EXECUTION COPY
EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
among
VANGUARD INFO-SOLUTIONS CORPORATION
(a New Jersey corporation formerly known as B2B Solutions, Inc.),
THE VANGUARD STOCKHOLDERS NAMED HEREIN,
THE AUTHORIZED REPRESENTATIVE NAMED HEREIN
and
THE A CONSULTING TEAM, INC.
(a New York corporation)
Dated as of
January 21, 2005
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND USAGE......................................................................1
Section 1.1 Definitions.......................................................................1
Section 1.2 Other Defined Terms...............................................................8
Section 1.3 Usage............................................................................10
ARTICLE 2 CONSUMMATION OF THE EXCHANGE TRANSACTION..................................................11
Section 2.1 The Exchange Transaction.........................................................11
Section 2.2 Issuance of Exchange Shares......................................................11
Section 2.3 Closing..........................................................................11
Section 2.4 Closing Obligations..............................................................11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE Vanguard STOCKHOLDERS...............................13
Section 3.1 Organization and Good Standing...................................................13
Section 3.2 No Conflict; No Consent; Enforceability..........................................13
Section 3.3 Books and Records................................................................14
Section 3.4 Capitalization...................................................................14
Section 3.5 Financial Statements.............................................................15
Section 3.6 No Undisclosed Liabilities.......................................................16
Section 3.7 No Material Adverse Change.......................................................16
Section 3.8 Absence of Certain Changes or Events.............................................16
Section 3.9 Taxes............................................................................18
Section 3.10 Accounts and Notes Receivable....................................................19
Section 3.11 Title to Properties; Encumbrances................................................19
Section 3.12 Condition and Sufficiency of Assets..............................................20
Section 3.13 Intellectual Property............................................................21
Section 3.14 Contracts; No Defaults...........................................................24
Section 3.15 Employees........................................................................28
Section 3.16 Labor Relations; Compliance......................................................28
Section 3.17 Employee Plans...................................................................29
Section 3.18 Compliance with Legal Requirements...............................................32
Section 3.19 Legal Proceedings; Orders........................................................33
Section 3.20 Relationships with Related Persons...............................................34
Section 3.21 Accounts and Notes Payable.......................................................35
Section 3.22 Certain Agreements...............................................................35
Section 3.23 Insurance........................................................................35
Section 3.24 Bank Accounts....................................................................35
Section 3.25 Brokers or Finders...............................................................35
Section 3.26 Disclosure.......................................................................35
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 4 ADDITIONAL REPRESENTATIONS OF THE Vanguard STOCKHOLDERS...................................35
Section 4.1 Title to Vanguard Capital Stock; No Agreements...................................36
Section 4.2 Organization, Good Standing and Power............................................36
Section 4.3 Enforceability; Authority; No Conflict; No Consent...............................36
Section 4.4 Certain United States Laws.......................................................37
Section 4.5 Investment Representations.......................................................37
Section 4.6 Representation by Legal Counsel; Review of Agreement.............................39
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF TACT....................................................39
Section 5.1 Organization and Good Standing...................................................39
Section 5.2 Books and Records................................................................40
Section 5.3 No Conflict; No Consent..........................................................40
Section 5.4 Capitalization...................................................................41
Section 5.5 No Material Adverse Change.......................................................41
Section 5.6 Absence of Certain Changes or Events.............................................41
Section 5.7 Legal Proceedings; Orders........................................................42
Section 5.8 SEC Reports......................................................................43
Section 5.9 Brokers or Finders...............................................................44
ARTICLE 6 COVENANTS OF Vanguard PRIOR TO CLOSING DATE...............................................44
Section 6.1 Access and Investigation.........................................................44
Section 6.2 Required Approvals...............................................................44
Section 6.3 Business Operations of the Acquired Companies....................................45
Section 6.4 Negative Covenant................................................................45
Section 6.5 Notification.....................................................................45
Section 6.6 Payment of Indebtedness by Related Persons.......................................46
Section 6.7 Best Efforts.....................................................................46
Section 6.8 Restriction on Transfer of Exchange Shares.......................................46
