AGREEMENT AND PLAN OF MERGER
AMONG
PROFESSIONAL DETAILING, INC.,
TVG ACQUISITION CORP.,
AND
TVG, INC.
May 12, 1999
TABLE OF CONTENTS
ARTICLE I THE MERGER..................................................1
1.1 The Merger.......................................................1
1.2 The Closing......................................................1
1.3 Actions at the Closing...........................................2
1.4 Additional Action................................................2
1.5 Conversion of Shares.............................................2
1.6 Exchange of Shares...............................................3
1.7 Dividends........................................................3
1.8 Fractional Shares................................................4
1.9 Escrow...........................................................4
1.10 Certificate of Incorporation.....................................4
1.11 By-laws..........................................................4
1.12 Directors and Officers...........................................5
1.13 No Further Rights................................................5
1.14 Closing of Transfer Books........................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............5
2.1 Organization, Qualification and Corporate Power..................5
2.2 Capitalization...................................................5
2.3 Authorization of Transaction.....................................6
2.4 Noncontravention.................................................6
2.5 Subsidiaries.....................................................7
2.6 Financial Statements.............................................7
2.7 Accounts Receivable..............................................7
2.8 Absence of Certain Changes.......................................8
2.9 Undisclosed Liabilities..........................................8
2.10 Tax Matters......................................................8
2.12 Assets..........................................................10
2.12 Owned Real Property.............................................10
2.13 Intellectual Property...........................................10
2.14 Real Property Leases............................................13
2.15 Contracts.......................................................13
2.16 Customers, Suppliers, Adverse Conditions........................15
2.17 Powers of Attorney..............................................16
2.18 Insurance.......................................................16
2.19 Litigation......................................................16
2.20 Employees and Subcontractors....................................17
2.21 Employee Benefits...............................................18
2.22 Environmental Matters...........................................20
2.23 Legal Compliance, Permits.......................................21
2.24 Certain Business Relationships With Affiliates..................22
2.25 Brokers' Fees...................................................22
2.26 Books and Records...............................................22
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2.27 Prepayments, Prebilled Invoices and Deposits....................22
2.28 Banking Facilities..............................................23
2.29 Pooling.........................................................23
2.30 Company Action..................................................23
2.31 Year 2000.......................................................23
2.32 Disclosure......................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
BUYER AND THE TRANSITORY SUBSIDIARY........................24
3.1 Organization....................................................24
3.2 Capitalization..................................................24
3.3 Authorization of Transaction....................................24
3.4 Noncontravention................................................25
3.5 Reports and Financial Statements................................25
3.6 Absence of Material Adverse Changes.............................26
3.7 Pooling.........................................................26
3.8 Brokers' Fees...................................................26
3.9 Disclosure......................................................26
3.10 Opinion of Financial Advisor....................................26
ARTICLE IV COVENANTS..................................................26
4.1 Best Efforts....................................................26
4.2 Notices and Consents............................................27
4.3 Operation of Business...........................................27
4.4 Full Access.....................................................28
4.5 Notice of Breaches..............................................29
4.6 Exclusivity.....................................................29
4.7 Agreements from Certain Affiliates of the Company...............29
4.8 Listing of Merger Shares........................................29
4.9 Assistance with Retention.......................................29
4.10 Assistance with Tax Disputes....................................29
4.11 Credit for Service..............................................30
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER.......................30
5.1 Conditions to Obligations of the Buyer and the Transitory
Subsidiary......................................................30
5.2 Conditions to Obligations of the Company........................32
ARTICLE VI INDEMNIFICATION............................................33
6.1 Indemnification.................................................33
6.2 Method of Asserting Claims......................................34
6.3 Survival........................................................35
6.4 Limitations.....................................................35
ARTICLE VII TERMINATION................................................36
7.1 Termination of Agreement........................................36
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7.2 Effect of Termination...........................................36
ARTICLE VIII DEFINITIONS................................................37
ARTICLE IX MISCELLANEOUS..............................................38
9.1 Press Releases and Announcements................................38
9.2 No Third Party Beneficiaries....................................38
9.3 Entire Agreement................................................38
9.4 Succession and Assignment.......................................39
9.5 Counterparts....................................................39
9.6 Headings........................................................39
9.7 Notices.........................................................39
9.8 Governing Law...................................................40
9.9 Amendments and Waivers..........................................40
9.10 Severability....................................................40
9.11 Expenses........................................................41
9.12 Specific Performance............................................41
9.13 Construction....................................................41
9.14 Incorporation of Exhibits and Schedules.........................41
9.15 Submission to Jurisdiction......................................41
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EXHIBITS
Exhibit A -- Form of Escrow Agreement
Exhibit B -- Form of Certificate of Incorporation of Surviving Corporation
Exhibit C -- Form of Registration Rights Agreement
Exhibit D -- Form of Employment Agreement
Exhibit E -- Form of Affiliate Agreement
Exhibit F -- Form of Opinion of Counsel to the Company
Exhibit G -- Form of Opinion of Counsel to the Buyer
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as of
May 12, 1999 by and among PROFESSIONAL DETAILING, INC., a Delaware corporation
(the "Buyer"), TVG ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of the Buyer (the "Transitory Subsidiary"), and TVG, INC., a Delaware
corporation (the "Company"). For purposes of this Agreement, where the context
requires, the term "Company" shall also include any predecessors of the Company.
The Buyer, the Transitory Subsidiary and the Company are referred to
collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary into the
Company in a transaction that will qualify for federal tax purposes as a
reorganization within the meaning of Section 368 of the Code (as defined below)
and for accounting purposes as a "pooling of interests" pursuant to Accounting
Principles Bulletin Opinion No. 16. In such merger, the stockholders of the
Company will receive capital stock of the Buyer in exchange for their capital
stock of the Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Company and
the Transitory Subsidiary file the certificate of merger prepared and executed
in accordance with the relevant provisions of the Delaware General Corporation
Law, including, without limitation, Section 251 thereof (the "Certificate of
Merger") with the Secretary of State of the State of Delaware. The Merger shall
have the effects set forth in Sections 251, 259 and 260 of the Delaware General
Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Morse, Zelnick,
Rose & Lander, LLP, 450 Park Avenue, New York, New York 10022 commencing at 2:00
p.m. local time on May 12, 1999, or, if all of the conditions to the obligations
of the Parties to consummate the transactions contemplated hereby have not been
satisfied or waived by such date, on such mutually agreeable later date as soon
as practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(the "Closing Date").
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1.3 Actions at the Closing. At the Closing, (a) the Company shall deliver
to the Buyer and the Transitory Subsidiary the various certificates, instruments
and documents referred to in Section 5.1, (b) the Buyer and the Transitory
Subsidiary shall deliver to the Company the various certificates, instruments
and documents referred to in Section 5.2, (c) the Company and the Transitory
Subsidiary shall file with the Secretary of State of the State of Delaware the
Certificate of Merger, (d) the Buyer shall deliver certificates for the Initial
Shares to the Company Stockholders (as such terms are defined below) in
accordance with Section 1.6 and (e) the Buyer, the Indemnification
Representative (as defined therein) and the Escrow Agent (as defined therein)
shall execute and deliver the Escrow Agreement in substantially the form
attached hereto as Exhibit A (the "Escrow Agreement") and the Buyer shall
deliver to the Escrow Agent a certificate for the Escrow Shares (as defined
below) being placed in escrow on the Closing Date pursuant to Section 1.9.
1.4 Additional Action. 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 the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, no par value per share, of the
Company ("Company Shares") issued and outstanding immediately prior to the
Effective Time (other than the Company Shares held in the Company's treasury)
shall be converted into and represent the right to receive (subject to the
provisions of Section 1.9) such number of shares of common stock, $.01 par value
per share, of the Buyer ("Buyer Common Stock") as is equal to the Conversion
Ratio. The "Conversion Ratio" shall initially be equal to a fraction, (x) the
numerator of which shall be 1,256,882 and (y) the denominator of which shall be
763,876 (the number of Company Shares issued and outstanding immediately prior
to the Effective Time). The Conversion Ratio shall be subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split
or similar event affecting the Buyer Common Stock between the date of this
Agreement and the Effective Time. Stockholders of record of the Company
("Company Stockholders") shall be entitled to receive immediately 90% of the
shares of Buyer Common Stock into which their Company Shares were converted
pursuant to this Section 1.5(a) (the "Initial Shares"); the remaining 10% of the
shares of Buyer Common Stock into which Company Shares were converted pursuant
to this Section 1.5(a) (the "Escrow Shares") shall be deposited in escrow
pursuant to Section 1.9 and shall be held and disposed of in accordance with the
terms of the Escrow Agreement. The Initial Shares and the Escrow Shares shall
together be referred to herein as the "Merger Shares."
(b) Each Company Share held in the Company's treasury immediately
prior to the Effective Time shall be cancelled and retired without payment of
any consideration therefor.
(c) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into
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and thereafter evidence one share of common stock, $.01 par value per share, of
the Surviving Corporation.
1.6 Exchange of Shares.
(a) Each holder of certificates that, immediately prior to the
Effective Time, represented Company Shares ("Certificates"), upon proper
surrender thereof to the Buyer at or after the Effective Time, shall be entitled
to receive in exchange therefor (subject to any taxes required to be withheld)
the Initial Shares issuable pursuant to Section 1.5(a). Until properly
surrendered, each such Certificate shall be deemed for all purposes to evidence
only the right to receive the Initial Shares issuable pursuant to Section
1.5(a). Holders of Certificates shall not be entitled to receive certificates
for the Initial Shares to which they would otherwise be entitled until such
Certificates are properly surrendered.
(b) If any Initial Shares are to be issued in the name of a person
other than the person in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition to the issuance of such Initial
Shares that (i) the Certificate so surrendered shall be transferable, and shall
be properly assigned, endorsed or accompanied by appropriate stock powers, (ii)
such transfer shall otherwise be proper and (iii) the person requesting such
transfer shall pay to the Buyer any transfer or other taxes payable by reason of
the foregoing or establish to the satisfaction of the Buyer that such taxes have
been paid or are not required to be paid. Notwithstanding the foregoing, no
Party shall be liable to a holder of Company Shares for any Initial Shares
issuable to such holder pursuant to Section 1.5(a) that are delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Buyer shall issue in
exchange for such lost, stolen or destroyed Certificate the Initial Shares
issuable in exchange therefor pursuant to Section 1.5(a). The Board of Directors
of the Buyer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to
submit to the Buyer an affidavit and to give to the Buyer an indemnity against
any claim that may be made against the Buyer with respect to the Certificate
alleged to have been lost, stolen or destroyed.
