental Laws;
5.16.3 There is no civil, criminal or administrative action,
investigation, or proceeding pending or, to the best knowledge of the
Shareholders, threatened against Seller relating in any way to Environmental
Laws; and
5.16.4 As of the date of this Agreement, Seller is not aware
of nor has it received notice of any past or present violations of
Environmental Laws or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or
prevent continued compliance with or which would give rise to any material
liability, or otherwise form the basis of any claim or proceeding against
Seller based on or resulting from the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the emission,
discharge or release into the environment, of any pollutant, contaminant or
hazardous or toxic material or waste which violation of claim could reasonably
be expected to have a Material Adverse Effect on the financial condition of
Seller.
5.17 Customers. Schedule 5.17 sets forth a list of all the
Company's customers (detailed, in the case of government agencies, by separate
government agency) in terms of 1996 gross revenues for the past year. There
have not been any changes in the business relationships of the Company with any
of the customers named that would constitute a Material Adverse Effect.
5.18 Books. The books of account, minute books, stock record books
and other records of the Company are complete and correct in all material
respects and have been maintained in accordance with sound business practices.
5.19 No Third-Party Approvals. Except as set forth in Schedule
5.19, no consent, approval, authorization, order, filing, registration or
qualification of or with any court, governmental authority or third person is
required to be made or obtained by the Company in connection with the execution
and delivery of this Agreement or the consummation by the Company of the
transactions contemplated.
5.20 Employee Matters.
5.20.1 There are no collective bargaining agreements or other
labor union contracts applicable to persons employed by the Company and to
the best knowledge of the Shareholders, there are no activities or proceedings
of any labor union to organize any such employees.
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5.20.2 Except to the extent set forth in Schedule 5.20, the Company
is not in violation of any applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours applicable to
it, in any case which could reasonably be expected individually or in the
aggregate to have a Material Adverse Effect, nor is the Company engaged in any
unfair labor practice.
5.20.3 Schedule 5.20 sets forth a complete and correct list of all
employee contracts, other arrangements (which involve an amount in excess of
$5,000) and "employee welfare benefit" or "employee pension benefit" plans
relating to the Company, as such plans are defined in Sections 3(l) and 3(2),
respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (collectively, the "Plans"), under which the Company, with
respect to any employee, former employee, or beneficiary of such employee has
any obligation. The Company has furnished to Parent true and correct copies or
instruments evidencing all such Plans, all as amended to date.
5.20.4 The Plans have been administered in compliance in all material
respects with their terms and with all filings, reporting, disclosure, and
other requirements of ERISA and the Code and other applicable laws.
5.20.5 Each Plan which is a group health plan (within the meaning of
Section 4980B(g)(2) of the Code) has complied at all times with the health care
continuation coverage requirements of ERISA.
5.20.6 Each Plan which is an employee pension benefit plan, is
qualified under Section 401 of the Code and the regulations issued thereunder,
and has been qualified from the date of its adoption to the Effective Time.
Each employee pensions benefit plan and its related funding instrument have
been the subject of a favorable determination letter issued by the Internal
Revenue Service holding that such plan and funding instrument are so qualified.
5.20.7 None of the Plans which is an employee welfare benefit plan
provides benefits to retirees or other former employees of the Company, and the
Company has not terminated any employee welfare benefit plan providing benefits
to retirees.
5.20.8 Neither the Company nor any of its employees, nor any plan
fiduciary of any of the Plans has engaged in any action in violation of any
"prohibited transaction" under ERISA or the Code which could subject any of the
Plans or any fiduciary of any of the Plans to any tax or penalty.
5.20.9 Other than routine claims for benefits made in the ordinary
course of business, there are no pending claims, investigations or causes of
action ("Plan
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Claims") and to the best knowledge of the Shareholders, no Plan Claims are
threatened against any Plan or fiduciary of any such Plan by any participant,
beneficiary or governmental agency with respect to the qualification or
administration of any such Plan.
5.20.10 Neither the execution and delivery of this Agreement nor the
Merger or any of the transactions contemplated will terminate or modify (or
give a third person a right to terminate or modify) the provisions or terms of
any plan, contract or arrangement (including employment agreements) listed on
Schedule 5.20 and will not constitute a triggering event that will result in
any payment (including parachute payments, severance payments or any similar
payments) becoming due to any person.
5.21 Personal Property. Schedule 5.21 sets forth a complete and
correct list of any lease (the "Personal Property Leases") pursuant to which
the Company leases personal property (as lessee or lessor). Except as set
forth in Schedule 5.21, the Company has or will have at the Effective Time (a)
good and valid title to all of its personal property listed in Schedule 5.21
(the "Personal Property") as owned by it, and (b) valid leasehold interests in
all Personal property leased under the Personal Property Leases, in each case
free and clear of all liens, encumbrances, or other security interests other
than (i) those listed in Schedule 5.21, (ii) suppliers, vendors or similar
liens arising in the ordinary course securing amounts which are not delinquent,
(iii) liens for current taxes, assessments or governmental charges not yet due
and delinquent, and (iv) those which do not, individually or in the aggregate
materially interfere with the use of the Personal Property or materially
detract from its value.
5.22 Accounts Receivable. The accounts receivable of the Company
as reflected in the Financial Statements, to the extent uncollected on the date
hereof, and the accounts receivable reflected on the books of the Company are
valid and existing and represent monies due, and the Company has made reserves
reasonably considered adequate for receivables not collectible in the ordinary
course of business, and (subject to those reserves) are subject to no refunds
or other adjustments and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof, except for such refunds, adjustments, defenses, rights
of setoff, assignments, restrictions, encumbrances or conditions as would not
reasonably be expected to have a Material Adverse Effect. Company and
Shareholders agree that any accounts receivable which are not collected within
120 days and for which a reserve was not created may be offset against the
Escrow Fund referenced in Schedule 8.7.
5.23 Bank Accounts; Safe Deposit Boxes. Schedule 5.23 sets forth a
complete and correct list of each account with any financial institution with
which the Company has any account, the identifying numbers or symbols thereof,
and the name of each person authorized to draw thereon or to have access
thereto.
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5.24 Guaranties. Except as set forth in Schedule 5.24, the Company is
not a guarantor for any liability or obligation (including indebtedness) of any
third party.
5.25 Certain Business Relationships with the Company. Except as
set forth in Schedule 5.25, to the Shareholders' best knowledge, none of the
Shareholders has been involved in any business arrangement or relationship with
the Company, and none of such Shareholders owns any asset which is used in the
business of the Company.
5.26 Restrictions on Business Activities. Except as set forth in
Schedule 5.26, to the best knowledge of the Shareholders, there is no
agreement, judgment, injunction or other order binding upon the Company which
has or could reasonably be expected to have the effect of prohibiting or
impairing any business practice of the Company or the conduct of business by
the Company as currently conducted.
5.27 Approvals, etc. All consents and approvals (corporate,
governmental or otherwise) necessary for the due authorization, execution and
delivery by the Company of this Agreement have been obtained or will be
obtained prior to the Effective Time.
5.28 Non-Foreign Status. Except as set forth on Schedule 5.28, none
of the Shareholders is a foreign person within the meaning of Section 1445(f)
of the Code.
5.29 Company Indebtedness. The Company Indebtedness as of the date
of this Agreement is as set forth in Schedule 5.29 and constitutes all of the
indebtedness for borrowed money of the Company.
5.30 Representations with Respect to Parent Common Stock. The
Shareholders represent and warrant as follows:
5.30.1 They are fully aware that some of the Parent Common
Stock to be received by them will be issued without registration (i.e., those
shares so reflected in the last column on Schedule 2.1.2 ["Restricted Shares"])
under the Securities Act of 1933, as amended (the "Securities Act"). The
Shareholders represent that they are acquiring the Restricted Shares with no
intention of reselling any of the shares in any distribution within the meaning
of the Securities Act. Specifically, but not by way of limitation, the
Shareholders represent that they are acquiring the Restricted Shares for their
own account, that no one else has or will have the beneficial interest in the
Restricted Shares, that although the Parent Common Stock may be subject to
pledge or lien as permitted by the provisions of Rule 144 and the Securities
Act, they do not intend to and will not resell the Restricted Shares unless, at
a future date, they are registered under the Securities Act or a specific
exemption from registration is available to the Shareholders in connection with
any such sale. Shareholders further understand an exemption from such
registration may be available pursuant to Rule 144 promulgated
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under the Securities Act by the Securities and Exchange Commission (the
"Commission"), but that in no event may they sell the Restricted Shares
pursuant to Rule 144 prior to the expiration of a two year period after the
Effective Time, and that any sales pursuant to Rule 144 can only be made in
full compliance with the provisions thereof.
5.30.2 Before any disposition is made by the Shareholders of the
Restricted Shares by sale, gift, pledge or otherwise, the Shareholders agree to
give the Parent written notice describing briefly the manner of such proposed
disposition. No such disposition shall be made unless and until (i) the
Shareholders have furnished to the Parent an opinion of the Shareholders'
counsel to the effect that such proposed disposition does not require
registration pursuant to the Securities Act by reason of Section 4(l) and/or
4(2) thereof and a representation and agreement of the Shareholders in form and
substance as set forth in this Agreement, and the Parent shall have advised the
Shareholders that such opinion, representation and agreement are satisfactory
to it; or (ii) the Shareholders have furnished the Parent with an opinion of
counsel to the effect that the proposed disposition complies with the
provisions of Rule 144 promulgated under the Act and such an opinion is
satisfactory to the Parent; or (iii) a registration statement or other filing
has been made covering the Restricted Shares and their proposed disposition and
has been declared effective.
5.30.3 The Shareholders understand that each certificate representing
the shares of Restricted Shares delivered to the Shareholders will bear on its
face a legend in substantially the following form:
"The shares represented by the certificate have not been registered
under the Securities Act of 1933 ("Act"). The shares have been
acquired for investment and any sale, transfer or hypothecation of the
shares or any interest therein may not be made except pursuant to an
effective registration statement under the Securities Act unless the
Company has received an opinion of counsel to the Company that such
transfer does not require registration under the Securities Act".
The Shareholders further understand that the Parent may place a stop
order pertaining to the certificates evidencing the shares of Restricted Shares
with the transfer agent to the same effect as such restrictive legend.