Section 6.9 Restrictions on Transfer of Transferred Vanguard Shares Prior to Closing.........48
ARTICLE 7 COVENANTS OF TACT PRIOR TO CLOSING DATE...................................................48
Section 7.1 Access and Investigation.........................................................48
Section 7.2 Required Approvals...............................................................49
Section 7.3 Business Operations of the Acquired Companies....................................49
Section 7.4 Negative Covenant................................................................49
Section 7.5 Notification.....................................................................49
Section 7.6 Payment of Indebtedness by Related Persons.......................................50
Section 7.7 No Solicitation by TACT..........................................................50
Section 7.8 Shareholders' Meeting............................................................51
Section 7.9 Best Efforts.....................................................................52
Section 7.10 Registration Rights..............................................................52
Section 7.11 Declaration and Payment of Dividend..............................................52
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 8 ADDITIONAL COVENANTS......................................................................53
Section 8.1 Public Announcements.............................................................53
Section 8.2 Confidentiality..................................................................53
Section 8.3 Board Membership.................................................................53
ARTICLE 9 CONDITIONS PRECEDENT TO TACT'S OBLIGATION TO CLOSE........................................54
Section 9.1 Accuracy of Representations......................................................54
Section 9.2 Vanguard Stockholders' Performance...............................................54
Section 9.3 Additional Documents.............................................................54
Section 9.4 Consummation of Other Transactions...............................................55
Section 9.5 No Proceedings...................................................................55
Section 9.6 No Material Adverse Effect.......................................................55
Section 9.7 Intentionally Omitted............................................................55
Section 9.8 Castor...........................................................................55
ARTICLE 10 CONDITIONS PRECEDENT TO Vanguard STOCKHOLDERS' OBLIGATION TO CLOSE........................55
Section 10.1 Accuracy of Representations......................................................55
Section 10.2 TACT's Performance...............................................................56
Section 10.3 Additional Documents.............................................................56
Section 10.4 Consummation of Other Transactions...............................................56
Section 10.5 No Proceedings...................................................................56
Section 10.6 No Material Adverse Change.......................................................56
Section 10.7 Falcone Employment Agreement.....................................................56
Section 10.8 Resignations.....................................................................56
ARTICLE 11 INDEMNIFICATION; REMEDIES; LIMITS ON LIABILITY............................................57
Section 11.1 Indemnification..................................................................57
Section 11.2 Limitations on Indemnification...................................................60
Section 11.3 Set-Off Against Escrowed Shares..................................................61
Section 11.4 Survival of Representations and Warranties.......................................61
Section 11.5 Claims...........................................................................62
Section 11.6 Limitation of Remedies as to Berenson............................................62
ARTICLE 12 TERMINATION...............................................................................62
Section 12.1 Termination by Mutual Consent....................................................62
Section 12.2 Termination by the Authorized Representative or TACT.............................62
Section 12.3 Termination by TACT..............................................................62
Section 12.4 Termination by the Authorized Representative.....................................63
Section 12.5 Effect of Termination............................................................63
Section 12.6 Extension; Waiver................................................................65
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 13 MISCELLANEOUS PROVISIONS..................................................................65
Section 13.1 Expenses.........................................................................65
Section 13.2 Notices..........................................................................65
Section 13.3 Entire Agreement; Modifications..................................................67
Section 13.4 Governing Law; Submission to Jurisdiction; Venue.................................67
Section 13.5 Assignment; Successors; No Third Party Rights....................................67
Section 13.6 Severability.....................................................................67
Section 13.7 No Waiver........................................................................68
Section 13.8 Jurisdiction; Service of Process.................................................68
Section 13.9 Further Assurances...............................................................68
Section 13.10 Counterparts.....................................................................68
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SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT is made as of January 21, 2005 among
Vanguard Info-Solutions Corporation, a corporation organized under the New
Jersey Corporations Act formerly known as B2B Solutions, Inc. ("Vanguard"), each
of the Vanguard Stockholders (as defined herein), T.V. Govindarajan in his
capacity as the representative of all of the Vanguard Stockholders (in such
capacity, the "Authorized Representative"), and The A Consulting Team, Inc., a
New York corporation ("TACT").