1.7 Dividends. No dividends or other distributions that are payable to the
holders of record of Buyer Common Stock as of a date on or after the Closing
Date shall be paid to former Company Stockholders entitled by reason of the
Merger to receive Initial Shares until such holders surrender (or provide an
affidavit of loss and agreement of indemnity with respect thereto) their
Certificates in accordance with Section 1.6. Upon such surrender, the Buyer
shall pay or deliver to the persons in whose name the certificates representing
such Initial Shares are issued any dividends or other distributions that are
payable to the holders of record of Buyer Common Stock as of a date on or after
the Closing Date and which were paid or delivered between the Closing Date and
the time of such surrender; provided that no such person shall be entitled to
receive any interest on such dividends or other distributions.
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1.8 Fractional Shares. No certificates or scrip representing fractional
Initial Shares shall be issued to former Company Stockholders upon the surrender
for exchange of Certificates (or delivery of an affidavit of loss and agreement
of indemnity), and such former Company Stockholders shall not be entitled to any
voting rights, rights to receive any dividends or distributions or other rights
as a stockholder of the Buyer with respect to any fractional Initial Shares that
would otherwise be issued to such former Company Stockholders. In lieu of any
fractional Initial Shares that would otherwise be issued, each former Company
Stockholder that would have been entitled to receive a fractional Initial Share
shall, upon proper surrender of such person's Certificates, receive a cash
payment equal to the average closing bid and ask price per share of the Buyer
Common Stock on the Nasdaq National Market, as reported by Nasdaq, on the
fifteen consecutive trading days ending three calendar days immediately
preceding the Closing Date, multiplied by the fraction of a share that such
Company Stockholder would otherwise be entitled to receive.
1.9 Escrow.
(a) On the Closing Date, the Buyer shall deliver to the Escrow Agent
a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, as described in Section 1.5(a), for the purpose
of securing the indemnification obligations of the Company Stockholders set
forth in this Agreement. The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement pursuant to the terms thereof. The Escrow Shares
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party, and
shall be held and disbursed solely for the purposes and in accordance with the
terms of the Escrow Agreement.
(b) The adoption of this Agreement and the approval of the Merger by
the Company Stockholders shall constitute approval of the Escrow Agreement and
of all of the arrangements relating thereto, including without limitation the
placement of the Escrow Shares in escrow and the appointment of the
Indemnification Representative.
1.10 Certificate of Incorporation. The Certificate of Incorporation of the
Surviving Corporation shall be amended as of the Effective Time so as to read in
its entirety in the form attached hereto as Exhibit B.
1.11 By-laws. The By-laws of the Surviving Corporation shall be the same
as the By-laws of the Transitory Subsidiary immediately prior to the Effective
Time, except that the name of the corporation set forth therein shall be changed
to the name of the Company.
1.12 Directors and Officers. The directors and officers of the Transitory
Subsidiary shall become the directors and officers of the Surviving Corporation
as of the Effective Time.
1.13 No Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
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1.14 Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be cancelled and exchanged for Initial
Shares in accordance with Section 1.5(a), subject to Section 1.9.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article II are true and
correct, except as set forth in the disclosure schedule attached hereto (the
"Disclosure Schedule"). The Disclosure Schedule shall be initialed by the
Parties and shall be arranged in paragraphs corresponding to the numbered and
lettered sections and paragraphs contained in this Article II, and the
disclosures in any paragraph of the Disclosure Schedule shall qualify other
sections and paragraphs in this Article II only to the extent it is clear from a
reading of the disclosure that such disclosure is applicable to such other
sections and paragraphs.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company is duly qualified to conduct business and
is in corporate and tax good standing under the laws of each jurisdiction in
which the nature of its businesses or the ownership or leasing of its properties
requires such qualification except where the failure to so qualify would not
have a material adverse effect on the Company and each such jurisdiction is set
forth in Section 2.1 of the Disclosure Schedule. The Company has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Company has
furnished to the Buyer true and complete copies of its Certificate of
Incorporation and By-laws, each as amended and as in effect on the date hereof.
The Company is not in default under or in violation of any provision of, its
Certificate of Incorporation.
2.2 Capitalization. The authorized capital stock of the Company consists
of 2,000,000 shares of Common Stock, $.01 par value per share, of which 763,876
shares are issued and outstanding and 236,124 shares are held in the treasury of
the Company. Section 2.2 of the Disclosure Schedule sets forth a complete and
accurate list of all stockholders of the Company, indicating the number of
Company Shares held of record by each stockholder. All of the issued and
outstanding Company Shares are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. There are no outstanding or
authorized options, warrants, rights, calls, convertible instruments, agreements
or commitments to which the Company is a party or which are binding upon the
Company providing for the issuance, disposition or acquisition of any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no
agreements, voting trusts, proxies, or understandings with respect to the
voting, or registration under the Securities Act of 1933, as amended (the
"Securities Act"), or any foreign securities laws, of any Company Shares (i)
between or among the Company and any of its stockholders and (ii) between or
among any of the
5
Company's stockholders. All of the issued and outstanding Company Shares were
issued in compliance with applicable federal and state securities laws.
2.3 Authorization of Transaction. The Company has all requisite power and
authority to execute and deliver the Fundamental Agreements (as defined below in
this Section 2.3) and to perform its obligations under the Fundamental
Agreements. The execution and delivery of the Fundamental Agreements and,
subject to the adoption of this Agreement and the approval of the Merger by a
majority of the votes represented by the outstanding Company Shares entitled to
vote on this Agreement and the Merger voting as a single class (the "Requisite
Stockholder Approval"), the performance by the Company of the Fundamental
Agreements and the consummation by the Company of the transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. Each Fundamental Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the Buyer and the Transitory Subsidiary, constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and except as the availability of equitable remedies may be limited by
general principles of equity. For purposes of this Agreement, the term
"Fundamental Agreements" means this Agreement, the Escrow Agreement, the
Registration Rights Agreement in the form attached hereto as Exhibit C (the
"Registration Rights Agreement") and, with respect to the Company and each
shareholder signatory hereto (the "Shareholder Employees"), the Employment
Agreement in the form attached hereto as Exhibits D.
2.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws and
the filing of the Certificate of Merger as required by the Delaware General
Corporation Law, neither the execution and delivery by the Company or the
Company Stockholders of the Fundamental Agreements, nor the consummation by the
Company or the Company Stockholders of the transactions contemplated thereby,
will (a) conflict with or violate any provision of the Certificate of
Incorporation (as amended) or By-laws of the Company, (b) require on the part of
the Company any filing with, or any permit, authorization, consent or approval
of, any court, arbitrational tribunal, administrative agency or commission or
other governmental or regulatory authority or agency (a "Governmental Entity"),
(c) conflict with, result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify or cancel, or require
any notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest (as defined below) or other
arrangement to which the Company is a party or by which the Company is bound or
to which any of its assets is subject, (d) result in the imposition of any
Security Interest upon any assets of the Company or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets. For purposes of this Agreement, "Security Interest"
means any mortgage, pledge, security interest, encumbrance, charge, or other
lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
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documentary letters of credit, in each case arising in the ordinary course of
business consistent with past custom and practice (including with respect to
frequency and amount) ("Ordinary Course of Business") of the Company.
2.5 Subsidiaries. The Company has no Subsidiaries.
2.6 Financial Statements. The Company has provided to the Buyer (i) the
audited balance sheet and statements of income, changes in stockholders' equity
and cash flows of the Company for the fiscal years ended December 31, 1998, 1997
and 1996; and (ii) the unaudited combined balance sheet (the "Most Recent
Balance Sheet") and statements of income, cash flows and stockholders' equity of
the Company as of and for the three-month period ended as of March 31, 1999 (the
"Balance Sheet Date"). Such financial statements (collectively, the "Financial
Statements") have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") (except for the absence of footnotes in
the Financial Statements referred to in clause (ii) of this Section 2.6) applied
on a consistent basis throughout the periods covered thereby, fairly present in
all material respects the financial condition, results of operations and cash
flows of the Company as of the respective dates thereof and for the periods
referred to therein and are consistent with the books and records of the Company
in all material respects. Complete copies of the Financial Statements are set
forth in Section 2.6 of the Disclosure Schedule.
2.7 Accounts Receivable. All trade accounts receivable and other
receivables reflected on the Most Recent Balance Sheet and all accounts and
other receivables acquired by the Company subsequent to the Balance Sheet Date
to and including the Closing Date (collectively, the "Accounts Receivable")
arose and/or will arise from bona fide transactions in the ordinary course of
business. All Accounts Receivable will be collected, in full (less reserves
applicable thereto as reflected on the Most Recent Balance Sheet) within 270
days after the Closing Date.
2.8 Absence of Certain Changes. Since the Balance Sheet Date, (a) to the
Company's knowledge, there has not been any material adverse change in the
assets, business, financial condition or results of operations of the Company,
nor has there occurred any event or development which could reasonably be
foreseen to result in such a material adverse change in the future, and (b) the
Company has not taken any of the actions set forth in paragraphs (a) through (o)
of Section 4.3 below.
2.9 Undisclosed Liabilities. The Company has no liability (whether known
or unknown, whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due), except for (a) liabilities accrued or
expressly reserved for on the Most Recent Balance Sheet, (b) liabilities which
have arisen since the Balance Sheet Date in the Ordinary Course of Business and
which are similar in nature to the liabilities which arose during the comparable
period of time in the immediately preceding fiscal period and (c) contractual
liabilities incurred in the Ordinary Course of Business of the Company which are
not required by GAAP to be reflected on a balance sheet and that are not in the
aggregate material.
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2.10 Tax Matters.
(a) The Company has filed and will file all Tax Returns (as defined
below) that it was required to file up to and including the Closing Date and all
such Tax Returns were correct and complete in all respects. The Company has paid
or will pay all Taxes (as defined below) due on or before the Closing Date,
whether or not shown on any such Tax Returns. The accrued but unpaid Taxes of
the Company for tax periods through the date of the Most Recent Balance Sheet do
not exceed the accruals and reserves (excluding reserves for deferred Taxes) for
Taxes set forth on the Most Recent Balance Sheet. All Taxes attributable to the
period from and after the date of the Most Recent Balance Sheet and continuing
through the Closing Date are attributable to the conduct by the Company of its
operations in the ordinary course of business. All Taxes that the Company is or
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Entity.
For purposes of determining the amount of Taxes attributable to a specified
period (e.g., the period from the date of the Most Recent Balance Sheet through
the Closing Date) other than a Tax Period, each Tax shall be computed as if the
specified period were a Tax Period. For purposes of this Agreement, a Tax Period
means a period for which a Tax is required to be computed under applicable
statutes and regulations.