5.30.4 Shareholders acknowledge receipt of the Parent's Prospectus
dated September 27, 1996 relating to the public offer and sale of 3,000,000
shares of Parent Common Stock and of the Parent's Quarterly Report on Form 10-Q
for the quarter ended
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September 30, 1996. Shareholders have reviewed the Prospectus and Report on
Form 10-Q and understand the risks associated with an investment in the Parent
Common Stock as well as the lack of liquidity of the Parent Common Stock in
view of their overall investment objectives. Shareholders have received all
information concerning an investment in the Parent Common Stock that they have
requested from the Parent and have received satisfactory and complete
information concerning the business and financial condition of the Parent in
response to all inquiries in respect thereof.
5.31 Full Disclosure. No statement contained in any certificate or
schedule furnished or to be furnished by the Company to Parent or Acquisition
in, or pursuant to the provisions of, this Agreement contains or shall contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in the light of the circumstances under which it was
made, in order to make statements herein or therein not misleading.
5.32 Definition of "Best Knowledge". For purposes of this
Agreement, the term "to the best knowledge of the Shareholders" or other term
of similar import means that none of the persons identified on Schedule 5.32
has actual knowledge that the representations or warranties set forth in this
Agreement is untrue in any material respect.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent makes the following representations and warranties to the
Shareholders:
6.1 Organization and Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted.
6.2 Authority Relative to this Agreement. Parent has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated. The execution and delivery of this Agreement by Parent and the
consummation by Parent of the transactions contemplated have been duly and
validly authorized by all necessary corporate action on the part of Parent, and
no other corporate proceedings on the part of Parent are necessary to authorize
this Agreement or to consummate the transactions contemplated. This Agreement
has been duly and validly executed and delivered by Parent and, assuming the
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of Parent.
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6.3 No Conflict; Required Filings and Consents.
6.3.1 The execution and delivery of this Agreement by Parent
does not, and the performance of this Agreement by Parent will not, (i)
conflict with or violate the Articles of Incorporation or Bylaws of Parent, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or by which its properties are bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or impair Parent's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Parent pursuant to any contract, agreement, license, permit, or other
instrument or obligation to which Parent is a party or by which Parent or its
properties are bound or affected, except in any such case for any such
conflicts, violations, breaches, defaults or other occurrences that would not
reasonably be expected to prevent or delay consummation of the Merger, or
otherwise materially and adversely affect the ability of Parent to perform its
obligations under this Agreement.
6.3.2 The execution and delivery of this Agreement by Parent
does not, and the performance of this Agreement by Parent will not require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for the filing and recordation of appropriate merger or other documents as
required by the DCL, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notification,
would not reasonably be expected to prevent or delay consummation of the Merger,
or otherwise materially and adversely affect the ability of Parent to perform
its obligations under this Agreement.
6.4 Ownership of Acquisition. Acquisition is a direct, wholly-owned
subsidiary of Parent.
6.5 Full Disclosure. No statement contained in any certificate or
schedule furnished or to be furnished by Parent to the Company in, or pursuant
to the provisions of, this Agreement contains or shall contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
6.6 Brokers, Finders. Parent has not retained any broker or finder
in connection with the transactions contemplated herein and is not obligated and
has not agreed to pay any brokerage or finder's commission, fee or similar
compensation.
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6.7 Litigation. There are no actions, suits, proceedings or
investigations pending, or to Parent's best knowledge, threatened, which
question the validity of or seeks to enjoin this Agreement or of any action
taken or to be taken in connection herewith or the consummation of the
transactions contemplated or which could affect Parent's ability to perform its
obligations hereunder.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF ACQUISITION.
Acquisition makes the following representations and warranties to the
Shareholders:
7.1 Organization and Standing. Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted.
7.2 Authority Relative to this Agreement. Acquisition has all
necessary corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated have been duly authorized by the Board of Directors of Acquisition
and by Parent as its sole stockholder, and no other corporate proceedings on the
part of Acquisition are necessary to authorize this Agreement and the
transactions contemplated. This Agreement has been duly executed and delivered
by Acquisition and constitutes a legal, valid and binding obligation of
Acquisition.
7.3 No Conflict; Required Filings and Consents.
7.3.1 The execution and delivery of this Agreement by
Acquisition does not, and the performance of this Agreement by Acquisition will
not, (i) conflict with or violate the Articles of Incorporation or Bylaws of
Acquisition, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Acquisition by which its properties are bound
or affected, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or impair Acquisition's rights or alter the rights or obligations of any third
party under, or give to other any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Acquisition pursuant to, any contract, agreement,
license, permit or other instrument or obligation to which Acquisition is a
party or by which Acquisition or its properties is bound or affected.
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7.3.2 The execution and delivery of this Agreement does not,
and the performance of this Agreement will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, except (i) for the filing and
recordation of appropriate merger or other documents as required by the DCL, and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not reasonably be
expected to prevent or delay consummation of the Merger, or otherwise materially
and adversely affect the ability of Acquisition to perform its obligations under
this Agreement.
ARTICLE 8. COVENANTS AND AGREEMENTS.
8.1 Employee and Employee Benefit Matters.
8.1.1 Employment Status. The Shareholders and Parent agree
that the sale of the Company Shares shall cause no change in the status of the
employment of Employees as the same existed immediately prior to the Effective
Time. For purposes of this Agreement, "Employees" shall include all employees
of the Company who are active Employees of the Company at the Effective Time.
Notwithstanding the above, Shareholders who are also Company employees agree
that their existing employment contracts may be assigned from Company to Parent,
upon Parent's election.
8.1.2 Employee Benefits; Crediting of Service. After the
Effective Time, Parent shall provide, or cause Acquisition to provide, to all
Employees, for their continuing service with Acquisition, the employee benefits
which, in the aggregate, are substantially similar to those currently provided
by Company and are described on Schedule 8.1.2 (the "Existing Benefits") at
least through June 30, 1997. At such time as Parent or Acquisition shall decide
to replace in whole the Existing Benefits, the employees of Acquisition at that
time shall be eligible to participate in the employee benefit plans of the
Parent. Parent shall grant and shall continue to grant, or cause Acquisition to
grant, and continue to grant, to all Employees under all of its employee benefit
plans in which Employees are or will be eligible to participate, all service
with the Company credited to them and to be credited to them in respect of
employee benefits for all purposes under such plans and shall cause any
pre-existing condition for the Existing Benefits to be waived for employees
currently participating in like plans of the Company.
8.1.3 Stock Options in Parent Common Stock. At the Effective
Time, Parent shall grant to those Company employees listed on Schedule 8.1.3
options in Parent Common Stock in the amounts set opposite their names pursuant
to Parent's 1990 Nonqualified Stock Option Plan. The option price for all such
option shares shall
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be $23/share, and the options shall vest and may be exercised in accordance
with the Plan and each person's Nonqualified Stock Option Agreement over a 4
year term at the rate of 25% per year.
8.2 Performance of the Company's Obligations. Acquisition shall
perform and fulfill all obligations and commitments of the Company existing as
of the Effective Time or thereafter incurred, all in accordance with this
Agreement.
8.3 Reasonable Best Efforts to Close; Consent; Approvals. During the
period commencing on the date of the execution of this Agreement and continuing
until the Effective Time, Parent and the Company shall each;
8.3.1 Use their reasonable best efforts to obtain all
consents, waivers, approvals, authorizations or orders (including, without
limitation, all United States and foreign governmental and regulatory rulings
and approvals),
8.3.2 Make all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by Parent and the Company and the consummation by them of the
transactions contemplated,
8.3.3 Comply promptly with all requests or requirements which
applicable federal or state law or governmental officials may impose on them
with respect to the transactions which are the subject of this Agreement,
8.3.4 Consummate all of the transactions described in
subsections 8.3.1, 8.3.2 and 8.3.3 as promptly as practicable, and
8.3.5 The reasonable best efforts of Parent and the Company
shall include, without limitation, good faith response, in cooperation with each
other, to all requests for information, documentary or otherwise, by any
governmental agency.
8.4 Disclosures. Except as required by law or occurring after the
Effective Time, neither the Company nor Parent, without the prior written
consent of the other, will make any press release or any similar public
announcement concerning the transactions contemplated. Except as required by
law or occurring after the Effective Time, no written or oral announcement or
private disclosure with respect to the transactions contemplated will be made to
any person unrelated to the Company or Parent unless jointly approved by the
Company and Parent. If disclosure is required by law, the disclosing party
shall consult in advance with the other party and attempt in good faith to
reflect such other party's concerns in the required disclosure.
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8.5 Books, Records and Information.
8.5.1 Parent agrees that all documents delivered to Parent by
or on behalf of the Company pursuant to this Agreement shall after the Closing
be open for inspection by the Shareholders' Representative at any time during
regular business hours for reasonable and necessary purposes until such time as
documents are destroyed or possession thereof is given to the other party as
provided for in Section 8.5.2 hereof and that the Shareholders' Representative
may during such period at his expense make such copies thereof as he may
reasonable request.
8.5.2 Prior to December 31, 2002, Parent shall not destroy or
give up possession of any item referred to in Section 8.5.1 hereof without first
offering to the Shareholders' Representative, the opportunity, at the
Shareholders' Representative's expense (but without any other payment) to obtain
the same. Thereafter Parent shall be free to dispose of such items as it deems
fit.
8.5.3 Parent shall use reasonable efforts to afford the
Shareholders' Representative access to employees who were previously employees
of the Company and remain in the employ of Acquisition or Parent, as the
Shareholders' Representative shall reasonably request for his proper purposes,
including, without limitation, the defense of legal proceedings. Such access
may include interviews or attendance at depositions or legal proceedings. All
out-of-pocket expenses reasonably incurred by Parent or Acquisition in
connection with this shall be paid or promptly reimbursed by the Shareholders'
Representative; such reimbursement shall include the cost on a pro rata basis of
the salary or wages and benefits of the employee involved to the extent the time
involved is in excess of 3 business days per year.
8.6 Tax Matters.
8.6.1 Except to the extent Taxes are reserved for on the
Financial Statements, the Shareholders shall indemnify and hold harmless Parent
and Acquisition for any and all Taxes of the Company with respect to all taxable
periods of the Company ending on or prior to the Effective Time, and any losses,
damages, assessments, settlements, judgments or reasonable costs and expenses,
with respect to all taxable period of the Company ending on or prior to the
Effective Time, arising out of or incident to the imposition, assessments or
assertion of any such Taxes, including those incurred in connection with the
assertion or defense of any claim or assessment for such Taxes (collectively,
"Other Amounts").