THE RECITALS
A. On the terms and conditions hereinafter provided, TACT desires
to acquire from the Vanguard Stockholders, and the Vanguard Stockholders desire
to transfer to TACT, 100% of the issued and outstanding capital stock, no par
value ("Vanguard Capital Stock"), of Vanguard (the "Transferred Vanguard
Shares") in exchange for an aggregate of 7,312,796 shares of common stock, $0.01
par value per share ("TACT Common Stock"), of TACT (the "Exchange Transaction"),
as such number may be subsequently adjusted pursuant to the terms of this
Agreement.
B. Oak Finance Investments Limited, a company formed under the
laws of the British Virgin Islands ("Oak"), has agreed to purchase,
simultaneously with the consummation of the Exchange Transaction, from the TACT
Stockholder and his spouse 1,024,697 shares of TACT Common Stock at a purchase
price of $10.25 per share, pursuant to an agreement dated as of the date hereof
between the TACT Stockholder and Oak (the "Shareholder Stock Purchase
Agreement"), which purchase has been approved by the board of directors of TACT.
C. Oak has agreed, simultaneously with the consummation of the
Exchange Transaction and for a period of 120 days thereafter, to purchase from
TACT up to 1,250,000 shares of TACT Common Stock pursuant to an agreement dated
as of the date hereof between Oak and TACT (the "TACT Stock Purchase
Agreement").
D. The Authorized Representative and each of the Vanguard
Stockholders have entered into an Irrevocable Power of Attorney and Custody
Agreement, a form of which is attached hereto as Exhibit B (the "Custody
Agreement") and, simultaneously with the execution and delivery hereof, each of
the Vanguard Stockholders has executed and delivered to TACT a Stockholder
Certificate, a form of which is attached hereto as Exhibit C (each, a
"Stockholder Certificate").
E. The Board of Directors of TACT has approved the Contemplated
Company Transactions and has, subject to the terms and conditions contained
herein, agreed to recommend to its shareholders that they approve the
Contemplated Company Transactions.
F. The approval of the shareholders of TACT is necessary to
consummate the Contemplated Company Transactions.
THE AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
Section 1.1 Definitions. For purposes of this Agreement, the following
terms have the respective meanings set forth below:
"Agreement" means this Share Exchange Agreement, as amended
from time to time in accordance with the terms hereof.
"Applicable Contract" means any Contract (a) under which any
Vanguard Company has or may acquire any rights, (b) under which any
Vanguard Company has or may become subject to any obligation or
liability, or (c) by which any Vanguard Company or any assets owned or
used by it is or may become bound.
"Berenson" means Berenson Investments LLC.
"Best Efforts" means the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to
achieve that result as expeditiously as possible, provided, however,
that a Person required to use Best Efforts under this Agreement will
not thereby be required to take actions that would result in a material
adverse change in the benefits to such Person of this Agreement and the
Contemplated Company Transactions or to dispose of or make any material
change to its business, expend any material funds or incur any other
material burden.
"Breach" means any breach of, or any inaccuracy in, any
representation or warranty or any breach of, or failure to perform or
comply with, any covenant or obligation, in or of this Agreement or any
other Contract, or any event which with the passing of time or the
giving of notice, or both, would constitute such a breach, inaccuracy
or failure.
"Business Day" means any day except Saturday, Sunday or any
other day on which commercial banks located in New York, New York are
authorized by law to be closed for business.
"Castor" means Castor Finance Private Company Ltd., an Indian
corporation.