(b) The Company has delivered to the Buyer correct and complete
copies of all income, sales and property Tax Returns, filed for the years 1995,
1996, 1997 and 1998, and examination reports and statements of deficiencies
assessed against or agreed to by the Company during such years. The federal and
state income Tax Returns of the Company and the periods associated therewith are
closed by the applicable statute of limitations for all taxable years through
fiscal year 1994. No examination or audit of any Tax Returns of the Company by
any Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. The Company has not waived any statute of
limitations with respect to Taxes or agreed to an extension of time with respect
to an assessment of or deficiency in Taxes.
(c) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
and none of the assets of the Company are subject to an election under Section
341(f) of the Code. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
(d) The Company is not and has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the Code).
(e) The Company is not a party to any Tax allocation or sharing
agreement or any Tax indemnity agreement. The Company has never filed Tax
Returns on a combined, consolidated or unitary basis with any other Business
Entity in any jurisdiction. The Company has not participated in or cooperated
with an international boycott within the meaning of Section 999 of the Code. The
Company is not a party to any agreement, contract, arrangement or plan
8
that has resulted, or would result, separately or in the aggregate, in the
payment of any excess "parachute payments" within the meaning of Section 280G of
the Code.
(f) The Company has no actual or potential liability for any Tax
obligation of any taxpayer (including, without limitation, any affiliated or
combined group of corporations or other entities that included the Company
during a prior period) other than the Company. The Company is not a party to any
agreement, contract or instrument pursuant to which the Company may be liable
for any Taxes of any other person.
(g) The Company is not a party to any tax litigation. The Company
has no reason to suspect any tax litigation attributable to periods ended on or
before the Closing Date. The Company is not and has not been a party to any
specific transaction the main purpose of which has been to evade Taxes.
(h) For all Tax Periods beginning January 1, 1997, the Company has
been an S corporation pursuant to an election validly made under Subchapter S of
the Code (which election has not been revoked or terminated for any such period)
and has not been subject to federal income taxes for such period.
(i) The Company has not been required to make any adjustments under
Section 481(a) of the Code by reason of a change in accounting method, and will
not be required to make any such adjustments to its taxable income as a result
of the consummation of the transactions contemplated hereby.
(j) For purposes of this Agreement, (i) "Taxes" means all taxes,
charges, fees, levies, custom duties or other similar assessments or
liabilities, including without limitation income, gross receipts, ad valorem,
premium, value-added, excise, severance, stamp, occupation, windfall profits,
real property, personal property, sales, use, transfer, transfer gains,
withholding, employment, unemployment, insurance, social security, business
license, business organization, environmental, payroll and franchise taxes
imposed by any federal, state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions thereto
resulting from, attributable to or incurred in connection with any of the above
or any contest or dispute thereof and any amounts of Taxes of another person
that the Company is liable to pay by law or otherwise, and (ii) "Tax Returns"
means all reports, returns, declarations, statements, forms or other information
required to be supplied to a taxing authority in connection with Taxes.
2.11 Assets
(a) The Company owns or leases all tangible assets necessary for the
conduct of its business as presently conducted. Each such tangible asset is free
from material defects, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used.
9
(b) No asset of the Company (tangible or intangible) is subject to
any Security Interest.
(c) Section 2.11(c) of the Disclosure Schedule sets forth (i) a
true, correct and complete list of all items of tangible personal property,
including without limitation purchased and capitalized software, owned by the
Company as of the date hereof, or not owned by the Company but in the possession
of or used in the business of the Company (the "Personal Property"), other than
individual assets with a book value of less than $10,000, or $30,000 in the
aggregate, and (ii) a description of the owner of, and any agreement relating to
the use of, each item of Personal Property not owned by the Company and the
circumstances under which such Property is used.
2.12 Owned Real Property. The Company does not own, nor has it ever owned,
any real property.
2.13 Intellectual Property.
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all Intellectual Property (as defined below in this
Section 2.13) that are used to conduct its business as currently conducted.
Except as identified in Section 2.13(a) of the Disclosure Schedule, each item of
Intellectual Property owned or used in the operation of the business of the
Company at any time during the period covered by the Financial Statements will
be owned or available for use by the Surviving Corporation on identical terms
and conditions immediately following the Closing. The Company has taken
reasonable measures to protect the proprietary nature of each item of
Intellectual Property and to maintain in confidence all trade secrets and
confidential information that it owns or uses.
(b) To the Company's knowledge, no other person or any corporation,
partnership, limited liability company or other form of business association (a
"Business Entity") has any rights to any of the Intellectual Property owned or
used by the Company (other than any rights in any such Intellectual Property (i)
not owned by the Company that constitutes commercially available software or
other items generally available to the public or (ii) owned by the Company
granted pursuant to software or other licenses entered into in the Ordinary
Course of Business), and to the Company's knowledge, no other person or Business
Entity is infringing, violating or misappropriating any of the Intellectual
Property that the Company owns or uses. The Company has taken reasonable
measures to ensure that it has acquired all rights to Intellectual Property
developed or held for the Company by any employees or third parties. For
purposes of this Agreement, "Intellectual Property" means all (A) patents,
patent applications, patent disclosures and all related continuation,
continuation in part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (B) trademarks, service marks, trade dress,
logos, trade names and corporate names and registrations and applications for
registration thereof, (C) copyrights and registrations and applications for
registration thereof, (D) computer software, data and documentation, (E) trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
copyrightable works, financial,
10
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information, (F) other
proprietary rights relating to any of the foregoing, and (G) copies and tangible
embodiments thereof.
(c) To the Company's knowledge, none of the products or services
marketed or distributed by the Company, and none of the activities or business
conducted by the Company, infringes, violates or constitutes a misappropriation
of (or in the past infringed, violated or constituted a misappropriation of) any
Intellectual Property rights of any other person or Business Entity. The Company
has not received any complaint, claim or notice alleging any such infringement,
violation or misappropriation, and to the Company's knowledge there is no basis
for any such complaint, claim or notice.
(d) Section 2.13(d) of the Disclosure Schedule identifies each (i)
patent or registration that has been issued to the Company with respect to any
of its Intellectual Property, (ii) pending patent application or application for
registration that the Company has made with respect to any of its Intellectual
Property, and (iii) material license or other material agreement pursuant to
which the Company has granted any rights to any third party with respect to any
of its Intellectual Property. The Company has delivered to the Buyer correct and
complete copies of all such patents, registrations, applications, licenses and
agreements (as amended to date) and has specifically identified and made
available to the Buyer correct and complete copies of all other written
documentation evidencing ownership of, and any claims or disputes relating to,
each such item. With respect to each item of Intellectual Property that the
Company owns:
(A) subject to such rights as have been granted by the Company
under license agreements entered into in the Ordinary Course of Business of the
Company, to the Company's knowledge, the Company possesses all right, title and
interest in and to such item;
(B) such item is not subject to any outstanding judgment,
order, decree, stipulation or injunction; and
(C) except in accordance with the terms of the Company's
standard form of software license agreement, a copy of which has previously been
provided to the Buyer, the Company has not agreed to indemnify any person or
Business Entity for or against any infringement, misappropriation or other
conflict with respect to such item.
(e) Section 2.13(e) of the Disclosure Schedule identifies each item
of Intellectual Property used in the operation of the business of the Company at
any time during the period covered by the Financial Statements, or that the
Company plans to use in the future, that is owned by a party other than the
Company (other than commercially available desktop software applications
generally available to the public, which are not listed in Section 2.13(e) of
the Disclosure Schedule but with respect to which the representations set forth
below in this Section 2.13(e) are true). The Company has supplied the Buyer with
correct and complete copies of all licenses, sublicenses or other agreements (as
amended to date) pursuant to which the Company uses such Intellectual Property,
all of which are listed on Section 2.13(e) of the
11
Disclosure Schedule (other than commercially available desktop software
applications generally available to the public). With respect to each such item
of Intellectual Property:
(i) the license, sublicense or other agreement covering such
item is legal, valid, binding, enforceable and in full force and effect with
respect to the Company, and to the Company's knowledge is legal, valid, binding,
enforceable and in full force and effect with respect to each other party
thereto;
(ii) except as identified in Section 2.13(e) of the Disclosure
Schedule, such license, sublicense or other agreement will continue to be legal,
valid, binding, enforceable and in full force and effect immediately following
the Closing in accordance with the terms thereof as in effect prior to the
Closing;
(iii) neither the Company nor, to the Company's knowledge, any
other party to such license, sublicense or other agreement is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation or injunction to
which the Company is a party or has been specifically named, nor to the
Company's knowledge subject to any other outstanding judgment, order, decree,
stipulation or injunction;
(v) except as identified in Section 2.13(e) of the Disclosure
Schedule, the Company has not agreed to indemnify any person or Business Entity
for or against any interference, infringement, misappropriation or other
conflict with respect to such item; and
(vi) no license or other fee is payable upon any transfer or
assignment of such license, sublicense or other agreement by the terms thereof
or the terms of any other agreement or arrangement with the other party or
parties thereto.
2.14 Real Property Leases. Section 2.14 of the Disclosure Schedule lists
all real property leased or subleased to or by the Company. The Company has
delivered to the Buyer correct and complete copies of the leases and subleases
(as amended to date) listed in Section 2.14 of the Disclosure Schedule. With
respect to each lease and sublease listed in Section 2.14 of the Disclosure
Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect with respect to the Company, and to the Company's
knowledge, is legal, valid, binding, enforceable and in full force and effect
with respect to each other party thereto;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
12
(c) the Company is not in breach or default thereunder, to the
Company's knowledge, no other party to the lease or sublease is in breach or
default, and, to the Company's knowledge, no event has occurred which, with
notice or lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(d) to the Company's knowledge, there are no disputes, oral
agreements or forbearance programs in effect as to the lease or sublease;
(e) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(f) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(g) no construction, alteration or other leasehold improvement
work with respect to the lease or sublease remains to be paid for or performed
by the Company.