8.6.2 The Shareholders' Representative shall prepare or cause
to be prepared, and file or cause to be filed, all Tax Returns of the Company
with respect to periods ending on or before the Effective Time. Parent shall
prepare or cause to be
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prepared, and file or cause to be filed, all Tax Returns of Acquisition due
after the Effective Time. Tax Returns which include periods ending at or
before the Effective Time shall be delivered to the Parent not less than 30
days prior to the due date, including any extensions thereof, for such Tax
Returns.
8.6.3 Shareholders' Representative and Parent shall cooperate
fully with each other and make available to each other such Tax data and other
information as may be reasonably required for the preparation by Parent or the
Shareholders' Representative of any Tax Returns required to be prepared and
filed by Parent and the Shareholders hereunder.
8.6.4 Parent agrees to give prompt written notice to
Shareholders' Representative of any pending or threatened audit or related
administrative or judicial proceeding involving any federal, state, local or
foreign liability for Taxes for which the Shareholders have indemnified Parent.
8.6.5 Parent shall, and shall cause the Acquisition to, permit
the Shareholders' Representative to have full access, at any reasonable time and
from time to time, at the business location at which the books and records are
maintained, after the Effective Time, to such data of the Company as the
Shareholders' Representative may from time to time reasonably request and
furnish, and request the independent accountants and legal counsel of Parent to
furnish, to the Shareholders' Representative such additional Tax and other
information and documents in the possession of such persons with respect to Tax
Returns filed in respect of periods ending on or prior to the Effective Time, as
the Shareholders' Representative may from time to time reasonably request. Such
information shall be retained until the expiration of one month after the
applicable statute of limitations or such other date as the Shareholders'
Representative may reasonably request; provided, however, that in the event a
proceeding has been instituted against the Shareholders prior to the expiration
of the applicable statute of limitations, the information shall be retained
until there is a final determination with respect to such proceeding. Similarly,
the Shareholders' Representative will permit Parent to have full access, at any
reasonable time and from time to time, after the Effective Time, to all Tax data
and supporting papers relating to the Company, and furnish, and request the
independent accountants and legal counsel of the Shareholders to furnish, to
Parent such additional Tax and other information and documents in the possession
of such persons as reasonably may be required by Parent or Acquisition in
connection with their Tax reporting obligations.
8.7 Escrow Fund. A portion of the shares comprising the Share
Consideration, equaling 12140 Restricted Shares: such shares shall be
contributed to the Escrow Fund from those persons and in those numbers
identified on Schedule 2.1.1 and shall constitute the Escrow Fund and shall be
held by Parent for a period of 24 months as
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security for the indemnification of Parent's Indemnified Persons (as defined in
Section 12.1) pursuant to and in accordance with the terms of the form of the
Escrow Agreement (the "Escrow Agreement") attached as Schedule 8.7.
8.8 Shareholder Approval. The Company shall promptly submit this
Agreement and the transactions contemplated for the approval of the Shareholders
at a meeting or by consent of the Shareholders and shall use its reasonable
efforts to obtain the Shareholders' approval and adoption of this Agreement and
the transactions contemplated, such meeting to be held as soon as practicable
after the date of this Agreement, and the Company shall, through its Board of
Directors, recommend to the Shareholders approval of the transactions
contemplated by this Agreement, subject, in each case, to the determination of
the Board of Directors of the Company after consultation with its counsel that
the foregoing actions would not be inconsistent with its fiduciary duties to the
Shareholders under applicable law.
8.9 Access to Information; Confidentiality. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which the
Company is subject (from which it shall use reasonable efforts to be released),
the Company shall afford to the officers, employees, accountants, counsel and
other representatives of Parent, reasonable access, during the period prior to
the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall furnish promptly to Parent
all information concerning its businesses, properties and personnel as Parent
may reasonably request, and the Company shall make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of its business, properties and personnel as
Parent may reasonably request.
8.10 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent or Acquisition, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 8.10 shall not limit or otherwise affect the remedies available to
the party receiving such notice; and provided, however, that failure to give
such notice shall not be treated as a breach of covenant for the purposes of
Section 10.2.1 or 10.3.2 unless the failure to give such notice results in
material prejudice to the other party.
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8.11 Investor Questionnaire. The Shareholders shall execute and
deliver the Investor Questionnaire in substantially the form set forth in
Schedule 8.11 (the "Investor Letter").
ARTICLE 9. CONDUCT OF BUSINESS PENDING CLOSING.
Except as disclosed in Schedule 9 or otherwise permitted by this
Agreement, the Company agrees that pending the Effective Time, the Company shall
conduct its business in a manner materially consistent with its past practices,
and shall not engage in any transactions out of the ordinary course of business.
Furthermore, except as may otherwise be required under this Agreement, the
Company shall not do any of the following without the prior consent of Parent
(which consent shall not be unreasonably withheld):
9.1 Declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to the Shareholders in their capacity as
such;
9.2 Split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock;
9.3 Purchase, redeem or otherwise acquire any Company Shares or
any rights, warrants or options to acquire any such shares.
9.4 Issue, deliver, sell, pledge, dispose of or otherwise encumber
any Company Shares, any other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities or equity equivalent,
except shares issued upon the exercise of the options set forth on Schedule 5.2;
9.5 Amend or change its Articles of Incorporation or Bylaws;
9.6 Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership or other business
organization;
9.7 Make any commitment or enter into any contract or agreement
except in the ordinary course of business consistent with past practice;
9.8 Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of
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others, except for borrowings or guarantees incurred in the ordinary course of
business consistent with past practice under financing arrangements in
existence on the date hereof, or make any loans, advances or capital
contributions to, or investments in, any other person, other than in the
ordinary course of business consistent with past practice;
9.9 Make any tax election or settle or compromise any income tax
liability;
9.10 Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in, or contemplated by, the Financial Statements of the Company
or incurred in the ordinary course of business consistent with past practice;
9.11 Incur or permit to be incurred any obligation or other
liabilities in excess of $10,000, except for inventory purchases in the normal
and ordinary course of business consistent with past practice;
9.12 Sell, lease or otherwise dispose of or encumber any of the
assets of the Company;
9.13 Increase the compensation payable or to become payable to any
of the employees of the Company, except for increases in the ordinary course and
consistent with past practice, or otherwise enter into or alter any employment,
consulting, or service agreement;
9.14 Commence, enter into, or alter any profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retirement, or
incentive plan or any fringe benefit plan for employees of the Company;
9.15 Sever or terminate any employees of the Company without the
consent of Parent which shall not be unreasonably withheld;
9.16 Make or commit to any capital expenditure in excess of $10,000
or make or commit to such expenditures which would, in the aggregate, exceed
$25,000;
9.17 Eliminate any reserves established on their books or change
its method of accrual unless there is any change of significant facts or
circumstances pertaining to any reserves which would justify their elimination;
or
9.18 Make any material change in its method of accounting.
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ARTICLE 10. CONDITIONS TO THE MERGER.
10.1 Conditions to the Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
10.1.1 No Injunctive Proceedings. No injunction (preliminary
or permanent) or other order (including a temporary restraining order) of any
state or federal court or other legal restraint or prohibition which prevents
the consummation of the Merger shall have been issued and remain in effect, nor
shall any proceedings brought by any administrative agency or commission or
other governmental authority or instrumentality seeking any of the foregoing be
pending; and there shall not be any action taken, or any statute, rule or
regulation or order enacted, entered, enforced or deemed applicable to the
Merger which makes the consummation of the Merger illegal.
10.1.2 Governmental Actions. There shall not have been
instituted, or be pending or threatened, any action or proceeding (or any
investigation or other inquiry that might result in an action or proceeding) by
any governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, nor shall
there be in effect any judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction, in either case,
seeking to prohibit or limit Parent from exercising all material rights and
privileges pertaining to its ownership of Acquisition or the ownership or
operation by Parent of all or a material portion of the business or assets of
the Company, or seeking to compel Parent to dispose of or hold separate all or
any material portion of the business or assets of Parent (including
Acquisition), as a result of the Merger or the transactions contemplated by this
Agreement.
10.2 Additional Conditions to Obligations of Parent. The
obligations of Parent to effect the Merger are also subject to the following
conditions:
10.2.1 Representations and Warranties. All representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects as of the Effective Time, except as otherwise
contemplated by this Agreement, and that no representation or warranty of the
Company shall be deemed to be untrue or incorrect by reason of any transaction
that conforms to the requirements of Article 8 hereof.
10.2.2 Performance of Agreements; Instruments of Transfer. The
Company shall have fully performed in all material respects all obligations,
agreements, conditions and commitments required to be fulfilled by the Company
pursuant to the
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terms hereof at or prior to the Effective Time and shall have tendered to Parent
the documents and certificates required by Article 11.
10.2.3 Compliance Certificate. The Company shall have
delivered to Parent its certificate, dated the Effective Time, executed on its
behalf by its President as to the fulfillment of the conditions set forth in
Sections 10.2.1 and 10.2.2.
10.2.4 Material Adverse Effect. There shall not have been any
Material Adverse Effect on the Company from the date hereof to the Effective
Time.
10.2.5 Opinion of Counsel. Parent shall have received the
opinion of Tiedeman, Lynch, Smart & Kampfe, counsel for the Company and the
Shareholders.
10.2.6 Consents, etc. All material authorizations, consents,
waivers or approvals of any and all governmental regulatory authorities
necessary in connection with the consummation of the Merger shall have been
obtained, and all filings required shall have been made, by the Company for the
authorization, execution and delivery of this Agreement and the consummation by
them of the transactions contemplated shall have been obtained and made by the
Company.
10.2.7 Shareholders Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote (or consent) of the
Shareholders.
10.3 Additional Conditions to the Obligations of the Company. The
obligations of the Company to effect the Merger are also subject to the
satisfaction at or prior to the Effective Time of the following conditions:
10.3.1 Share Consideration. Parent shall have delivered the
Cash and Share Consideration at the Effective Time pursuant to the terms of
Section 2.2.
10.3.2 Representations and Warranties. All representations and
warranties of Parent contained in this Agreement shall be true and correct in
all material respects as of the Effective Time except as otherwise contemplated
by this Agreement.