"Claim Notice" shall mean written notification that, as a
result of a claim made by any Indemnified Person under this Agreement,
the Company has incurred or reasonably expects to incur Losses for
which it is entitled to indemnification under the Share Exchange
Agreement, which written notification shall include (i) a description
of the Losses incurred or reasonably expected to be incurred by the
Indemnified Person and the amount of such Losses, to the extent then
known, and (ii) a statement that the Company is entitled to
indemnification for such Losses under the Share Exchange Agreement and
a reasonable explanation of the basis therefor.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means U.S. Securities and Exchange Commission.
"Consent" means any approval, consent, ratification, waiver or
other authorization.
"Contemplated Company Transactions" means, collectively, the
transactions contemplated by the Exchange Agreement and the
transactions contemplated by the TACT Stock Purchase Agreement (other
than the transactions contemplated by the Shareholder Stock Purchase
Agreement).
"Contemplated Transactions" means the Contemplated Company
Transactions and the transactions contemplated by the Shareholder Stock
Purchase Agreement.
"Contract" means any agreement, contract, obligation, promise
or undertaking (whether written or oral and whether express or implied)
that is legally binding.
"Designated Equipment Leases" means the Master Lease
Agreement, dated March 25, 2004, between Vanguard and The
CIT/Group/Equipment Financing, Inc. ("CIT"), pursuant to which the
equipment set forth in Equipment Schedule 1, dated March 24, 2004, in
Equipment Schedule 2, dated June 23, 2004, and in Equipment Schedule 3,
dated June 23, 2004, has been leased to Vanguard, as any of such leases
may be amended from time to time, Vanguard having been discharged from
such leases on December 14, 2004.
"Disclosure Schedule" means a schedule delivered by one party
to the other party concurrently with the execution and delivery of this
Agreement, setting forth certain disclosure information arranged in
numbered Sections, each of which corresponds to a section of this
Agreement, and provides (1) additional disclosure in response to an
express disclosure requirement in such section or (2) an exception or
qualification to a representation or warranty contained in such
section.
"Employee Plan" means, with respect to an employer, all
"employee benefit plans" as defined by Section 3(3) of ERISA, all
specified fringe benefit plans as defined in Section 6039D of the Code,
and all other bonus, incentive compensation, deferred compensation,
profit sharing, stock option, stock appreciation right, stock bonus,
stock purchase, employee stock ownership, savings, severance, change in
control, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, accident,
group insurance, vacation, holiday, sick leave, fringe benefit or
welfare plan, and any other employee compensation or benefit plan,
agreement, policy, practice, commitment, contract or understanding
(whether qualified or nonqualified, currently effective or terminated,
written or unwritten) and any trust, escrow or other agreement related
thereto that (i) is maintained or contributed to by any such employer
or any ERISA Affiliate or has been maintained or contributed to in the
last six (6) years by any such employer or any ERISA Affiliate, or with
respect to which any such employer or any ERISA Affiliate has or may
have any liability, and (ii) provides benefits, or describes policies
or procedures applicable to any current or former director, officer,
employee or service provider of any such employer or any ERISA
Affiliate, or the dependents of any thereof, regardless of how (or
whether) liabilities for the provision of benefits are accrued or
assets are acquired or dedicated with respect to the funding thereof.
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"Encumbrance" means any charge, claim, community or other
marital property interest, condition, equitable interest, Lien,
guarantee, option, pledge, security interest, mortgage, right of way,
easement, encroachment, servitude, right of first option, right of
first refusal or similar restriction, including any restriction on use,
voting (in the case of security or equity interests), transfer, receipt
of income or exercise of any other attribute of ownership.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" means, with respect to an employer, any
other corporation or trade or business controlled by, controlling or
under common control with such employer (within the meaning of Section
414, Section 4001(a)(14) or Section 4001(b) of ERISA).
"Escrow Agent" means the escrow agent named in the Escrow
Agreement.
"Escrow Agreement" means the Escrow Agreement, to be dated the
Closing Date, substantially in the form of Exhibit D, among TACT, the
Authorized Representative and the Escrow Agent.