2.15 Contracts. Section 2.15 of the Disclosure Schedule lists the
following written arrangements (including without limitation written agreements)
to which the Company is a party:
(a) any written arrangement for the lease of personal property from
or to third parties providing for lease payments in excess of $20,000 per annum;
(b) any written arrangement for the licensing or distribution of
software, products or other personal property or for the furnishing or receipt
of services (i) which calls for performance over a period of more than one year,
(ii) which involves more than the sum of $20,000, or (iii) in which the Company
has granted rights to license, sublicense or copy, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products, services or territory or has agreed to purchase a minimum quantity of
goods or services or has agreed to purchase goods or services exclusively from a
certain party;
(c) any written arrangement establishing a partnership or joint
venture;
(d) any written arrangement under which it has created, incurred,
assumed, or guaranteed (or may create, incur, assume, or guarantee) indebtedness
(including capitalized lease obligations) involving more than $15,000 or under
which it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(e) any written arrangement concerning confidentiality or
noncompetition (other than the Company's standard form of confidentiality,
nonsolicitation and non-competition agreement with its employees, a copy of
which has been provided to the Buyer, and the nondisclosure agreements entered
into among any of the Parties in connection with the transactions contemplated
by this Agreement);
13
(f) any written arrangement involving any of the Company
Stockholders, directors or officers or their respective Affiliates (for the
purpose of this Agreement, "Affiliate" shall mean (A) in the case of an
individual, the members of the immediate family (including parents, siblings and
children) of (i) the individual and (ii) the individual's spouse, and (iii) any
Business Entity that directly or indirectly, through one or more intermediaries
controls, or is controlled by, or is under common control with any of the
foregoing individuals, or (B) in the case of a Business Entity, another Business
Entity or a person that directly or indirectly, through one or more
intermediaries controls, or is controlled by, or is under common control with
the Business Entity);
(g) any written arrangement under which the consequences of a
default or termination could have a material adverse effect on the assets,
business, financial condition, results of operations or future prospects of the
Company;
(h) any note, debenture, other evidence of indebtedness, guarantee,
loan, letter of credit, surety-bond or financing agreement or instrument or
other contract for money borrowed, including any agreement or commitment for
future loans, credit or financing;
(i) any employment agreement, collective bargaining agreement or
other Contract to or with any employee or any labor union or other employee
representative of a group of employees relating to wages, hours, and other
conditions of employment;
(j) any written agreement containing covenants which in any way
purport to restrict the Company's business activity or purport to limit the
freedom of the Company to engage in any line of business or to compete with any
person or entity;
(k) any written agreement providing for payments to or by any person
or entity based on sales, purchases or profits, other than direct payments for
goods;
(l) any written agreement under which the Company is obligated to
incur capital expenditures after the date hereof in an aggregate amount in
excess of $50,000; and
(m) any other written arrangement either involving more than $20,000
or not entered into in the Ordinary Course of Business of the Company.
The Company has delivered to the Buyer a correct and complete copy of each
written arrangement (as amended to date) listed in Section 2.15 of the
Disclosure Schedule. With respect to each written arrangement so listed: (i) the
written arrangement is legal, valid, binding and enforceable and in full force
and effect with respect to the Company and, to the Company's knowledge the
written arrangement is legal, valid, binding and enforceable and in full force
and effect with respect to each other party thereto; (ii) the written
arrangement will continue to be legal, valid, binding and enforceable and in
full force and effect with respect to the Company immediately following the
Closing in
14
accordance with the terms thereof as in effect prior to the Closing and, to the
Company's knowledge the written arrangement will continue to be legal, valid,
binding and enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing
with respect to each other party thereto; and (iii) neither the Company nor, to
the Company's knowledge, any other party, is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach or
default by the Company or, to the Company's knowledge, by any such other party,
or permit termination, modification or acceleration, under the written
arrangement. The Company is not a party to any oral contract, agreement or other
arrangement which, if reduced to written form, would be required to be listed in
Section 2.15 of the Disclosure Schedule under the terms of this Section 2.15.
The Company is not a party to any contract or agreement, or subject to any
judgement order or decree, which restricts or prohibits it from carrying on its
business, as presently conducted, anywhere in the world.
Except as provided for in the contracts or agreements listed in Section
2.15 of the Disclosure Schedule, there are no renegotiations of, or attempts to
renegotiate, or outstanding rights to renegotiate, any material amounts paid or
payable to the Company under current or completed contracts, with any person
having the contractual or statutory right to require such renegotiation. The
Company has not received any written demand for such renegotiation in respect of
any such contract. No customer or government contracting officer has asserted
that any material adjustments are required to the terms of any written agreement
to which the Company is a party.
No written agreement to which the Company is a party has accrued, or is
expected by the Company to result in, any material losses.
2.16 Customers; Suppliers; Adverse Conditions. (i) There has not, since
January 1, 1998, been any termination or cancellation of the business
relationship of the Company with any of its major customers or major suppliers;
and (ii) to the Company's knowledge, there does not exist any facts or
circumstances (except for general economic conditions affecting business
generally) which have adversely affected or will adversely affect in any
material way the business of the Company with such major customers or major
suppliers or which have prevented or will prevent such business from being
carried on after the Closing Date in substantially the same manner as is
currently carried on.
2.17 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
2.18 Insurance.
(a) Section 2.18 of the Disclosure Schedule lists each material
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company is a party, a named insured, or otherwise the beneficiary of coverage at
any time within the past year. Each such insurance policy is in full force and
effect.
(b) The Company is not in breach or default (including with respect
to the payment of premiums or the giving of notices) under such policy, and no
event has occurred
15
which, with notice or the lapse of time, would constitute such a breach or
default or permit termination, modification or acceleration, under any such
policy; and the Company has not received any notice from the insurer disclaiming
coverage or reserving rights with respect to a particular claim or such policy
in general. Section 2.18 of the Disclosure Schedule identifies all claims
asserted by the Company pursuant to any insurance policy since January 1, 1997
and describes the nature and status of such claim. The Company has not incurred
any loss, damage, expense or liability covered by any such insurance policy for
which it has not properly asserted a claim under such policy. The Company is
covered by insurance in scope and amount customary for the businesses in which
it is engaged.
2.19 Litigation. There is no action, suit, proceeding or investigation to
which the Company is a party (either as a plaintiff or defendant) pending or, to
the Company's knowledge, threatened before any court, Governmental Entity or
arbitrator, and to the Company's knowledge, there is no basis for any such
action, suit, proceeding or investigation; (b) neither the Company nor, to the
Company's knowledge, any officer, director or employee of the Company has been
permanently or temporarily enjoined by any order, judgment or decree of any
court or Governmental Entity from engaging in or continuing to conduct the
business of the Company; and (c) no order, judgment or decree of any court or
Governmental Entity has been issued in any proceeding to which the Company is or
was a party or, to the Company's knowledge, in any other proceeding that enjoins
or requires the Company to take an action of any kind with respect to its
business, assets or properties. None of the actions, suits, proceedings or
investigations set forth in Section 2.19 of the Disclosure Schedule,
individually or collectively, if determined adversely to the interests of the
Company, could have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company.
2.20 Employees and Subcontractors.
(a) Section 2.20(a) of the Disclosure Schedule contains a list of
all employees of the Company along with the position, date of hire and the
annual rate of compensation of each such person including salary and other
benefits (or, with respect to employees compensated on an hourly or per diem
basis, the hourly or per diem rate of compensation) and estimated or target
annual incentive compensation of each such employee. Except as set forth in
Section 2.20 of the Disclosure Schedule, each such employee has entered into a
confidentiality/assignment of inventions agreement with the Company, a copy of
which has previously been delivered to the Buyer. To the Company's knowledge, no
employee or group of employees has any plans to terminate employment with the
Company. The Company is not a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. The Company has
no knowledge of any organizational effort made or threatened, either currently
or within the past two years, by or on behalf of any labor union with respect to
employees of the Company.
(b) Section 2.20(b) of the Disclosure Schedule sets forth (i) a list
of all subcontractors currently performing services or under contract to perform
future services for the Company and (ii) the start date, type of services to be
provided, estimated completion date and hourly or per diem pay rate of such
subcontractors.
16
(c) Neither the Company nor any of the Company Stockholders nor any
director or officer, or to the Company's knowledge, any key employee of the
Company, or to the Company's knowledge, any relatives of any of the foregoing,
owns, directly or indirectly, individually or collectively, any interest in any
corporation, company, partnership, entity or organization which is in a business
similar or competitive to the businesses of the Company or which has any
existing undisclosed contractual relationship with the Company, other than any
interest as a holder of less than 5% of the outstanding voting securities of any
publicly traded company.
(d) The Company has not violated any labor legislation, regulation
or agreement in any relevant jurisdiction the violation of which will have a
material adverse effect on the Company.
(e) The Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, occupational safety and health, and wages and hours
and the Company has not received any written notice that it has failed to comply
in any respect with any such laws. The Company is not engaged in any unfair
labor practice. There is no unfair labor practice complaint against the Company
pending before the National Labor Relations Board or, to the Company's
knowledge, threatened. There is no labor strike, dispute, sympathy strike,
boycott, informational picketing, slowdown or stoppage, actual, pending or, to
the Company's knowledge, threatened, against or affecting the Company. To the
Company's knowledge, there are no charges, complaints, claims, lawsuits or
proceedings by or on behalf of any of its employees, whether threatened or
pending, whether administrative or judicial, asserting any violation of any
federal, state or local law regarding civil rights, equal employment
opportunity, fair employment practices, wage-hour laws, or discrimination or
harassment based on any legally protected status, or asserting any other
dispute, tort or cause of action related to or growing out of the employment
relationship or asserted contractual relationship of the Company and any
employee (except for unemployment compensation claims or medical claims).
2.21 Employee Benefits.
(a) Section 2.21(a) of the Disclosure Schedule contains a complete
and accurate list of all Employee Benefit Plans (as defined below) maintained,
or contributed to, by the Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
pension, retirement plans, profit sharing, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement compensation. For purposes of this
Agreement, "ERISA Affiliate" means any entity which is a member of (i) a
controlled group of corporations (as defined in Section 414(b) of the Code),
(ii) a group of trades
17
or businesses under common control (as defined in Section 414(c) of the Code),
or (iii) an affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code), any of which includes
the Company. Complete and accurate copies of (i) all Employee Benefit Plans
which have been reduced to writing, (ii) written summaries of all unwritten
Employee Benefit Plans, (iii) all related trust agreements, insurance contracts
and summary plan descriptions, and (iv) all annual reports filed on IRS Form
5500, 5500C or 5500R for the last five plan years for each Employee Benefit
Plan, have been delivered to the Buyer. Each Employee Benefit Plan has been
administered in accordance with its terms and each of the Company and the ERISA
Affiliates has met its obligations with respect to such Employee Benefit Plan
and has made all required contributions thereto. The Company and all Employee
Benefit Plans are in compliance with the currently applicable provisions of
ERISA and the Code and other applicable federal, state and local laws and the
regulations thereunder. Each Employee Benefit Plan that is intended to qualify
under Section 401(k) of the Code is so qualified. Nothing has occurred that
might cause a loss of such qualification and no loss of qualification has been
threatened.