10.3.3 Performance of Agreements; Instruments of Transfer.
Parent shall have fully performed in all material respects all obligations,
agreements, conditions and commitments required to be fulfilled by Parent on or
prior to the Effective Time and shall have tendered to the Shareholders'
Representative the documents and certificates required by Article 9.
10.3.4 Compliance Certificate. Each of Parent and Acquisition
shall have delivered to the Shareholders' Representative its certificate, at and
as of the Effective
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Time, executed on its behalf by its Chief Executive Officer or a Vice President,
as to the fulfillment of the conditions set forth in Sections 10.3.2 and 10.3.3.
10.3.5 Material Adverse Effect. There shall not have been any
Material Adverse Effect on the Parent from the date hereof to the Effective
Time.
10.3.6 Opinion of Counsel. The Shareholders' Representative
shall have received the opinion of Cox, Hodgman & Giarmarco, counsel for Parent
and Acquisition.
10.3.7 Consents, etc. All material authorizations, consents,
waivers or approvals of any and all governmental regulatory authorities
necessary in connection with the consummation of the Merger shall have been
obtained, and all filings required to be made, by Acquisition and Parent for the
authorization, execution and delivery of this Agreement and the consummation by
them of the transactions contemplated shall have been obtained and made by
Acquisition and Parent.
10.4 Non-Compliance with and Termination of this Agreement.
10.4.1 Each of the parties agrees to use its reasonable best
efforts to bring about the satisfaction of the conditions required to be
performed by it prior to and at the Effective Time, including, without
limitation, compliance with the requirements of Section 8.3.
10.4.2 This Agreement may be terminated at any time prior to
the Effective Time without any liability of any party to any other party
notwithstanding approval by the Shareholders upon the occurrence of any of the
following:
10.4.2.1 by the mutual agreement of the Company and
Parent, provided such termination is set forth in writing executed by all
parties;
10.4.2.2 by either Parent or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or ruling or
taken any other action have the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger (provided that the right to terminate this
Agreement under this subsection shall not be available to any party who has not
complied with its obligations under Section 8.3 and such noncompliance
materially contributed to the issuance of any such order, decree or ruling or
the taking of such action);
10.4.2.3 if by either Parent or the Company the
requisite vote (or consent) of the Shareholders shall not have been obtained by
December 31, 1996;
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10.4.2.4 by Parent, if any of the conditions specified
in Section 10.2 shall not have been met and the Merger shall not have been
consummated by January 15, 1997 and shall not have been waived in writing by
Parent; or
10.4.2.5 by the Company, if any of the conditions set
forth in Section 10.3 shall not have been met and the Merger shall not have been
consummated by January 15, 1997 and shall not have been waived in writing by the
Company.
10.4.3 In the event of the termination of this Agreement
pursuant to Section 10.4.2, this Agreement shall forthwith become void and there
shall be no liability on the part of any party or any of its affiliates,
directors, officers or shareholders except as set forth in Sections 5.12 and
6.6, 15.1 and 15.8 and nothing herein shall relieve any party from liability for
any breach hereof.
ARTICLE 11. CLOSING DOCUMENTS
11.1 Shareholders' Obligations. At the Effective Time, Shareholders'
Representative shall deliver to Parent the following:
11.1.1 Company Shares. The Company Shares as provided in Section
2.2.2 on or prior to the Effective Time.
11.1.2 Resolutions. Copies of resolutions of the Company
certified by the Secretary, authorizing the execution, delivery and performance
of this Agreement and the transactions contemplated.
11.1.3 Resignations. Resignations of those officers and
directors of the Company who are not employees of the Company, or whose
resignations may be requested by Parent.
11.1.4 Compliance Certificate. The certificate required by
Section 10.2.3.
11.1.5 Opinion of Counsel. The opinion of counsel for the
Company required by Section 10.2.5.
11.1.6 Company Indebtedness. Uniform Commercial Code Form
UCC-3 Termination Statements and such other releases of lien as may be necessary
to effect the satisfaction of all liens, encumbrances, security interests and
charges given to secure Company Indebtedness.
11.1.7 Investor Letters. The Investor Letters required by
Section 8.11.
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11.2 Parent's Obligations. At the Effective Time, Parent shall
deliver to the Shareholders' Representative the following:
11.2.1 Share Consideration. Subject to Section 8.7, Cash and the
Parent Common Stock provided in Section 2.2.1 on or prior to the Effective Time.
11.2.2 Resolutions. Copies of resolutions of the Board of
Directors of each of Parent and Acquisition certified by the Secretary or an
Assistant Secretary of each authorizing the execution, delivery and performance
of this Agreement and the transactions contemplated.
11.2.3 Compliance Certificate. The certificate required by
Section 10.3.4.
11.2.4 Opinion of Counsel. The opinion of counsel for Parent
required by Section 10.3.5.
11.3 Joint Obligations. The parties will deliver each to the other
the certificates, records, schedules, the Escrow Agreement and the other
documents required by the terms of this Agreement.
ARTICLE 12. INDEMNIFICATION.
12.1 Indemnification by the Shareholders. Subject to the limits
set forth in this Section 12, the Shareholders jointly and severally agree to
indemnify, defend and hold Parent, Acquisition, and each of Parent's and
Acquisition's affiliates, officers, directors, employees, agents, successors and
assigns (Parent and such persons are collectively referred to as "Parent's
Indemnified Persons"), harmless from and against any and all loss, liability,
damage or deficiency (including interest, penalties, costs of preparation and
investigation, and reasonable attorneys' fees) (collectively, "Losses") that
Parent's Indemnified Persons may suffer, sustain, incur or become subject to
arising out of or due to:
12.1.1 any inaccuracy of any representation of the Company in
this Agreement, any Schedule, or any certificate or other transaction document;
12.1.2 the breach of any warranty of the Company in this
Agreement, any Schedule, or any certificate or other transaction document; and
12.1.3 the nonfulfillment of any covenant, agreement or other
obligation of the Company under this Agreement, any Schedule, or any certificate
or other transaction document not otherwise waived by Parent.
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12.2 Indemnification by Parent. Subject to the limits set forth in
this Section 12, Parent agrees to indemnify, defend and hold the Shareholders
and each of the Shareholders' affiliates, officers, directors, employees,
agents, successors and assigns (the Shareholders and such persons are
collectively referred to as "Shareholders' Indemnified Persons"), harmless from
and against any and all Losses that the Shareholders' Indemnified Persons may
suffer, sustain, incur or become subject to arising out of or due to:
12.2.1 any inaccuracy of any representation of Parent in this
Agreement, any Schedule, or any certificate or other transaction document;
12.2.2 the breach of any warranty of Parent in this Agreement,
any Schedule, or any certificate or other transaction document; and
12.2.3 the nonfulfillment of any covenant, undertaking,
agreement or other obligation of Parent under this Agreement, any Schedule, or
any certificate or other transaction document not otherwise waived by the
Shareholders' Representative.
12.3 Survival of Representations, Warranties and Covenants;
Deductible; Cap. The several representations, warranties, covenants of the
parties or in any transaction document and the parties' right to indemnity in
accordance with this Section 12 shall survive the Effective Time and shall
remain in full force and effect thereafter for a period of 24 months after the
Effective Time and shall be effective with respect to any inaccuracy therein or
breach thereof, notice of which shall have been duly given within such 24 month
period in accordance with Section 12.5. Notwithstanding the foregoing, Parent
may give notice of, and make a claim relating to, and shall be jointly and
severally indemnified in accordance with Section 12.1 by the Shareholders
identified as the principal shareholders on Schedule 2.1.1 in connection with
(i) the breach of the representations and warranties contained in Section 5.11,
and the covenants contained in Section 8.6, at any time prior to the expiration
of the appropriate statute of limitations and any extension thereof with respect
to all taxable periods of the Company ending on or prior to the Effective Time;
and (ii) the Company Shares and the ownership thereof, at any time. Anything to
the contrary contained herein notwithstanding, neither party shall be entitled
to recovery from the other party with respect to any inaccuracy or breach of
such warranties or representations in Articles 5, 6 or 7, as applicable, unless
and until the amount of such Losses suffered, sustained or incurred by the
asserting party, or to which such party becomes subject, by reason of such
inaccuracy or breach, shall exceed $25,000 calculated on a cumulative basis and
not a per item basis (the "Basket Amount"), and then only with respect to the
excess over the Basket Amount, but in no event shall the Shareholders or Parent
be liable to the other, in each case, in an aggregate amount in excess of
$1,000,000. The Basket Amount shall not apply to the
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obligations with respect to any Indemnified Person may suffer, sustain, incur or
become subject to arising out of or due to the breach of the representations and
warranties contained in Section 5.11 or the covenants contained in Sections 8.1,
8.2 and 8.6.
12.4 Prior Disclosure. Except as otherwise specifically provided,
notwithstanding any other provision of this Agreement, no right of
indemnification shall exist pursuant for any Losses attributable to matters or
conditions which have been disclosed by the Company in this Agreement or the
Schedules.
12.5 Notice and Opportunity to Defend. If there occurs an event
which either party asserts is an indemnifiable event pursuant to Sections 8.6,
12.1 or 12.2 hereof, the party seeking indemnification (the "Indemnitee") shall
notify the party obligated to provide indemnification (the "Indemnitor")
promptly. If such event involves any claim or the commencement of any action or
proceeding by a third person, the Indemnitee shall give the Indemnitor written
notice of such claim or the commencement of such action or proceeding. The note
shall describe the claim, the amount thereof if known and quantifiable, and the
basis therefor. Delay or failure to so notify the Indemnitor shall only relieve
the Indemnitor of its obligations to the extent, if at all, that is prejudiced
by reasons of such delay or failure. The Indemnitor shall be entitled to assume
and control (with counsel of its choice) the defense of such matter at the
Indemnitor's expense by sending written notice of its election to do so within
30 days after receiving written notice from the Indemnitee. The Indemnitee
agrees to cooperate fully with the Indemnitor and its counsel in the defense
against any such asserted liability. In any event, the Indemnitee shall have the
right to participate with separate counsel, if it desires, at its own expense in
the defense of such asserted liability. Any compromise of such asserted
liability by the Indemnitor shall require the prior written consent of the
Indemnitee which shall not be unreasonably withheld; provided no such consent
shall be necessary as long as it is a monetary settlement which provides a
release of the Indemnitee with respect to such matter. If, however, the
Indemnitee refuses its consent to a bona fide offer of settlement which the
Indemnitor wishes to accept, the Indemnitee may continue to pursue such matter,
free of any participation by the Indemnitor, at the sole expense of the
Indemnitee. In such event, the obligation of the Indemnitor to the Indemnitee
shall be equal to the lesser of (i) the amount of the offer of settlement which
the Indemnitee refused to accept plus the costs and expenses of the Indemnitee
prior to the date the Indemnitor notifies the Indemnitee of the offer of
settlement, and (ii) the actual out-of-pocket amount the Indemnitee is obligated
to pay as a result of the Indemnitee's continuing to pursue such matter. The
Indemnitor shall be entitled to recover from the Indemnitee any additional
expenses incurred by the Indemnitor as a result of the Decision of the
Indemnitee to pursue such matter. If the Indemnitor shall not have assumed the
defense of such claim within the 30 day period, the Indemnitee may assume the
defense of such claim with counsel of its choice but may not settle or
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compromise such claim without the consent of the Indemnitor, which consent shall
not be unreasonably withheld.