"Escrow Shares" means those of the Exchange Shares delivered
by TACT to the Escrow Agent pursuant to Section 2.1 that are to be held
by the Escrow Agent under the Escrow Agreement.
"Excalibur" means Excalibur Investment Group Limited, a
British Virgin Islands company.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Ratio" means the number of shares of TACT Common
Stock to be issued in exchange for each share of Vanguard Capital
Stock, which shall be 731.2796:1.
"Exchange Shares" means those shares of TACT Common Stock to
be issued to the Vanguard Stockholders in exchange for the Transferred
Vanguard Shares.
"Facilities" means any real property, leasehold or other
interest in real property currently owned or operated by Vanguard,
including the tangible personal property used or operated by Vanguard
at the respective locations of the real property specified in Section
3.11.
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"GAAP" means United States generally accepted accounting
principles applied on a consistent basis.
"Governmental Authorization" means any Consent, license,
registration or permit issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"Governmental Body" means any (i) nation, state, county, city,
town, borough, village, district or other jurisdiction; (ii) federal,
state, local, municipal, foreign or other government; (iii)
governmental or quasi-governmental authority of any nature (including
any agency, branch, department, board, commission, court, tribunal or
other entity exercising governmental or quasi-governmental powers);
(iv) multinational organization or body; (v) body exercising, or
entitled or purporting to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power;
or (vi) any official of any of the foregoing.
"IRS" means the United States Internal Revenue Service and, to
the extent relevant, the United States Department of the Treasury.
"Knowledge" means, with respect to a particular fact or other
matter:
(i) in the case of an individual, either that
individual is actually aware of that fact or matter, or a
prudent individual could be expected to discover or otherwise
become aware of that fact or matter in the course of
conducting a reasonably comprehensive investigation regarding
the accuracy of any representation or warranty contained in
this Agreement;
(ii) in the case of a Person (other than an
individual), any individual who is serving, or who has at any
time served, as a director, officer, executor or trustee of
that Person (or in any similar capacity) has, or at any time
had, Knowledge of that fact or other matter (as set forth in
clause (i) above); and
(iii) any such individual (referred to in clause (ii)
above) and any individual party to this Agreement will be
deemed to have conducted a reasonably comprehensive
investigation regarding the accuracy of any representation or
warranty made herein by that Person or individual;
provided, that the "Knowledge of the Vanguard Stockholders" excludes
any knowledge of Berenson.
"Legal Requirement" means any federal, state, local,
municipal, foreign, international, multinational or other constitution,
law, ordinance, principle of common law, code, regulation, rule, Order,
Governmental Authorization, statute or treaty, including any rule or
regulation of the Nasdaq Smallcap Market, and further including the
Sarbanes Oxley Act of 2002.
-4-
"Liability" means, with respect to any Person, any liability
or obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or unaccrued,
disputed or undisputed, liquidated or unliquidated, secured or
unsecured, joint or several, due or to become due, vested or unvested,
executory, determined, determinable or otherwise, and whether or not
the same is required to be accrued on the financial statements of such
Person.
"Lien" means, with respect to any asset, any deed of trust
mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect of that asset.
"Material Adverse Effect" means a material adverse effect on
the business, condition (financial or otherwise), assets, properties,
operations, results of operations, prospects, affairs or Liabilities of
the relevant Organization and its Subsidiaries taken as a whole.
"Order" means any order, injunction, judgment, decree, ruling,
assessment or arbitration award of any Governmental Body, arbitrator or
NASDAQ, Inc. (including without limitation any notice or letter
threatening or warning of possible delisting of the TACT Common Stock).
"Ordinary Course of Business" means, with respect to any
action, the action taken by a Person only if that action:
(i) is consistent in nature, scope and magnitude with
the past practices of such Person and is taken in the ordinary
course of the normal, day-to-day operations of such Person;
(ii) does not require authorization by the board of
directors or stockholders of such Person (or by any Person or
group of Persons exercising similar authority); and
(iii) is similar in nature, scope and magnitude to
actions customarily taken in the ordinary course of the
normal, day-to-day operations of other Persons that are in the
same line of business as such Person.