(b) To the Company's knowledge, there are no inquiries or
investigations by any Governmental Entity, termination proceedings or other
claims (except claims for benefits payable in the normal operation of the
Employee Benefit Plans and proceedings with respect to qualified domestic
relations orders), suits or proceedings against or involving any Employee
Benefit Plan or asserting any rights or claims to benefits under any Employee
Benefit Plan.
(c) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date of
its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its qualification
or increase its cost.
(d) Neither the Company nor any ERISA Affiliate has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(e) At no time has the Company or any ERISA Affiliate been obligated
to contribute to any "multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Employee Benefit
Plan providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code and
insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company or any ERISA
Affiliate that would subject the
18
Company or any ERISA Affiliate to any fine, penalty, tax or liability of any
kind imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan and any Employee Benefit Plan may be terminated
without liability to the Company, the Surviving Corporation or the Buyer, except
for benefits accrued through the date of termination. No former employees
participate in any welfare benefit plans listed in Section 2.21(a) of the
Disclosure Schedule. No Employee Benefit Plan includes in its assets any
securities issued by the Company. No Employee Benefit Plan has been subject to
tax under Section 511 of the Code.
(j) Section 2.21(j) of the Disclosure Schedule discloses each: (i)
agreement with any director, executive officer or other key employee of the
Company (A) the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving the Company of the
nature of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such director,
executive officer or key employee; (ii) agreement, plan or arrangement under
which any person may receive payments from the Company that may be subject to
the tax imposed by Section 4999 of the Code or included in the determination of
such person's "parachute payment" under Section 280G of the Code; and (iii)
agreement or plan binding the Company, including without limitation any stock
option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan, severance benefit plan, or any Employee Benefit Plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
2.22 Environmental Matters.
(a) The Company has complied with all applicable Environmental Laws
(as defined below). There is no pending or, to the Company's knowledge,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, relating to any Environmental Law involving the
Company. For purposes of this Agreement, "Environmental Law" means any federal,
state or local law, statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including without limitation
any statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or hazardous
waste, including without
19
limitation emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants or chemicals; (v) the protection of wildlife, marine
sanctuaries and wetlands, including without limitation all endangered and
threatened species; (vi) storage tanks, vessels and containers; (vii)
underground and other storage tanks or vessels, abandoned, disposed or discarded
barrels, containers and other closed receptacles; (viii) health and safety of
employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used above, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Compensation, Liability and Response Act of
1980 ("CERCLA").
(b) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility formerly or currently owned, operated or controlled by the
Company for which the Company may be liable under any Environmental Law of the
jurisdiction in which such property or facility is located. With respect to any
such releases of Materials of Environmental Concern, the Company has given all
required notices to Governmental Entities (copies of which have been provided to
the Buyer). The Company is not aware of any other releases of Materials of
Environmental Concern at parcels of real property or facilities other than those
owned, operated or controlled by the Company that could reasonably be expected
to have an impact on the real property or facilities owned, operated or
controlled by the Company. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA or any Environmental
Law), solid wastes and hazardous wastes (as such terms are defined under the
federal Resources Conservation and Recovery Act or any Environmental Law), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law.
(c) Set forth in Section 2.22(c) of the Disclosure Schedule is a
list of all environmental reports, investigations and audits known to the
Company or any of the Company Stockholders (whether conducted by or on behalf of
the Company or a third party, and whether done at the initiative of the Company
or directed by a Governmental Entity or other third party) issued or conducted
during the past five years and relating to premises currently or previously
owned or operated by the Company. Complete and accurate copies of each such
report, or the results of each such investigation or audit, have been provided
to the Buyer.
(d) The Company is not aware of any material environmental liability
of the solid and hazardous waste transporters and treatment, storage and
disposal facilities that have been utilized by the Company.
2.23 Legal Compliance, Permits.
(a) The Company, its operation of its business and its use and
occupancy of its assets are (i) in compliance with all, and not in violation of
any, and (ii) the Company has not received any claim or notice that such
operation or use and occupancy is in violation in a material respect of any
applicable law or ordinance, or any order, rule or regulation of any
governmental
20
agency or body to which the Company or its business, operations, assets or
properties are subject, including, without limitation, any Occupational Safety
Health Administration laws, ordinances, orders, rules or regulations; nor has
the Company failed to obtain or to adhere to the requirements of any government
license, permit or authorization necessary to the ownership of its assets and
properties or to the conduct of its business. Section 2.23 of the Disclosure
Schedule sets forth a list of all permits, licenses, registrations,
certificates, orders or approvals from any Governmental Entity (including
without limitation those issued or required under applicable export laws or
regulations and those relating to the occupancy or use of owned or leased real
property) ("Permits") issued to or held by the Company. Such listed Permits are
the only Permits that are required for the Company to conduct its business as
presently conducted or as proposed to be conducted. Each such Permit is in full
force and effect and, to the Company's knowledge, no suspension or cancellation
of such Permit is threatened and there is no basis for believing that such
Permit will not be renewable upon expiration. Each such Permit will continue in
full force and effect following the Closing.
(b) The Company has not engaged in any transaction, maintained any
bank account or used any corporate funds except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books and
records of the Company. To the Company's knowledge, (i) no officer or employee
of the Company has been indicted, tried or convicted of a felony or is under
investigation by any governmental authority with respect to any action related
to the Company or the operation of its business, and (ii) no officer or employee
of the Company has made any illegal or improper payment to any person or entity
in connection with operation of its business.
2.24 Certain Business Relationships With Affiliates. Except as identified
in Schedule 2.24 of the Disclosure Schedule, no Affiliate of the Company (a)
owns any property or right, tangible or intangible, which is used in the
business of the Company, (b) has any claim or cause of action against the
Company, (c) is a party to any contract or other arrangement, written or verbal,
with the Company, or (d) owes any money to the Company or is owed money by the
Company or any affiliate (the agreements, arrangements and relationships
described in this sentence are hereinafter referred to as "Related Party
Transactions"). Section 2.24 of the Disclosure Schedule describes any Related
Party Transactions.
2.25 Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement other than a fee to Howard Lawson &
Co. in the amount of $425,000.
2.26 Books and Records. The minute books and other similar records of the
Company contain true and complete records of all actions taken at any meetings
of the Company's stockholders, Board of Directors or any committee thereof and
of all written consents executed in lieu of the holding of any such meeting. The
books and records of the Company reflect the basis for the preparation of the
Financial Statements and have been maintained in accordance with good business
and bookkeeping practices.
21
2.27 Prepayments, Prebilled Invoices and Deposits.
(a) Section 2.27(a) of the Disclosure Schedule sets forth (i) all
prepayments, prebilled invoices and deposits that have been received by the
Company as of the date hereof from customers for products to be shipped, or
services to be performed, after the Closing Date, and (ii) with respect to each
such prepayment, prebilled invoice or deposit, (A) the party and contract
credited, (B) the date received or invoiced, (C) the products and/or services to
be delivered, and (D) the conditions for the return of such prepayment,
prebilled invoice or deposit. All such prepayments, prebilled invoices and
deposits are properly accrued for on the Most Recent Balance Sheet in accordance
with GAAP applied on a consistent basis with the past practice of the Company.
(b) Section 2.27(b) of the Disclosure Schedule sets forth (i) all
prepayments, prebilled invoices and deposits that have been made or paid by the
Company as of the date hereof received after the Closing Date, and (ii) with
respect to each such prepayment, prebilled invoice or deposit, (A) the party to
whom such prepayment, prebilled invoice or deposit was made or paid, (B) the
date made or paid, (C) the products and/or services to be delivered, and (D) the
conditions for the return of such prepayment, prebilled invoice or deposit. All
such prepayments, prebilled invoices and deposits are properly reflected on the
Most Recent Balance Sheet in accordance with GAAP applied on a consistent basis
with the past practices of the Company.
2.28 Banking Facilities. Section 2.28 of the Disclosure Schedule
identifies:
(a) Each bank, savings and loan or similar financial institution in
which the Company has an account or safety deposit box and the numbers of the
accounts or safety deposit boxes maintained by the Company thereat; and
(b) The names of all persons authorized to draw on each such account
or to have access to any such safety deposit box facility, together with a
description of the authority (and conditions thereof, if any) of each such
person with respect thereto.
2.29 Pooling. To the Company's knowledge, neither the Company nor any of
its Affiliates has through the date of this Agreement taken or agreed to take
any action that would prevent the Company and the Buyer from accounting for the
business combination to be effected by the Merger as a "pooling of interests" in
conformity with GAAP.
2.30 Company Action. The Board of Directors of the Company, at a meeting
duly called and held, has by the unanimous vote of all directors (i) determined
that the Merger is fair and in the best interests of the Company and its
stockholders, (ii) adopted this Agreement in accordance with the provisions of
the Delaware General Corporation Law, and (iii) directed that this Agreement and
the Merger be submitted to the Company Stockholders for their adoption and
approval and resolved to recommend that Company Stockholders vote in favor of
the adoption of this Agreement and the approval of the Merger.
22
2.31 Year 2000. To the Company's knowledge, the Company has obtained or is
in the process of obtaining all systems and software solutions reasonably
necessary or appropriate to address and accommodate Year 2000 computer system
issues that, if not so addressed and accommodated, would have a material adverse
effect on the business or financial condition of the Company. The Company's
computer systems have been tested or are in the process of being tested to
determine whether they are fully capable of providing accurate results using
data having date ranges spanning the twentieth and twenty-first centuries.
Except as identified in Section 2.31 of the Disclosure Schedule, to the
Company's knowledge the Company's computer systems (i) are designed to be used
prior to, during, and after January 1, 2000 A.D. and with Date Data from all
such time periods, and (ii) when used in accordance with the documentation
therefor, do and will (A) operate during each such time period without
interruption or human intervention with four digit year processing on all Date
Data, including errors, omissions or interruptions from functions which involve
Date Data from more than one century or leap years, regardless of the date of
processing or date of Date Data, (B) provide results from any operation
accurately reflecting any Date Data used in the operation performed, with output
having four digit years, (C) accept two digit year Date Data in a manner that
resolves any ambiguities as to century in a defined manner, and (D) provide date
interchange in the ISO 8601:1988 standard of CCYYMMDD. As used herein, "Date
Data" means any data, input or output which includes a date, an indication of
date or is date dependent.