12.6 Reduction of Loss.
12.6.1 The amount which an Indemnitor is required to pay to,
for, or on behalf of an Indemnitee pursuant to Section 12 shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of the Indemnitee in reduction of the related
indemnifiable loss and the related tax benefit (as described in subsection
12.6.3) (the "Indemnifiable Loss"). Amounts required to be paid, as so reduced,
are sometimes called an "Indemnity Payment".
12.6.2 If an Indemnitee shall have received, or if an
Indemnitor shall have paid on its behalf, an Indemnity Payment in respect of an
Indemnifiable Loss and shall subsequently receive, directly or indirectly,
insurance proceeds in respect of such Indemnifiable Loss, then such Indemnitee
shall promptly pay to the Indemnitor the amount of such insurance proceeds, or,
if less, the amount of the Indemnity Payment. The parties agree that the
foregoing shall not affect the subrogation rights of any insurance companies
making payments hereunder.
12.6.3 The amount of any Loss for which the Shareholders are
obligated to indemnify and hold harmless Parent pursuant to Section 12.1 and
with respect to which such Indemnity Payments are not required to be included in
the income of Parent or Acquisition for tax purposes or are otherwise not
subject to tax shall be reduced as applicable by the net Federal, state and
local tax savings attributable to such Loss available to Parent or Acquisition
(to the extent actually received); if Parent or Acquisition receives any such
tax savings in respect of Loss for which the Shareholders have reimbursed Parent
under Section 12.1, Parent shall promptly pay to the Shareholders'
Representative the amount of such tax savings up to the amount previously
reimbursed by the Shareholders in respect of such Loss under Section 12.1.
12.7 Damages. Notwithstanding anything herein to the contrary, no
claims or causes of action arising out of or related to the transactions
contemplated by this Agreement may be asserted by either party for punitive,
special, exemplary, contingent, incidental, speculative or consequential
damages, or for any other damages other than actual damages.
ARTICLE 13. SHAREHOLDERS' REPRESENTATIVE.
13.1 Appointment of Shareholders' Representative. The Shareholders
irrevocably constitute and appoint Daniel L. Kemp as the Shareholders'
Representative who shall act as their agent and attorney-in-fact to modify or
amend this Agreement or
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any of its terms or provisions (including modifications, amendments or changes
subsequent to the Effective Time except that after approval by Shareholders,
changes cannot be made which adversely impact the Share Consideration to be paid
to the Shareholders), to take all actions and to execute all transaction
documents necessary or desirable to consummate the transactions contemplated by
this Agreement, and to take all actions and to execute all documents which may
be necessary or desirable in connection therewith, to give and receive consents
and all notices hereunder, and to perform any other act arising under or
pertaining to this Agreement and the transactions contemplated. The
Shareholders agree that service of process upon the Shareholders' Representative
in any action or proceeding arising under or pertaining to this Agreement shall
be deemed to be a valid service of process upon the Shareholders and any claim
by Parent against the Shareholders with respect to this Agreement may be
asserted against, and settled with, the Shareholders' Representative. The
Shareholders' Representative shall be deemed to have accepted the appointment
upon his execution of this Agreement.
13.2 Liability of Shareholders' Representative. Nothing contained
herein shall be deemed to make the Shareholders' Representative personally
liable to the Shareholders or the Parent solely because of service in his
capacity as agent and attorney-in-fact. In performing any of his duties
hereunder, the Shareholders' Representative shall not incur any liability to the
Shareholders or the Parent for losses, damages, liabilities or expenses, except
for his own willful default.
13.3 Irrevocable; Binding on Successors, Etc. This power of
attorney and the agency created is coupled with an interest of the Shareholders
and shall be binding and enforceable on and against the respective heirs,
personal representatives, successors and assigns of the Shareholders and this
power of attorney shall not be revoked or terminated by the bankruptcy or
dissolution of any Shareholder(s), but shall continue to be binding and
enforceable by the Shareholders' Representative, Parent and their respective
successors and on and against the successors and assigns of the Shareholders in
the manners provided.
ARTICLE 14. REGISTRATION RIGHTS.
14.1 Piggyback Registration Rights. If at any time Parent proposes
to register any shares of Parent Common Stock under the Securities Act of 1933,
as amended (the "Securities Act") on a form which would permit registration of
the Parent Common Stock for sale to the general public, Parent shall each such
time given written notice to the Shareholder's Representative of its intention
to do so, describing the securities to be registered and specifying the form and
manner and other relevant facts involved in such proposed registration. Upon the
written request of any of the Shareholders who are then holders of Parent Common
Stock delivered to Parent within 20 days after the giving of
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any such notice (which request shall specify the Parent Common stock intended to
be disposed of by such holder), Parent will use its best efforts as a part of
its filing of such form to effect the registration under the Securities Act of
all Parent Common Stock which Parent has been so requested to register by the
Shareholders; provided, however, that in the event the Company proposes to
register any of its securities for the account of any holder of its securities
other than the Shareholders, no Shareholder shall request Parent to effect the
registration of more than the number of shares of Parent Common Stock held by
such Shareholder which bears the same ratio to the total number of shares of
Parent Common Stock held by such Shareholder as the number of shares of
securities that Parent proposes to register for the account of such Shareholder
bears to the total number of shares of securities held by such Shareholder.
Parent shall not be required to honor any such request if, in the opinion of
counsel to Parent reasonably acceptable to the Shareholder's Representative,
registration under the Securities Act is not required for the transfer of the
Parent Common Stock in the manner proposed by the Shareholders or that the
registration is for a limited purpose or through a limited process such that,
without the Shareholder's shares, the regulatory oversight or registration
process would be more limited. If any such registration relates to a firmly
underwritten offering of Parent Common Stock for the account of Parent, and if
the managing underwriter of such offering advises Parent in writing that, in its
opinion, inclusion of shares of Parent Common Stock held by the Shareholders
would adversely affect any such offering, then such shares shall, to such
extent, be excluded from such registration.
14.2 Registration Procedures. If and whenever Parent is required to
use its best efforts to effect the registration of any Parent Common Stock under
the Securities Act as provided herein, Parent shall register or otherwise
qualify the sale of Parent Common Stock under the 'blue sky' laws in up to 8
states and Canadian provinces, and the following procedures shall apply:
14.2.1 The Shareholders shall promptly furnish to Parent such
information regarding the Shareholder, the distribution of the Parent Common
Stock and such other matters as Parent may reasonably request in writing.
14.2.2 Parent will bear all expenses of the registration,
except for any underwriting spread and brokerage commission and transfer taxes
incurred in connection with sales of the Parent Common Stock owned by the
Shareholders.
14.2.3 Parent will furnish to the Shareholders at its expense
such number of prospectuses conforming to the requirements of the Securities Act
and the rules and regulations thereunder and relating to the Parent Common Stock
subject thereto as may, from time to time, be requested by the Shareholders.
Further, Parent shall (a) notify the Shareholders, at any time when a prospectus
relating to the Parent Common Stock is required to be delivered under the
Securities Act, of the happening of any event which
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Parent, in its best judgment, believes would make a supplement to, or an
amendment of, such prospectus necessary or appropriate, and (b) at the request
of the Shareholder's Representative, prepare and furnish thereto a reasonable
number of copies of any supplement to, or any amendment of, such prospectus that
may be necessary so that, thereafter delivered to the shareholders, such
prospectus shall not include 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 not misleading in light of the circumstances when made.
14.2.4 The Shareholders who are sellers of Parent Common
Stock to be distributed in any underwritten offering shall be parties to the
underwriting agreement entered into by Parent in connection therewith, and the
representations and warranties by, and the other agreements on the part of
Parent, including any lock-up provisions, to or for the benefit of the
underwriter shall also be made to and for the benefit of such Selling
Shareholders.
14.2.5 Each Selling Shareholder agrees (except to the extent
that such Shareholder is prohibited by applicable law from agreeing to withhold
Parent Common Stock from sale), if requested in a timely notice from the
managing underwriters in an underwritten offering, not to effect any public sale
or distribution of Parent Common Stock, including a sale pursuant to Rule 144
under the Securities Act (except as part of such underwritten offering), during
the 30 day period prior to and during the 90-day period beginning on the closing
date of each underwritten offering made pursuant to such registration statement.
14.2.6 Parent shall not be required to maintain in effect any
registration statement as it relates to Parent Common Stock held by the
Shareholders beyond the period necessary to comply with the Securities Act
(otherwise than pursuant to Rule 415 or any similar regulation permitting "shelf
registration") with respect to the distribution of the Parent Common Stock
included therein. However, Parent will use its reasonable best efforts to
continue to file those documents which will permit Selling Shareholder to
qualify sales of Parent Common Stock pursuant to Rule 144 under the Securities
Act.
14.3 Indemnification and Contribution.
14.3.1 Indemnification by Parent. In the case of each offering
of Parent Common Stock registered under the Securities Act pursuant hereto,
Parent agrees to indemnify and hold harmless each Selling Shareholder in such
offering, each underwriter of such Parent Common Stock under such registration
and each other person, if any, who controls such Selling Shareholder or
underwriter within the meaning of Section 15 of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which any of them
may become subject under the Securities Act or otherwise, and to
-39-
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reimburse them for any legal or any other expenses reasonably incurred by them
in connection with investigating any claim, or defending any action or
proceeding, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement under which such Parent
Common Stock was registered under the Securities Act, any preliminary
prospectus or final prospectus included therein, or any related summary
prospectus, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that Parent
shall not be so liable to a person otherwise indemnified to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement thereto or document
incorporated by reference therein to the extent that such statements or alleged
statements or omissions or alleged omission was made in reliance upon and in
conformity with written information furnished to Parent by or on behalf of a
Selling Shareholder expressly for use in connection with any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement thereto or document included by reference therein. The
indemnification agreement contained in this Section 14.3.1 shall remain in full
force and effect regardless of any investigation made by or on behalf of any
Selling Shareholder or any other person indemnified pursuant to such agreement
and shall survive the transfer of such securities by such Selling Shareholder
in the offering.