"Organization" shall be construed as broadly as possible and
shall include any entity, including a corporation (either non-profit or
other), partnership (either limited or general), joint venture, joint
stock company, limited liability company, trust, estate or other
unincorporated association, whether or not a legal entity.
"Organizational Documents" means (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general
partnership; (c) the limited partnership agreement and the certificate
of limited partnership of a limited partnership; (d) the articles of
organization or certificate of formation and any operating or limited
liability company agreement of a limited liability company; (e) any
charter or similar document adopted or filed in connection with the
creation, formation, or organization of a Person, and (f) any amendment
to any of the foregoing.
-5-
"Person" means an individual or natural person or an
Organization.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal,
whether public or private) commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Related Person" means:
(a) with respect to a particular individual, (i) each
other member of such individual's Family; (ii) any Person that is
directly or indirectly controlled by any one or more members of such
individual's Family; (iii) any Person in which members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and (iv) any Person with respect to which one or more members
of such individual's Family serves as a director, officer, partner,
executor or trustee (or in a similar capacity); and
(b) with respect to a specified Person other than an
individual, (i) any Person that directly or indirectly controls, is
directly or indirectly controlled by or is directly or indirectly under
common control with such specified Person; (ii) any Person that holds a
Material Interest in such specified Person; (iii) each Person that
serves as a director, officer, partner, executor or trustee of such
specified Person (or in a similar capacity); (iv) any Person in which
such specified Person holds a Material Interest; and (v) any Person
with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity).
For purposes of this definition:
(i) "control" (including "controlling," "controlled
by," and "under common control with") means the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise, and shall be construed as such term is used in the
rules promulgated under the Securities Act;
(ii) the "Family" of an individual includes (i) the
individual, (ii) the individual's spouse, (iii) any other
natural Person who is related to the individual or the
individual's spouse within the second degree and (iv) any
other natural Person who resides with such individual; and
(iii) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of voting securities or other voting interests
representing at least ten percent (10%) of the outstanding
voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the
outstanding equity securities or equity interests in a Person.
"Representative" means, with respect to a Person, any
director, officer, manager, employee, agent, consultant, advisor,
accountant, financial advisor, legal counsel or other representative of
that Person.
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"SEC Reports" means all forms, reports, schedules, statements
and other documents, and amendments thereto, required to be filed by
TACT under the Exchange Act.
"Securities Act" means the Securities Act of 1933.
"Subsidiary" means, with respect to an Organization (the
"Owner"), any Organization of which securities or other interests
having the power to elect a majority of that Organization's board of
directors or similar governing body, or otherwise having the power to
direct the business and policies of that Organization (other than
securities or other interests having such power only upon the happening
of a contingency that has not occurred) are held by the Owner or one or
more of its Subsidiaries; when used without reference to a particular
Person, "Subsidiary" means a Subsidiary of TACT.
"TACT Disclosure Schedule" means the Disclosure Schedule
delivered by TACT hereunder.
"TACT Stockholder" means Shmuel BenTov, an individual resident
of the State of New York.
"Tax" or "Taxes" means any income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental, windfall profit, customs, vehicle, airplane,
boat, vessel or other title or registration, capital stock, franchise,
employees' income withholding, foreign or domestic withholding, social
security, unemployment, disability, real property, personal property,
sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind
whatsoever and any interest, penalty, addition or additional amount
thereon imposed, assessed or collected by or under the authority of any
Governmental Body or payable under any tax-sharing agreement or any
other Contract.
"Tax Return" means any return (including any information
return), report, statement, schedule, notice, form, declaration, claim
for refund or other document or information filed with or submitted to,
or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of
any Tax or in connection with the administration, implementation or
enforcement of or compliance with any Legal Requirement relating to any
Tax.