2.32 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Company pursuant to this Agreement, contains or will
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 or
will be made, in order to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants to
the Company as follows:
3.1 Organization. Each of the Buyer and the Transitory Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware.
3.2 Capitalization. The authorized capital stock of the Buyer consists of
30,000,000 shares of Buyer Common Stock, of which 10,689,562 shares are issued
and outstanding and no shares are held in the treasury, and 5,000,000 shares of
Preferred Stock, $.01 par value, of which no shares are outstanding. All of the
issued and outstanding shares of Buyer Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. All
23
of the Merger Shares will be, when issued in accordance with this Agreement,
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights.
3.3 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver the
Fundamental Agreements to which it is a party and to perform its obligations
under each such agreement. The execution and delivery of such agreements by the
Buyer and the Transitory Subsidiary and the performance of such agreements and
the consummation of the transactions contemplated thereby by the Buyer and the
Transitory Subsidiary have been duly and validly authorized by all necessary
corporate and shareholder action on the part of the Buyer and Transitory
Subsidiary. Each Fundamental Agreement to which the Buyer or the Transitory
Subsidiary is a party has been (or, in the case of the Fundamental Agreements to
be entered into on the Closing Date, shall be when delivered) duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and, assuming
the due authorization, execution and delivery by the Company, constitutes (or,
in the case of the Fundamental Agreements to be entered into on the Closing
Date, shall constitute when delivered) a valid and binding obligation of the
Buyer and the Transitory Subsidiary, enforceable against them in accordance with
its terms, subject to the effect of bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally and except
as the availability of equitable remedies may be limited by general principles
of equity.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws and
the filing of the Certificate of Merger as required by the Delaware General
Corporation Law, neither the execution and delivery by the Buyer or the
Transitory Subsidiary of the Fundamental Agreements, nor the consummation by the
Buyer or the Transitory Subsidiary of the transactions contemplated thereby,
will (a) conflict or violate any provision of the charter or By-laws of the
Buyer or the Transitory Subsidiary, (b) require on the part of the Buyer or the
Transitory Subsidiary any filing with, or permit, authorization, consent or
approval of, any Governmental Entity, (c) conflict with, result in breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Buyer or the
Transitory Subsidiary is a party or by which either is bound or to which any of
their respective assets are subject, or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Buyer or the Transitory
Subsidiary or any of their respective properties or assets.
3.5 Reports and Financial Statements. The Buyer has previously furnished
to the Company complete and accurate copies, as amended or supplemented, of the
Buyer's (a) Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as filed by the Buyer with the United States Securities and Exchange
Commission (the "SEC"), and (b) all other reports filed by the Buyer with the
SEC under Section 13 or 15 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), since December 31, 1998 (such materials, together with any
amendments or supplements thereto, are collectively referred to herein as the
"Buyer Reports"). As of their respective dates, the Buyer Reports did not
contain any untrue statement of a material
24
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited financial statements and unaudited
interim financial statements of the Buyer included in the Buyer Reports (i)
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (ii) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby (except as may be indicated therein
or in the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Exchange Act), (iii) fairly present the
consolidated financial condition, results of operations and cash flows of the
Buyer as of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records of the Buyer.
3.6 Absence of Material Adverse Changes. Since December 31, 1998, there
has not been any material adverse change in the assets, business, financial
condition or results of operations of the Buyer, nor has there occurred any
event or development which could reasonably be foreseen to result in such a
material adverse change in the future.
3.7 Pooling. To the knowledge of the Buyer, neither the Buyer nor any of
its Affiliates has through the date of this Agreement taken or agreed to take
any action that would prevent the Company and the Buyer from accounting for the
business combination to be effected by the Merger as a "pooling of interests" in
conformity with GAAP.
3.8 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement except to
Hambrecht & Quist.
3.9 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in the any document, certificate or
other instrument delivered to or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will 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 or will be made, in order to make
the statements herein or therein not misleading.
3.10 Opinion of Financial Advisor. The Buyer has received an opinion of
Hambrecht & Quist, the financial advisor to the Buyer, to the effect that the
consideration payable for the Company Shares in connection with the Merger is
fair, from a financial point of view, to the Buyer.
ARTICLE IV
COVENANTS
4.1 Best Efforts. Each of the Parties shall use its best efforts, to the
extent commercially reasonable, to take all actions and to do all things
necessary, proper or advisable to
25
consummate the Merger and the transactions contemplated by this Agreement;
provided, however, that notwithstanding anything in this Agreement to the
contrary, the Buyer shall not be required to sell or dispose of or hold
separately (through a trust or otherwise) any assets or businesses of the Buyer
or its Affiliates.
4.2 Notices and Consents. Each of the Buyer, the Transitory Subsidiary and
the Company shall use its respective best efforts to obtain, at its expense, all
such waivers, permits, consents, approvals or other authorizations from third
parties and Governmental Entities, and to effect all such registrations, filings
and notices with or to third parties and Governmental Entities, as may be
required by or with respect to the Buyer, the Transitory Subsidiary or the
Company, respectively, in connection with the transactions contemplated by this
Agreement (including without limitation, with respect to the Company, those
listed in Section 2.4 or Section 2.23 of the Disclosure Schedule).
4.3 Operation of Business. Except as contemplated by this Agreement, or as
set forth on Schedule 4.3, during the period from the date of this Agreement to
the Effective Time, the Company shall conduct its operations in the Ordinary
Course of Business and in compliance with all applicable laws and regulations
and, to the extent consistent therewith, use all reasonable efforts to preserve
intact its current business organization, keep its physical assets in good
working condition, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, the Company shall not, without the written consent of the
Buyer:
(a) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or authorize the
issuance, sale or delivery of, or redeem or repurchase, any stock of any class
or any other securities or any rights, warrants or options to acquire any such
stock or other securities;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases); assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.21(j) or (except for normal increases in the Ordinary Course of
Business) increase in any manner the compensation or fringe benefits of, or
materially modify the employment terms of, its directors, officers or
26
employees, generally or individually, or pay any benefit not required by the
terms in effect on the date hereof of any existing Employee Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any assets or
property other than purchases and sales of assets in the Ordinary Course of
Business;
(f) amend its Certificate of Incorporation or By-laws;
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(h) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(i) mortgage or pledge any of its property or assets or subject any
such assets to any Security Interest;
(j) sell, assign, transfer or license any Intellectual Property,
other than in the Ordinary Course of Business;
(k) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any material contract or agreement;
(l) make or commit to make any capital expenditure in excess of
$20,000 per item or $50,000 in the aggregate;
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Company set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Merger
set forth in Article V not being satisfied;
(n) take any action that would jeopardize the treatment of the
Merger as a "pooling of interests" for accounting purposes; or
(o) agree in writing or otherwise to take any of the foregoing
actions.
4.4 Full Access. The Company shall permit representatives of the Buyer to
have full access (at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company) to all premises,
properties, financial, accounting and Tax records, contracts, other records and
documents, and personnel, of or pertaining to the Company. The officers and
management of the Company shall cooperate fully with the Buyer's representatives
and agents and shall make themselves available to the extent necessary to
complete the due diligence process and the Closing. The Company shall, at the
request of the Buyer, introduce the Buyer to the principal suppliers, customers
and employees of the Company to facilitate discussions
27
between such persons and the Buyer in regard to the conduct of the business of
the Company following the Closing.
4.5 Notice of Breaches. The Company shall promptly deliver to the Buyer
written notice of any event or development that would (a) render any statement,
representation or warranty of the Company in this Agreement (including the
Disclosure Schedule) inaccurate or incomplete in any respect, or (b) constitute
or result in a breach by the Company of, or a failure by the Company to comply
with, any agreement or covenant in this Agreement applicable to such party. No
such disclosure shall be deemed to avoid or cure any such misrepresentation or
breach.
4.6 Exclusivity. Neither the Company nor any Company Shareholder shall,
and each of the Company and the Company Shareholders shall use its, hers or his
best efforts to cause its or his Affiliates and each of the officers, directors,
employees, representatives and agents of the Company not to, directly or
indirectly, (a) solicit, initiate, engage or participate in or encourage
discussions or negotiations with any person or entity (other than the Buyer)
concerning any merger, consolidation, sale of material assets, tender offer,
recapitalization, accumulation of Company Shares, proxy solicitation or other
business combination involving the Company or any division of the Company or (b)
provide any non-public information concerning the business, properties or assets
of the Company to any person or entity (other than the Buyer). The Company shall
immediately notify the Buyer of, and shall disclose to the Buyer all details of,
any inquiries, discussions or negotiations of the nature described in the first
sentence of this Section 4.6.
4.7 Agreements from Certain Affiliates of the Company. Concurrently with
the execution of this Agreement, the Company shall deliver to the Buyer a list
of all persons or entities who are at such time Affiliates of the Company (the
"Company Affiliates"). In order to help ensure that the Merger will be accounted
for as a "pooling of interests", that the issuance of Merger Shares will comply
with the Securities Act and that the Merger will be treated as a tax-free
reorganization, the Company shall cause each Company Affiliate to execute and
deliver to the Buyer, on the Closing Date, a written agreement substantially in
the form attached hereto as Exhibit E (the "Affiliate Agreement").
4.8 Listing of Merger Shares. The Buyer shall use its best efforts to list
the Merger Shares on the Nasdaq National Market and shall use its best efforts
to cause such listing to be approved prior to the Effective Time.
4.9 Assistance with Retention. For a period of twelve months commencing on
the Closing Date, each of the Company Shareholders shall provide the Company and
the Surviving Corporation with such assistance, as the Company may reasonably
request in its efforts to retain the services, following the Effective Time, of
the employees of the Company.
4.10 Assistance with Tax Disputes. Each of the Company Shareholders agrees
to provide the Company and its auditors and advisors with such assistance, at no
cost to such individuals (except any costs relating to any claim arising
pursuant to Article VI hereof), as the Company may reasonably request from time
to time in connection with any response to, or the
28
preparation of any defense to, any claims, inquiries or contests relating to the
characterization of the Company as an S corporation for Federal income tax
purposes.