14.3.2 Indemnification by Selling Shareholders. In the case
of each offering of Parent Common Stock registered under the Securities Act
pursuant hereto, the Selling Shareholders in such offering agree to indemnify
and hold harmless Parent, its officers and directors, each person who has
signed the registration statement, and each other person, if any, who controls
any of the foregoing within the meaning of Section 15 of the Securities Act,
each Selling Shareholder in such offering, each person, if any, who controls
each such Selling Shareholder within the meaning of Section 15 of the
Securities Act, and the directors and officers of each such Selling
Shareholder, against any losses, claims, damages or liabilities, joint or
several, to which any of them may become subject under the Securities Act or
otherwise and to reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating any claim, or defending any
action or proceeding, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of material fact contained
or incorporated by reference in any registration statement under which such
Parent Common Stock was registered under the Securities Act, any preliminary
-40-
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prospectus or final prospectus included therein, or any related summary
prospectus, or any amendment or supplement thereto, or any document incorporated
by reference therein, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, to the extent (any only to the extent) that
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to Parent by
or on behalf of such Selling Shareholder expressly for use in connection with
the preparation of any such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement thereto or
document incorporated by reference therein. The indemnification agreement
contained in this Section 14.3.2 shall remain in full force and effect
regardless of any investigation made by or on behalf of Parent or any other
person indemnified pursuant to such agreement and shall survive the transfer of
Parent Common Stock by such Selling Shareholder in the offering.
14.3.3 Other Indemnification or Contribution. Without by
implication limiting the scope of the other provisions of this Section 14.3, it
is agreed that indemnification or, if appropriate, contribution, similar to that
specified in the preceding subsections of this Section 14.3 (with appropriate
modifications), shall be given by Parent and each Selling Shareholder of Parent
Common Stock with respect to any required registration or other qualification of
such Parent Common Stock under any federal or state law or regulation of
governmental authority other than the Securities Act.
ARTICLE 15. MISCELLANEOUS.
15.1 Expenses. Whether or not the Merger shall be consummated,
each party shall pay its own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated.
15.2 Notices. All notices, requests, demands and other
communications given hereunder (collectively, "Notices") shall be in writing and
delivered personally or by overnight courier to the parties at the following
addresses or sent by telecopier, with confirmation received, to the telecopy
number specified below:
If to the Company at:
WebCentric Communications, Inc.
Attn: Daniel L. Kemp
210 S. 16th Street, Suite M8
Mezzanine Level
Braiker-Brandeis Building
Omaha, NB 68102
-41-
42
Fax No: (402) 330-9277
With copies to:
Kutak Rock
Attn: Bruce A. Harrell, Esq.
The Omaha Building
1650 Farnam Street
Omaha, NB 08102
Fax No: (402) 346-1148
If to Parent at:
National TechTeam, Inc.
Attn: Lawrence A. Mills
22000 Garrison Avenue
Dearborn, MI 48124
Fax No: (313) 277-6409
With copies to:
Cox, Hodgman & Giarmarco
Attn: Kenneth J. LaMotte, Esq.
201 W. Big Beaver, Suite 500
Troy, Ml 48084
Fax No: (810) 528-2773
If to Shareholders' Representative at:
(Same as Company)
All Notices shall be deemed delivered when actually received if
delivered personally or by overnight courier, or if sent by telecopier (the
receipt of which will be promptly confirmed in writing), addressed in accordance
with Section 15.2. Each of the parties shall notify the other in accordance with
this Section 15.2 of any change of address or telecopy number to which notice is
required to be mailed.
15.3 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, and by different parties in separate counterparts,
each of which when executed shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
-42-
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15.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter and supersedes
all prior agreements and understandings among the parties with respect to the
subject matter.
15.5 Headings. The headings contained in this Agreement (and the
Schedules) are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.6 Assignment: Amendment of Agreement. This Agreement shall not
be assigned by any party without the prior written consent of all other parties.
This Agreement may be amended only by written agreement of the parties, duly
executed and delivered by an authorized representative of each of the parties.
15.7 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware applicable to contracts executed and fully performed within that State,
without giving effect to the conflicts of laws principles thereof.
15.8 Failure to Close. If for any reason this Agreement is
terminated prior to the Effective Time, Parent shall return to the Company all
documents and other information, including all originals and all copies thereof,
theretofore delivered to Parent by the Company in conjunction with the Merger.
Parent shall not retain copies of any such documents or other information, and
shall not thereafter for a period of five years disclose to any person for any
purpose or use any information conveyed to Parent in connection with the
transactions contemplated by this Agreement, except for such information which
was: (a) possessed by Parent prior to October 15, 1996; (b) disclosed to Parent
by an independent third party without a violation of any obligation of
confidentiality on the part of such third party to the Company; (c)
ascertainable from public or published information or trade sources; or (d)
obtained from Company in Parent's capacity as a shareholder of the Company.
15.9 Further Assurances. Each party agrees that it will execute and
deliver, and cause to be executed and delivered, on or after the date of this
Agreement, all such other documents and will take all reasonable actions as may
be necessary to consummate the Merger on the terms of this Agreement, to
consummate the transactions contemplated, and to effectuate the provisions and
purposes thereof.
15.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party, and nothing in this Agreement is
intended or shall confer upon any other person any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement.
-43-
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15.11 Non-Waiver. The failure of any one or more instances of a
party to insist upon performance of any of the terms, covenants or conditions of
this Agreement, to exercise any right or privilege in this Agreement conferred,
or the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred.
15.12 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to affect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated are fulfilled to the extent possible.
15.13 Incorporation of Schedules. The Schedules are incorporated
into this Agreement and shall be deemed a part of this Agreement as if set forth
herein in full. References to "this Agreement" and the words "herein", "hereof"
and words of similar import refer to this Agreement (including its Schedules) as
an entirety. In the event of any conflict between the provisions of this
Agreement and any such Schedule, the provisions of this Agreement shall control.
15.14 Waiver of Jury-Trial. EACH OF THE COMPANY AND PARENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED.
IN WITNESS WHEREOF, Parent, Acquisition, the Company and the
Shareholders' Representative have executed and delivered this Agreement as of
the day and year first above written.
NATIONAL TECHTEAM, INC.
By: William F. Coyro, Jr.
---------------------------------
Its: CEO & CHAIRMAN
---------------------------------
"Parent"
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TECHTEAM TRAINING, INC.
By: William F. Coyro, Jr.
------------------------------------------
Its: Chairman
------------------------------------------
"Acquisition"
WEBCENTRIC COMMUNICATIONS, INC.
By: Daniel L. Kemp
------------------------------------------
Its: President
------------------------------------------
"Company"
Daniel L. Kemp
----------------------------------------------
Daniel L. Kemp "Shareholders' Representative"
-45-
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Schedule 2.1.1
Cash and Share Consideration
WebCentric NTT NTT NTT NTT
Share Cash Registered Restricted Stock Escrow
Name of Shareholder Outstanding Consideration Share Consideration Share Consideration Options Fund
- ------------------- ------------ ------------- ------------------- ------------------- ------- ------
Dan Kemp ", ** 1,200,000 $ 100,000 18,279 76,268 11,528 5,453
Mike Vesey ", ** 860,000 $ 30,000 13,482 56,089 8,262 3,907
Bruce Botkin ", ** 400,000 6,877 26,089 3,843 1,817
Summa Four, Inc. 345,685 $ 158,274 23,178
Lotus Development Corp. 266,000 $ 532,000
David Grunsted ", ** 212,000 3,644 13,829 2,037 963
Centepede Capital Investments 150,000 $ 300,000
John Kampfe 120,000 $ 48,000 8,348
John Borders 80,000 $ 18,400 591 5,585
Leonard Bommer 40,000 $ 16,000 2,783
M. S. I. LLC 30,000 $ 60,000
Kirkwin Trading Corp. 25,000 $ 50,000
Rose Bud Holdings, Ltd. 25,000 $ 50,000
3878 Investments 20,000 $ 40,000
Kossert Enterprises 15,000 $ 30,000
Wendy Balley and Diane L.
Carter, JT WROS 15,000 $ 30,000
AdMotion Marketing, Ltd. 15,000 $ 30,000
Dr. Hartley A. Schwartzberg 10,000 $ 20,000
Lionel Johnson 6,000 $ 12,000
Warting P. Clarke 5,000 $ 10,000
Jeffrey P. Zimmerman 5,000 $ 10,000
Richard L. Geringer 5,000 $ 10,000
Tom Liese ** 16,000 1,391 2,783
Mitzi Merti ** 12,000 1,043
Dan Linder ** 2,400 209
Chris Krebs ** 12,000 1,043 1,043
Total 3,892,085 $ 1,654,874 67,737 190,971 29,498 12,140
--------- ----------- ------ ------- ------ ------
" Denotes principle shareholders contributing National TechTeam, Inc.
Restricted Stock to the 24 month Escrow Account
** Denotes employee agreements (attached) relating to stock options and stock
ownership.
47
SCHEDULE 5.1
CORPORATE ORGANIZATION AND STANDING
WebCentric Communications, Inc. does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable for or
exercisable for any equity or any similar interest in, any corporation, joint
venture or other business association or entity.