"Third Party" means any Person who is not a party to this
Agreement.
"Vanguard Companies" means Vanguard and the Vanguard
Subsidiaries, collectively; individually, each a "Vanguard Company."
"Vanguard Disclosure Schedule" means the Disclosure Schedule
delivered by Vanguard hereunder.
"Vanguard Stockholders" means all of the holders of capital
stock of Vanguard.
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"Vanguard Subsidiary" means each Organization that is a
Subsidiary of Vanguard.
Section 1.2 Other Defined Terms. For purposes of this Agreement, the
following terms have the respective meanings set forth in the section and at the
page referred to opposite each such term:
....................................................... ................................ .................
Defined Term Section Page
....................................................... ................................ .................
AAA Rules Section 11.1(d) 57
....................................................... ................................ .................
Accounts Receivable Section 3.10 19
....................................................... ................................ .................
Aggregate Claim Threshold Section 11.2(a) 59
....................................................... ................................ .................
Aggregate Loss Limit Section 11.2(a) 59
....................................................... ................................ .................
Audited 2003 Financial Statements Section 3.5 15
....................................................... ................................ .................
CIT Section 1.1 2
....................................................... ................................ .................
Claim Notice Section 11.1(c) 57
....................................................... ................................ .................
Closing Section 2.3 11
....................................................... ................................ .................
Closing Date Section 2.3 11
....................................................... ................................ .................
COBRA Section 3.17(g) 30
....................................................... ................................ .................
Company Acquisition Proposal Section 7.7(a) 49
....................................................... ................................ .................
Competing Business Section 3.20 34
....................................................... ................................ .................
Confirming Audited Financial Statements Section 6.7 45
....................................................... ................................ .................
Copyrights Section 3.13(a)(iv) 21
....................................................... ................................ .................
Defined Benefit Plan Section 11.1(c) 57
....................................................... ................................ .................
Dividend Section 7.11
....................................................... ................................ .................
Good Faith Negotiation Period Section 11.1(c) 57
....................................................... ................................ .................
Historical Financial Statements Section 3.5 15
....................................................... ................................ .................
Indemnified Person(s) Section 11.1(c) 57
....................................................... ................................ .................
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....................................................... ................................ .................
Defined Term Section Page
....................................................... ................................ .................
Indemnifying Person(s) Section 11.1(c) 57
....................................................... ................................ .................
Individual Claim Threshold Section 11.2(a) 59
....................................................... ................................ .................
Intellectual Property Assets Section 3.13(a) 20
....................................................... ................................ .................
Interim Balance Sheet Section 3.5 15
....................................................... ................................ .................
Interim Financial Statements Section 3.5 15
....................................................... ................................ .................
Losses Section 11.1(a) 56
....................................................... ................................ .................
Marks Section 3.13(a) 20
....................................................... ................................ .................
Net Names Section 3.13(a)(iv) 21
....................................................... ................................ .................
Oak Recitals
....................................................... ................................ .................
Owner Section 1.1 1
....................................................... ................................ .................
PBGC Section 3.17(c) 29
....................................................... ................................ .................
Patents Section 3.13(a)(ii) 21
....................................................... ................................ .................
Shareholders' Meeting Section 7.8 51
....................................................... ................................ .................
Superior Proposal Section 7.7(a) 49
....................................................... ................................ .................
Survival Date Section 11.3 60
....................................................... ................................ .................
TACT Heading
....................................................... ................................ .................
TACT's Advisors Section 6.1 44
....................................................... ................................ .................
TACT Common Stock Recitals
....................................................... ................................ .................
TACT Indemnified Person(s) Section 11.1(a) 56
....................................................... ................................ .................
TACT Stock Purchase Agreement Recitals
....................................................... ................................ .................
TACT Termination Amount Section 12.5(a) 63
....................................................... ................................ .................
Vanguard Stockholders' Closing Documents Section 4.3(a) 35
....................................................... ................................ .................