4.11 Credit for Service. The Buyer shall grant to each of the employees of
the Company from and after the Effective Time credit for all service with the
Company with respect to eligibility under any benefit plan of the Buyer made
available to employees of the Surviving Corporation, including without
limitation for purposes of calculating vacation pay, severance pay under
severance plans or policies, if any, and any other seniority based plan,
practice, policy or arrangement sponsored or contributed to by the Buyer.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Obligations of the Buyer and the Transitory Subsidiary.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Merger is subject to the satisfaction, or waiver by the Buyer, of the
following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval by the Company Stockholders;
(b) no more than 5% of the Company's shares shall be Dissenting
Shares (as hereinafter defined) as of the Effective Time. For purposes of this
Agreement, "Dissenting Shares" means Company Shares held as of the Effective
Time by a Company Stockholder who has not voted such Company Shares in favor of
the adoption of this Agreement and the Merger and with respect to which
appraisal shall have been duly demanded and perfected in accordance with Section
262 of the Delaware General Corporation Law and not effectively withdrawn or
forfeited prior to the Effective Time;
(c) the Company shall have obtained all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, necessary for the consummation by the
Company and the Company Stockholders of the Merger and the transactions
contemplated by this Agreement;
(d) the representations and warranties of the Company set forth in
Article II shall be true and correct when made on the date hereof and shall be
true and correct in all material respects as of the Effective Time as if made as
of the Effective Time, except for representations and warranties made as of a
specific date, which shall be true and correct as of such date;
(e) the Company shall have performed or complied in all material
respects with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Effective Time;
(f) no action, suit or proceeding shall be pending or threatened by
or before any Governmental Entity wherein an unfavorable judgment, order,
decree, stipulation or
29
injunction would (i) prevent consummation of the Merger or any of the
transactions contemplated by this Agreement, (ii) cause the Merger or any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) affect adversely the right of the Company to own, operate
or control any of its assets or operations, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(g) the Company shall have delivered to the Buyer and the Transitory
Subsidiary a certificate to the effect that each of the conditions specified in
clauses (a) through (f) of this Section 5.1 is satisfied in all material
respects;
(h) the Buyer and the Transitory Subsidiary shall have received from
Morgan Lewis & Bockius LLP, counsel to the Company, an opinion in the form set
forth as Exhibit F attached hereto, addressed to the Buyer and the Transitory
Subsidiary and dated as of the Closing Date;
(i) the Buyer shall have received a letter from each of
PriceWaterhouse Coopers LLP and Grant Thornton LLP, auditors for the Buyer and
the Company, respectively, in a form reasonably satisfactory to the Buyer, to
the effect that the Company and, in the case of the letter from PriceWaterhouse
Coopers LLP, the Buyer may treat the Merger as a "pooling of interests" for
accounting purposes;
(j) the Buyer and the Transitory Subsidiary shall have received the
resignations, effective as of the Effective Time, of each director of the
Company;
(k) the Shareholder Employees shall be available for continued
employment pursuant to the Employment Agreement of even date herewith in the
form of Exhibit D attached hereto;
(l) the Buyer and each of the Company Stockholders shall have
entered into the Registration Rights Agreement and such Agreement shall be in
full force and effect on the Closing Date in accordance with its terms;
(m) the Buyer, the Company Stockholders, the Escrow Agent and the
Indemnification Representative shall have entered into the Escrow Agreement and
such Agreement shall be in full force and effect on the Closing Date in
accordance with its terms; and
(n) all actions to be taken by the Company in connection with the
Merger and the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to the Buyer and the Transitory Subsidiary.
5.2 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction, or waiver by
the Company and (if required after the Requisite Stockholder Approval) the
Company Stockholders, of the following conditions:
30
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval by the Company Stockholders;
(b) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in Article III shall be true and correct when
made on the date hereof and shall be true and correct in all material respects
as of the Effective Time as if made as of the Effective Time, except for
representations and warranties made as of a specific date, which shall be true
and correct as of such date;
(c) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Effective Time;
(d) the Buyer and the Transitory Subsidiary shall have delivered to
the Company a certificate (without qualification as to knowledge or materiality
or otherwise) to the effect that each of the conditions specified in clauses (b)
and (c) of this Section 5.2 is satisfied in all respects;
(e) the Company Stockholders shall have received from Morse,
Zelnick, Rose & Lander LLP, counsel to the Buyer and the Transitory Subsidiary,
an opinion in the form set forth as Exhibit G attached hereto, addressed to the
Company and dated as of the Closing Date;
(f) the Buyer and each of the Company Stockholders shall have
entered into the Registration Rights Agreement and such Agreement shall be in
full force and effect on the Closing Date in accordance with its terms;
(g) the Buyer, the Company Stockholders, the Escrow Agent and the
Indemnification Representative shall have entered into the Escrow Agreement and
such Agreement shall be in full force and effect on the Closing Date in
accordance with its terms;
(h) the Company Stockholders shall have received a copy of a letter
from each of Grant Thornton LLP and PriceWaterhouse Coopers LLP, auditors for
the Company and the Buyer, respectively, in a form reasonably satisfactory to
the Buyer, to the effect that the Company and, in the case of the letter from
PriceWaterhouse Coopers LLP, the Buyer may treat the Merger as a "pooling of
interests" for accounting purposes;
(i) the shares of Buyer Common Stock to be issued to the Company
Stockholders in connection with the Merger shall have been approved for listing
on the Nasdaq National Market, subject to official notice of issuance;
(j) the Company shall have received from Morgan, Lewis & Bockius
LLP, counsel to the Company, a written tax opinion based on reasonably requested
representation letters of Buyer and the Company and dated as of the Closing
Date, in a form reasonably satisfactory to the Company, to the effect that (i)
the Merger constitutes a reorganization within the meaning of Section 368(a) of
the code; (ii) Buyer, Transitory Subsidiary and the Company will each be a party
31
to the reorganization within the meaning of Section 368(a) of the Code; (iii)
none of Buyer, Transitory Subsidiary or the Company will recognize gain or loss
for U.S. Federal income tax purposes as a result of the Merger; and (iv) the
Company Stockholders will not recognize gain or loss for U.S. Federal income tax
purposes as a result of the Merger (except as a result of cash received in lieu
of fractional shares); and
(k) all actions to be taken by the Buyer and the Transitory
Subsidiary in connection with the Merger and the consummation of the
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to the Company.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification. The Company Stockholders shall indemnify the Buyer
and the Surviving Corporation (together, the "Indemnified Persons") in respect
of, and hold the Indemnified Persons harmless against, any and all claims,
debts, obligations and other liabilities (whether absolute, accrued, contingent,
fixed or otherwise, and whether known or unknown, due or to become due or
otherwise), monetary damages, fines, fees, Taxes, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court costs, costs of investigators, fees
and expenses of attorneys, accountants, financial advisors and other experts,
and other expenses of litigation) incurred or suffered by the Indemnified
Persons or any Affiliate thereof ("Damages"):
(a) resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Company contained in this Agreement or in the Certificate
delivered pursuant to Section 5.1(g) hereof; or
(b) resulting from any claim by a stockholder or former stockholder
of the Company, or any other person or Business Entity, seeking to assert, or
based upon: (i) ownership or rights to ownership of any shares of stock of the
Company; (ii) any rights of a stockholder (other than the right to receive the
Merger Shares pursuant to this Agreement or appraisal rights under the
applicable provisions of the Delaware General Corporation Law), including any
option, preemptive rights or rights to notice or to vote; (iii) any rights under
the Certificate of Incorporation or By-laws of the Company; or (iv) any claim
that his, her or its shares were wrongfully repurchased by the Company.
6.2 Method of Asserting Claims.
(a) All claims for indemnification by an Indemnified Person pursuant
to this Article VI shall be made in accordance with the provisions of this
Section 6.2 and the Escrow Agreement.
32
(b) If a third party asserts that an Indemnified Person is liable to
such third party for a monetary or other obligation which may constitute or
result in Damages for which such Indemnified Person may be entitled to
indemnification pursuant to Section 6.1, and such Indemnified Person reasonably
determines that it has a valid business reason to fulfill such obligation, then
(i) such Indemnified Person shall be entitled to satisfy such obligation,
without prior notice to or consent from the Company Stockholders or the
Indemnification Representative, (ii) such Indemnified Person may make a claim
for indemnification pursuant to this Article VI in accordance with the
provisions of the Escrow Agreement, and (iii) such Indemnified Person shall be
reimbursed, in accordance with the provisions of the Escrow Agreement, for any
such Damages for which it is entitled to indemnification pursuant to this
Article VI (subject to the right of the Indemnification Representative to
dispute the Indemnified Person's entitlement to indemnification under the terms
of this Article VI).
(c) The Indemnified Person shall give prompt written notification to
the Indemnification Representative of the commencement of any action, suit or
proceeding relating to a third party claim for which indemnification pursuant to
Section 6.1 may be sought; provided, however, that no delay on the part of the
Indemnified Person in notifying the Indemnification Representative shall relieve
the Company Stockholders of any liability or obligation hereunder except to the
extent of any damage or liability caused by or arising out of such failure.
Within 20 days after delivery of such notification, the Indemnification
Representative may, upon written notice thereof to the Indemnified Person,
assume control of the defense of such action, suit or proceeding with counsel
reasonably satisfactory to the Indemnified Person, provided the Indemnification
Representative acknowledges in writing to the Indemnified Person, on behalf of
the Company Stockholders, that the Company Stockholders shall indemnify the
Indemnified Person with respect to all elements of such action, suit or
proceeding and any Damages, fines, costs or other liabilities that may be
assessed against the Indemnified Person in connection with such action, suit or
proceeding. If the Indemnification Representative does not so assume control of
such defense, the Indemnified Person shall control such defense. The party not
controlling such defense may participate therein at its own expense; provided
that if the Indemnification Representative assumes control of such defense and
the Indemnified Person reasonably concludes that the indemnifying parties and
the Indemnified Person have conflicting interests or different defenses
available with respect to such action, suit or proceeding, the reasonable fees
and expenses of counsel to the Indemnified Person shall be considered "Damages"
for purposes of this Agreement. The party controlling such defense shall keep
the other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. The Indemnified Person shall not agree to any
settlement or the entry of a judgment in any such action, suit or proceeding
without the prior written consent of the Indemnification Representative, which
consent shall not be unreasonably withheld or delayed. The Indemnification
Representative shall not agree to any settlement or the entry of a judgment in
any action, suit or proceeding without the prior written consent of the
Indemnified Person, which shall not be unreasonably withheld (it being
understood that it is reasonable to withhold such consent if, among other
things, the settlement or the entry of a judgment (i) lacks a complete release
of the Indemnified Person for all liability with respect thereto or (ii) imposes
any liability or obligation on the Indemnified Person).
33
6.3 Survival. The representations and warranties of the Company set forth
in this Agreement and the indemnification obligations set forth in Section 6.1
hereof shall survive the Closing and the consummation of the transactions
contemplated hereby and continue until the first anniversary of the Closing
Date. If a notice is given in accordance with the Escrow Agreement before
expiration of such period, then (notwithstanding the expiration of such time
period) the representation or warranty applicable to such claim and the related
indemnification obligation in Section 6.1 shall survive until, but only for
purposes of, the resolution of such claim. The rights to indemnification,
reimbursement or other remedy set forth in this Agreement will not be affected
by any investigation conducted by an Indemnified Person with respect to, or any
knowledge acquired (or capable of being acquired) by an Indemnified Person
about, the accuracy or inaccuracy of, or compliance with, any representation,
warranty, covenant or obligation.