48
SCHEDULE 5.2
CAPITALIZATION OF THE COMPANY
STOCK
A. ISSUED SHARES
Name of Shareholder Number of Shares
Daniel L. Kemp 1,200,000
Michael A. Vesey 860,000
National TechTeam, Inc. 618,350
Bruce A. Botkin 400,000
Summa Four, Inc. 345,685
Lotus Development Corp. 266,000
David P. Grunsted 212,000
Centipede Capital Investments Corp. 150,000
John S. Kampfe 120,000
John K Borders Jr. 80,000
Leonard M. Sommer 40,000
M.S.I., LLC 30,000
Kirkwin Trading Corp. 25,000
Rose Bud Holdings, Ltd. 25,000
3878 Investments Ltd. 20,000
Kossert Enterprises 15,000
Wendy Bailey and Diane L. Carter, JT WROS 15,000
AdMotion Marketing, Ltd. l5,000
Dr. Hartley A. Schwartzberg 10,000
49
Exhibits previously
Submitted to company
SCHEDULE 5.2 - CONTINUATION
Lionel Johnson 6,000
Warring P. Clarke 5,000
Jeffrey P. Zimmerman 5,000
Richard L. Geringer 5,000
---------
Total 4,468,035
B. Employee Stock Options
Name of Shareholder Number of Shares
Tom Liese 80,000
Mitzi Mertl 60,000
Chris Krebs 60,000
Dan Linder 12,000
-------
Total 212,000
C. PREEMPTIVE RIGHTS
Each of the current owners of the Company's Common Stock have
preemptive rights pursuant to the Company's Articles of Incorporation.
D. SUMMA FOUR, INC. AGREEMENT
EXHIBIT A Purchase of Common Stock of WebCentric
Communications, inc. by Summa Four, Inc.
Individual Agreements
Stock Purchase Agreement with exhibits
Stockholders' Voting Agreement
Right of First Refusal Agreement
50
SCHEDULE 5.4
NO CONFLICT
The execution and delivery of this Agreement by the Seller does not, and the
performance of the Agreement by the Seller will not, ( I ) conflict with or
violate the Articles of Incorporation or By-Laws of the Seller, ( ii ) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Seller or by which it or any breach of or constitute a default ( or an
event that with notice or lapse of time or both would become a default ), or
impair the Seller's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Seller pursuant to, any
contract, agreement, license, permit or other instrument or obligation to which
the Seller is a party or by which the Seller or its properties is bound or
affected, except for any such conflicts, violations, breaches, defaults or
other occurrences that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
51
SCHEDULE 5.5
FINANCIAL STATEMENTS
Exhibit A Unaudited financial statements of the Company for the
period ending October 31, 1996.
Exhibits previously submitted
to company
52
SCHEDULE 5.6.4
SCHEDULE OF CONTRACTS
Contract Contract Current Monthly Contract
Inception Date Termination Date Payable Recurring Balance Due
Sprint Communications Voice T1 20-Aug-96 20-Aug-97 $ - $2,514.00 $ 25,140.00
TCG Co-Location $1,000.00 $ 12,000.00
TCG Tariffed Services-DS3 16-Oct-96 16-Oct-97 $ 920.00 $3,544.00 $ 42,528.00 *
TCG Tariffed Services-T1 29-Oct-96 Month-to-Month $ 560.00 $ 359.00 $ 4,308.00 **
Mega Corp Lease 1-Jan-97 31-Dec-01 $ - $161,888.60 ***
* Liability will transition to Sprint Communications within 3 months
** Month to Month expected termination February 1997.
*** WebCentric has leased space from from Mega Corp (2173 sq ft).
53
SCHEDULE 5.7
ABSENCE OF CERTAIN CHANGES
West Interactive, acceleration of $40,000.00 payment regarding cancellation of
March contract.
Summa Four, purchase of Summa Four, VC080 for $444,557.00 and sale of
WebCentric Stock for $445,000.00.
Chris Krebs, employee signing bonus of $40,000.00
Mega Corp., Security deposit of $15,000.00 for lease on new space.
54
SCHEDULE OF INSURANCE POLICIES
LOSSES OR
---------
CARRIER COVERAGE AMOUNT BENEFICIARY CLAIMS FILED
------- -------- ------ ----------- ------------
Lincoln Benefit Life Term Life Policy - Dan Kemp $1,000,000 WebCentric None
Lincoln Benefit Life Term Life Policy - Mike Vesey $1,000,000 WebCentric None
Lincoln Benefit Life Term Life Policy - David Grunsted $1,000,000 WebCentric None
Lincoln Benefit Life Term Life Policy - Bruce Botkin $1,000,000 WebCentric None
Lincoln Benefit Life Term Life Policy - Dan Kemp $ 500,000 Kemp Estate None
Lincoln Benefit Life Term Life Policy - Mike Vesey $ 500,000 Vesey Estate None
Lincoln Benefit Life Term Life Policy - David Grunsted $ 500,000 Grunsted Estate None
Lincoln Benefit Life Term Life Policy - Bruce Botkin $ 500,000 Botkin Estate None
Norwest Insurance EDP Hardware $ 840,000 WebCentric None
Transit Coverage $ 10,000 WebCentric None
Norwest Insurance Workers Compensation $ 300,000 Employee None
Norwest Insurance Crime Coverage $ 30,000 WebCentric None
Norwest Insurance Commercial General Liability - Per Occurance
General Aggregate $2,000,000 None
Products $1,000,000 None
Personal Injury $1,000,000 None
Each Occurance $1,000,000 None
Fire Damage $ 50,000 None
Medical Expenses $ 5,000 None
Chastain Otis Insurance Group Health
Mundy and Associates Group Disability - Long Term
55
SCHEDULE 5.9
LITIGATION
There is no claim, action, suit, proceeding, or investigation pending or, to
the best knowledge of the Company or the Shareholders, threatened against the
Company or the directors, officers, agents or employees of the Company (in
their capacity as such), or any properties or rights of the Company, before any
court, arbitrator or administrative, governmental, or regulatory authority or
body, that would reasonably be expected to have a Material Adverse Effect.
56
SCHEDULE 5.10
COMPLIANCE WITH LAWS; LICENSES AND PERMITS
The Company is not in conflict with, or in default or violation of, any law,
rule, regulation, order, judgment or decree applicable to the Company or by
which its properties are bound or affected, except for any such conflicts,
defaults or violations which would not reasonably be expected to have a
material Adverse Effect. The Company is not at this time required to hold or
possess in its own name licenses, permits or governmental approvals.
57
SCHEDULE 5.11
TAX MATTERS
Seller has (I) timely filed or will file when due (or has filed and has paid
all assessed penalties and interest), including extensions thereof, all
federal, foreign, state and local tax returns required to be filed by or with
respect to it (including those relating to any sales or use tax) prior to
Closing; and (ii) paid in full or accrued all taxes for all periods ending on
or prior to Closing.
Seller is not a party to any pending action or proceeding, nor, to the best
knowledge of Seller or the Shareholders, is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
any taxes has been asserted against Seller which has not been settled with all
amounts due having been paid or contested in good faith.
58
SCHEDULE 5.13
REAL PROPERTY; LEASED PREMISES
The Company does not have any ownership interest in any real property.
EXHIBIT A Lease Agreement between WebCentric Communications, Inc. and MR
INC. (landlord) for office space at 7101 Mercy Road, the
Insurance Exchange Building.
EXHIBIT B Lease Agreement between WebCentric Communications, Inc. and
Brandies Building investors, L.P.. This lease is scheduled to
expire December 31, 1996.
Exhibits previously
submitted to company
59
SCHEDULE 5.14
MATERIAL CONTRACTS
EXHIBIT A Employment Contract between WebCentric Communications, Inc.
and:
Employee Dated
-------- -----
Daniel L. Kemp October 23, 1996
Michael A. Vesey October 23, 1996
Bruce A. Botkin October 23, 1996
David P. Grunsted March 18, 1996
Tom Liese October 23, 1996
Mitzi Mertl October 23, 1996
Chris Krebs October 23, 1996
Dan Linder October 23, 1996
(referenced in Section 5.20 Exhibit A)
EXHIBIT B Sprint Agreement
EXHIBIT C Brite Voice Agreement
EXHIBIT D Schedule of various operational agreements
Exhibits previously submitted
to company
60
SCHEDULE 5.15
INTELLECTUAL PROPERTY AND INTELLECTUAL PROPERTY RIGHTS
Seller solely owns or has the exclusive right to use, free and clear of any
lien or other encumbrance or restriction, all patents, trademarks (whether
registered or unregistered), service mark, trade names, service names, brand
names, logos and copyrights (collectively, "Intellectual Property Rights")
owned or used by Seller in the conduct of its business.
EXHIBIT A Sprint Agreement
Exhibits previously
submitted to company
61
SCHEDULE 5.16
ENVIRONMENTAL COMPLIANCE
There are no exceptions to those representations and warranties made by the
Seller pursuant to Section 5.16 of Article V.
62
SCHEDULE 5.19
NO THIRD-PARTY APPROVALS
No consent, approval, authorization, order, filing, registration or
qualification of or with any court, governmental authority or third person is
required to be made or obtained by the Company in connection with the execution
and delivery of this Agreement or the consummation by the Company of the
transactions contemplated.
63
SCHEDULE 5.20
EMPLOYEE MATTERS
There are no collective bargaining agreements or other Labor union contracts
applicable to persons employed by the Company and to the best knowledge of the
Company or the Shareholders, there are no activities or proceedings of any
labor union to organize any such employees.
The Company is not in violation of any applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours applicable to it, in any case which could reasonably be expected
individually or in the aggregate to have a Material Adverse Effect, nor is the
Company engaged in any unfair labor practice.
EXHIBIT A Employee Contracts
EXHIBIT B Employee Group Health Plan
The Company currently participates in an Employee Group Health Insurance Plan.
Exhibits previously submitted to
company
64
SCHEDULE 5.21
PERSONAL PROPERTY
EXHIBIT A Personal Property
The Company (a) has good and valid title to all of its personal property listed
in Exhibit A as owned by it, and (b) valid leasehold interests in all Personal
Property leased under the Personal Property Leases, in each case free and clear
of all liens, encumbrances, or other security interests.
65
SCHEDULE 5.23
BANK ACCOUNTS; SAFE DEPOSIT BOXES
EXHIBIT A Listing of all Bank Accounts
Exhibits previously submit
to company
66
SCHEDULE 5.24
GUARANTIES
The Company is not a guarantor for any liability or obligation (including
indebtedness) of any third party.
67
SCHEDULE 5.25
CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY
Summa Four, inc. sold to WebCentric a VC080 switch, to the best knowledge of the
Company or the Shareholders no other Shareholders has been involved in any
business arrangement or relationship with the Company, and none of such
Shareholders owns any asset which is used in the business of the Company.