6.4 Limitations. Notwithstanding anything to the contrary herein, (a)
except in the case of any Damages resulting from or arising out of the breach of
any representations or warranties relating to Taxes, including without
limitation the representations and warranties set forth in Section 2.10 of this
Agreement, and the indemnification obligations with respect thereto
(collectively, the "Tax Obligations"), the aggregate liability of the Company
Stockholders for Damages under this Agreement shall not exceed the fair market
value of the Escrow Shares, as determined in accordance with the Escrow
Agreement, and shall be satisfied only from the Escrow Shares, (b) the aggregate
liability of the Company Stockholders for Damages under this Agreement for Tax
Obligations shall not exceed the sum of the value of the Merger Shares as of the
Effective Time minus the value of any other amounts paid pursuant to this
Section 6.4, and (c) the Company Stockholders shall be liable under the
indemnification provisions contained in Section 6.1(a) of this Agreement for
only that portion of the aggregate Damages which exceeds $125,000. No Company
Stockholder shall have any rights of contribution against the Company with
respect to any breach by the Company of any of its representations, warranties,
covenants or agreements. Except with respect to Tax Obligations and with respect
to claims based on fraud, the shares of Buyer Common Stock held pursuant to the
Escrow Agreement shall be the Buyer's sole and exclusive remedy for Damages
resulting from or relating to any breach of any representation, warranty,
covenant or indemnification obligation under this Agreement. The indemnification
obligations of the Company Stockholders pursuant to this Article VI shall be
joint and several.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval) as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice
to the Company in the event the Company is in breach, and the Company may
terminate this Agreement by giving written notice to the Buyer and the
Transitory Subsidiary in the event the Buyer or the
34
Transitory Subsidiary is in breach, of any material representation, warranty or
covenant contained in this Agreement, and such breach is not remedied within 10
days of delivery of written notice thereof;
(c) the Buyer may terminate this Agreement by giving written notice
to the Company if the Closing shall not have occurred on or before May 15, 1999
by reason of the failure of any condition precedent under Section 5.1 hereof
(unless the failure results primarily from a breach by the Buyer or the
Transitory Subsidiary of any representation, warranty or covenant contained in
this Agreement);
(d) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before May 15, 1999 by reason of the failure of any condition
precedent under Section 5.2 hereof (unless the failure results primarily from a
breach by the Company of any representation, warranty or covenant contained in
this Agreement); and
(e) the Company may terminate this Agreement if the average bid and
asked price of Buyer Common Stock for the fifteen (15) trading days ending three
(3) calendar days prior to the Closing Date is less than $27.00.
7.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party (except for any liability of any
Party for breaches of this Agreement).
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms
is defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
Accounts Receivable..................................................2.7
Affiliate........................................................2.15(f)
Affiliate Agreement..................................................4.7
Balance Sheet Date...................................................2.6
Business Entity.....................................................2.13
Buyer ......................................................Introduction
Buyer Common Stock................................................1.5(a)
Buyer Reports........................................................3.5
CERCLA...........................................................2.22(a)
Certificate of Merger................................................1.1
Certificates......................................................1.6(a)
35
Closing..............................................................1.2
Closing Date.........................................................1.2
Code.............................................................2.10(c)
Company ....................................................Introduction
Company Affiliates...................................................4.7
Company Shares....................................................1.5(a)
Company Stockholders..............................................1.5(a)
Conversion Ratio..................................................1.5(a)
Damages..............................................................6.1
Disclosure Schedule...........................................Article II
Dissenting Shares.................................................5.1(b)
Effective Time.......................................................1.1
Employee Benefit Plan............................................2.21(a)
Environmental Law................................................2.22(a)
ERISA............................................................2.21(a)
ERISA Affiliate..................................................2.21(a)
Escrow Agreement.....................................................1.3
Escrow Shares.....................................................1.5(a)
Exchange Act.........................................................3.5
Financial Statements.................................................2.6
Fundamental Agreements...............................................2.3
GAAP.................................................................2.6
Governmental Entity..................................................2.4
Indemnification Representative.......................................1.3
Indemnified Persons..................................................6.1
Initial Shares....................................................1.5(a)
Intellectual Property............................................2.13(b)
Materials of Environmental Concern...............................2.22(b)
Merger...............................................................1.1
Merger Shares.....................................................1.5(a)
Most Recent Balance Sheet............................................2.6
Ordinary Course of Business..........................................2.4
Parties.....................................................Introduction
Permits.............................................................2.23
Personal Property................................................2.11(c)
Registration Rights Agreement........................................2.3
Related Party Transactions..........................................2.24
Requisite Stockholder Approval.......................................2.3
SEC..................................................................3.5
Securities Act.......................................................2.2
Security Interest....................................................2.4
Shareholder Employees................................................2.3
Surviving Corporation................................................1.1
Taxes............................................................2.10(j)
Tax Obligations......................................................6.4
36
Tax Returns......................................................2.10(j)
Transitory Subsidiary.......................................Introduction
ARTICLE IX
MISCELLANEOUS
9.1 Press Releases and Announcements. No Party shall issue any press
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing Party shall advise the other
Parties and provide them with a copy of the proposed disclosure prior to making
the disclosure).
9.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns and the Company Stockholders.
9.3 Entire Agreement. The Fundamental Agreements and the exhibits and
schedules attached thereto constitute the entire agreement among the Parties and
supersede any prior understandings, agreements or representations by or among
the Parties, written or oral, that may have related in any way to the Merger.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
9.5 Counterparts. This Agreement may be executed in two or more
counterparts, including signatures presented by facsimile, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
37
If to the Buyer: Copy to:
Professional Detailing, Inc. Morse, Zelnick, Rose & Lander, LLP
10 Mountainview Road 450 Park Avenue, Suite 902
Upper Saddle River, New Jersey 07458 New York, NY 10022-2605
Attn: Charles T. Saldarini, Attn: Kenneth S. Rose, Esq.
Chief Executive Officer
If to the Company: Copy to:
TVG, Inc. Morgan, Lewis & Bockius LLP
520 Virginia Drive 1701 Market Street
Ft. Washington, PA 19034 Philadelphia, Pa 19103-2921
Attn: Gail Keppler Attn: Guy W. Winters, Jr., Esq.
If to the Transitory Subsidiary: Copy to:
Professional Detailing, Inc. Morse, Zelnick Rose & Lander LLP
10 Mountainview Road 450 Park Avenue, Suite 902
Upper Saddle River, New Jersey 07458 New York, NY 10022
Attn: Charles T. Saldarini, Attn: Kenneth S. Rose, Esq.
Chief Executive Officer
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
9.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment effected subsequent to the Requisite Stockholder Approval
shall be subject to the restrictions contained in the Delaware General
Corporation Law. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
38
9.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
9.11 Expenses. Except as set forth in the Escrow Agreement, each of the
Parties shall bear its own costs and expenses (including fees and expenses of
their respective legal, accounting and financial advisors) incurred in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that if the Merger is consummated, the Company shall not
incur fees and expenses of legal, accounting and financial advisors in
connection with the Merger in excess of the amounts set forth in Section 9.11 of
the Disclosure Schedule, and any such fees and expenses incurred by the Company
in excess of such amounts shall be recovered by the Buyer pursuant to the Escrow
Agreement without regard to the provisions of the first sentence of Section 6.4.
9.12 Specific Performance. Each of the Parties acknowledges and agrees
that one or more of the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
9.13 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
9.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
9.15 Submission to Jurisdiction. Each of the Parties (a) submits to the
exclusive jurisdiction of any state court sitting in Bergen County, New Jersey
or federal court sitting in New Jersey in any action or proceeding arising out
of or relating to this Agreement, (b) agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court, (c) agrees
not to bring any action or proceeding arising out of or relating to this
Agreement in any
39
other court and (d) waives any right it may have to a trial by jury with respect
to any action or proceeding arising out of or relating to this Agreement. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect thereto. Any
Party may make service on another Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
giving notices in Section 9.7. Nothing in this Section 9.15, however, shall
affect the right of any Party to serve legal process in any other manner
permitted by law.
[Signatures begin on the following page.]
40
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
PROFESSIONAL DETAILING, INC.
By: /s/ Charles T. Saldarini
------------------------------------
Charles T. Saldarini
Chief Executive Officer
TVG ACQUISITION CORP.
By: /s/ Charles T. Saldarini
------------------------------------
Charles T. Saldarini
Chief Executive Officer
TVG, INC.
By: /s/ Gail Keppler
------------------------------------
Gail Keppler
Co-Chief Executive Officer
The undersigned hereby joins in this Agreement solely for purposes of
agreeing to be bound by the provisions of Sections 4.6, 4.9, 4.10 and 9.12
and Article VI hereof.
/s/ Frank Smith /s/ Marc Julius
- -------------------- ----------------------
Frank Smith Marc Julius
/s/ Gail Keppler /s/ Gary Silverman
- -------------------- ----------------------
Gail Keppler Gary Silverman
/s/ John McNichol /s/ Robin Putzrath
- -------------------- ----------------------
John McNichol Robin Putzrath
/s/ Mary Attig /s/ Bill Wrubel
- -------------------- ----------------------
Mary Attig Bill Wrubel
/s/ Dennis Zanella /s/ Eric Rodes
- -------------------- ----------------------
Dennis Zanella Eric Rodes
41
The undersigned, being the duly elected Secretary of the Transitory
Subsidiary, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ Bernard C. Boyle
-----------------------------------
Bernard C. Boyle, Secretary
The undersigned, being the duly elected Secretary of the Company, hereby
certifies that this Agreement has been adopted by a majority of the votes
represented by the outstanding Company Shares entitled to vote on this Agreement
and that there are no Dissenting Shares.
/s/ John McNichol
---------------------------------
John McNichol, Secretary
42
Exhibit A
Form of Escrow Agreement
[Intentionally omitted]
43
Exhibit B
Form of Certificate of Incorporation of Surviving Corporation
[Intentionally omitted]
44
Exhibit C
Form of Registration Rights Agreement
[Intentionally omitted]
45
Exhibit D
Form of Employment Agreement
[Intentionally omitted]
46
Exhibit E
Form of Affiliate Agreement
[Intentionally omitted]
47
Exhibit F
Form of Opinion of Counsel to the Company
[Intentionally omitted]
48
Exhibit G
Form of Opinion of Counsel to the Buyer
[Intentionally omitted]
49