68
SCHEDULE 5.26
RESTRICTIONS ON BUSINESS ACTIVITIES
Except as set forth in Exhibits A and B, to the best knowledge of the Company or
the Shareholders, there is no agreement, judgment, injunction or other order
binding upon the Company which has or could reasonably be expected to have the
effect of prohibiting or impairing any business practice of the Company or the
conduct of business by the Company as currently conducted.
EXHIBIT A Brite Voice Agreement
EXHIBIT B Sprint Agreement
69
SCHEDULE 5.28
NON-FOREIGN STATUS
Except as set forth in Exhibit A, none of the Shareholders is a foreign person
within the meaning of Section 1445(f) of the Code.
EXHIBIT A Foreign Shareholders
Lotus Development, Corp.
3878 Investments Ltd.
Ms. Wendy Bailey and Diane Carter, JT WROS
AdMotion Marketing, Ltd.
Mr. Warring P. Clarke
Mr. Lionel Johnson
Mr. Jeffrey Zimmerman
Kirkwin Trading Corp.
Rose Bud Holdings, Ltd.
Centepede Capital Investments
70
SCHEDULE 5.29
COMPANY INDEBTEDNESS
As of the date of this agreement the Company has no debt.
71
SCHEDULE 5.32
DEFINITIONS OF "BEST KNOWLEDGE"
The term "to the best knowledge of the Shareholder" or other term of similar
import means that none of the persons listed below has actual knowledge that the
representations or warranties set forth in this Agreement is untrue in any
material respect.
EXHIBIT A Shareholder List
Exhibits previously submitted
to company
72
EXHIBIT A
NAME OF SHAREHOLDER
Daniel L. Kemp
Michael A. Vesey
National TechTeam, Inc.
Bruce A. Botkin
Summa Four, Inc.
Lotus Development Corp.
David P. Grunsted
Centipede Capital Investments Corp.
John S. Kampfe
John K. Borders, Jr.
Leonard M. Sommer
M.S.I., LLC
Kirkwin Trading Corp.
Rose Bud Holdings, Ltd.
3878 Investments Ltd.
Kossert Enterprises
Wendy Bailey and Diane L. Carter, JT WROS
AdMotion Marketing, Ltd.
Dr. Hartley A. Schwartzberg
Lionel Johnson
Warring P. Clarke
Jeffrey P. Zimmerman
Richard L. Geringer
73
SCHEDULE 8.1.2
EMPLOYEE BENEFITS; CREDITING SERVICE
Employee Benefits: Full family group health coverage
Full family dental coverage
Key employee Life Insurance
74
Schedule 8.1.3
National TechTeam Options
D. Kemp 11,528 shares
M. Vesey 8,262 shares
B. Bothin 3,843 shares
D. Grunsted 2,037 shares
T. Liese 2,783
C. Krebs 1,043
------
28,496
======
75
Schedule 8.7
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated January ___, 1997, among NATIONAL
TECHTEAM, INC, ("Parent"), TECHTEAM TRAINING, INC. ("Acquisition"), the
undersigned representative of the WEBCENTRIC COMMUNICATIONS, INC. shareholders
(the "Shareholders' Representative"), and NORWEST BANK NEBRASKA, NA, as the
escrow agent ("Escrow Agent").
1. Agreement and Plan of Merger. This Escrow Agreement is made
in connection with the Agreement and Plan of Merger, dated as of January ___,
1997 (the "Agreement"), among Parent, WebCentric Communications, Inc. (the
"Company"), and Acquisition pursuant to which the Company will merge into
Acquisition, and each share of Company Common Stock ("Company Share"), issued
and outstanding immediately prior to the Effective Time shall, subject to the
escrow provisions contained herein and in Section 8.7 of the Agreement, be
cancelled and converted into the right to receive cash and/or shares of Parent
Common Stock ("Parent Company Stock") in accordance with Section 2.1.1 of the
Agreement. All other capitalized words and terms used herein without
definition are as defined in the Agreement.
2. Escrow. Subject to the provisions of this Agreement,
immediately prior to the Effective Time, Parent will deliver to the Escrow
Agent certificates representing the number of shares of Parent Company Stock
determined in accordance with Section 2.1.1 and 8,7 of the Agreement. Each
such share of Parent Company Stock shall be registered in the name of the
principal Shareholders of the Company identified on Schedule 2.1.1 of the
Agreement (the "Principal Shareholders") who, subject to the provisions of this
Agreement, has the right to receive such shares of Parent Company Stock, and
shall be duly endorsed in blank or accompanied by stock powers duly signed in
blank by such Principal Shareholder, with signatures guaranteed by a bank or
member firm of the New York Stock Exchange (such shares of Parent Company
Stock, together with any shares of Parent Company Stock received in respect
thereof, are referred to as the "Escrowed Shares"). The Escrow Agent shall
hold and dispose of the Escrowed Shares and shall act as Escrow Agent in
accordance with the terms and provisions of this Agreement.
3. Liability Secured by the Escrowed Shares. The Escrowed Shares are
for the indemnification of the Parent's Indemnified Persons as provided in
Section 12 of the Agreement. The Escrowed Shares shall be held as a trust fund
and shall not be subject to lien or attachment of any creditor of any party and
shall be used solely for the purposes and subject to the conditions set forth
in this Escrow Agreement.
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4. Release of Escrowed Shares.
4.1 Deductions from the Escrow Fund - Purchasers'
Indemnified Persons. In the event that it is finally determined in accordance
with Article 12 of the Agreement that Losses have been suffered by the Parent's
Indemnified Persons and that monies are due to the Parent's Indemnified
Persons, then the Escrow Agent shall deliver to Parent, in satisfaction of
such monies due, the number of Escrowed Shares (computed to the nearest whole
share) having an aggregate dollar value on the date of said delivery equal to
the aggregate amount of such monies due.
4.2 Release of Escrowed Shares. On the Termination Date,
the Escrow Agent shall deliver to the Principal Shareholders the balance of the
Escrowed Shares not delivered to Parent pursuant to Section 4.1. The
distribution to each such Principal Shareholder shall include cash payment by
Parent in lieu of fractional shares.
5. Fees. Parent agrees to pay the Escrow Agent a total of $xxxx
for its services. Parent agrees to reimburse the Escrow Agent for all
reasonable expenses, disbursements and advances incurred or made by it in
performance of its duties hereunder.
6. Responsibilities of Escrow Agent. The Escrow Agent's
acceptance of its duties under this Escrow Agreement is subject to the
following terms and conditions, which shall govern and control with respect to
its rights, duties, liabilities and immunities:
6.1 Except as to the due execution and delivery of this
Escrow Agreement by its duly authorized officers, the Escrow Agent makes no
representation and has no responsibility as to the validity of this Escrow
Agreement or of any other instrument referred to in this Agreement, or as to
the correctness of any statement contained, and it shall not be required to
inquire as to the performance of any obligation under the Agreement.
6.2 The Escrow Agent shall be protected in acting upon
any written notice, request, waiver, consent, receipt or other document which
shall be in the form of a notice jointly executed by Parent, Acquisition and
the Shareholders' Representative, not only as to its due execution and the
validity and effectiveness of its provisions, but also as to the truth of any
information therein contained, which it in good faith believes to be genuine
and what it purports to be.
6.3 The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do or refrain from
doing in connection therewith, except ifs own negligence of misconduct.
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6.4 The Escrow Agent may consult with legal counsel
selected by it, and it shall not be liable for any action taken or omitted by
it in good faith in accordance with the advice of such counsel.
6.5 The Shareholders' Representative, on behalf of the
Shareholders, and Parent, jointly, agree to indemnify the Escrow Agent against
and save it harmless from any and all claims, liabilities, costs, payments and
expenses, including fees of counsel (who may be selected by the Escrow Agent),
for anything done or omitted by it in the performance of this Agreement, except
as a result of its own negligence or bad faith.
6.6 The Escrow Agent shall have no duties or
responsibilities except those expressly set forth. It shall not be bound by
any modification of this Escrow Agreement unless in writing signed by the other
parties and, if its duties as Escrow Agent are affected, unless it shall have
given prior written consent.
7. Resignation of Agent; Appointment of Successor. The Escrow
Agent acting at any time hereunder may resign at any time by giving 30 days
prior written notice of resignation to Parent and the Shareholders'
Representative, such resignation to be effective on the date specified in such
notice. Parent and the Shareholders' Representative shall appoint a successor
Escrow Agent, by a written instrument delivered to and executed by such
successor Escrow Agent, Parent and the Shareholders' Representative, whereupon
such successor Escrow Agent shall succeed to all the rights and obligations of
the retiring Escrow Agent as of the effective date of resignation as if
originally named and the retiring Escrow Agent shall duly transfer and deliver
the Escrowed Shares at the time held by the retiring Escrow Agent, provided
that, if no successor Escrow Agent shall have been appointed on the effective
date of resignation of the resigning Escrow Agent, the resigning Escrow Agent
may pay the Escrowed Shares into a court of competent jurisdiction.
8. Amendment and Termination. This Escrow Agreement may be
amended or terminated only by a writing signed by Parent, the Escrow Agent and
the Shareholders' Representative.
9. Notices. All notices to be delivered hereunder shall be
governed by Section 15.2 of the Agreement provided, that any notice to
the Escrow Agent shall be directed to:
Norwest Bank Nebraska, NA
Investments and Trust
1919 Douglas Street
Omaha NE 68103
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10. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of Michigan
applicable to contracts executed and fully performed within that State, without
giving effect to the conflicts of laws principles thereof.
11. Miscellaneous. This Agreement shall be binding and inure to
the benefit of the parties and their successors and assigns. The headings in
this Agreement are for convenience of reference only and shall not define or
limit the provisions hereof. This Agreement may be executed in one or more
counterparts, each of which is an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
TECHTEAM TRAINING, INC. NATIONAL TECHTEAM, INC.
By: Willie F. Coyro, Jr. By: Willie F. Coyro, Jr.
--------------------- ---------------------
Title: Chairman Title: CEO & Chairman
------------------ ------------------
SHAREHOLDERS' REPRESENTATIVE Norwest Bank Nebraska, NA, ESCROW Agent
By: Daniel L. Kemp By: Larry D. Loncke
------------------------- ------------------------
Title: LARRY D. LONCKE
Vice President
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SCHEDULE 9
CONDUCT OF BUSINESS PENDING CLOSING
The Company agrees that pending the Effective Time, the Company shall conduct
its business in a Manner materially consistent with its past practices, and
shall not engage in any transactions out of the ordinary course of business.
Exhibits previously submitted
to company