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Section 1.3 Usage.
(a) Interpretation. In this Agreement, unless a clear contrary
intention appears:
(i) a reference herein to days shall mean calendar
days unless otherwise specified. Any day or deadline or end of
a time period hereunder which falls on a day other than a
Business Day shall be deemed to refer to the first Business
Day following such day or deadline or end of the time period,
as the case may be;
(ii) a reference in this Agreement to an article,
section, exhibit or schedule shall mean an article or section
of, or exhibit or schedule attached to, this Agreement, as the
case may be. Article and section headings in this Agreement
are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement;
(iii) a reference to any Legal Requirement means such
Legal Requirement as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to
time, including rules and regulations promulgated thereunder,
and reference to any section or other provision of any Legal
Requirement means that provision of such Legal Requirement
from time to time in effect and constituting the substantive
amendment, modification, codification, replacement or
reenactment of such section or other provision;
(iv) the word "including" means without limitation;
the word "or" is not exclusive and is used in the inclusive
sense of "and/or"; and the words "herein," "hereof," "hereby,"
"hereto" and "hereunder" refer to this Agreement as a whole;
(v) a reference to document, instrument or agreement
shall be deemed to refer as well to all addenda, exhibits,
schedules or amendments thereto; and
(vi) all words used in this Agreement will be
construed to be of such gender or number as the circumstances
require.
(b) Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with GAAP.
(c) Legal Representation of the Parties. This Agreement was
negotiated by the parties with the benefit of legal representation, and any rule
of construction or interpretation otherwise requiring this Agreement to be
construed or interpreted against a party shall not apply to any construction or
interpretation hereof.
-10-
ARTICLE 2
CONSUMMATION OF THE EXCHANGE TRANSACTION
Section 2.1 The Exchange Transaction. The Authorized Representative
hereby agrees, with respect to the Vanguard Capital Stock he holds in the amount
set forth next to his name on Exhibit A hereto and for and on behalf of each of
the other Vanguard Stockholders with respect to the Vanguard Common Stock each
of them holds in the amounts set forth next to their names on Exhibit A hereto,
by the powers granted to him in the Custody Agreement, to assign, transfer and
deliver to TACT, all of the Transferred Vanguard Shares, and TACT agrees to
acquire such Transferred Vanguard Shares by issuing and delivering to the
Vanguard Stockholders or their designees in exchange therefor 6,312,796 of the
Exchange Shares and delivering 1,000,000 of the Exchange Shares to the Escrow
Agent to be held pursuant to the terms and conditions of the Escrow Agreement.
Section 2.2 Issuance of Exchange Shares. Based on the Exchange Ratio,
as a result of the Closing, each Vanguard Stockholder is entitled to receive, in
exchange for his or its portion of the Transferred Vanguard Shares, that number
of Exchange Shares that is set forth opposite such Vanguard Stockholder's name
on Exhibit A hereto (assuming that none of the Escrow Shares are returned to
TACT for cancellation in accordance with Section 3 of the Escrow Agreement).
Section 2.3 Closing. The closing of the Exchange Transaction (the
"Closing") provided for in this Agreement will take place (a) at the offices of
McGuireWoods LLP, 1345 Avenue of the Americas, 7th Floor, New York, NY 10105, at
10:00 a.m. (local time) on the third Business Day following the date on which
the last of the conditions set forth in ARTICLE 9 and ARTICLE 10 have been
satisfied or waived by the party entitled to waive the same, or (b) at such
other time, place and date (if any) to which the parties may mutually agree (the
"Closing Date").
Section 2.4 Closing Obligations. At the Closing:
(a) The Authorized Representative will deliver to TACT:
(i) certificates representing the Vanguard Capital
Stock, duly endorsed (or accompanied by duly executed stock
powers), with signatures guaranteed by a commercial bank or
trust company or by a member firm of a national securities
exchange, in proper form for transfer to TACT with all
required stock transfer stamps affixed or provided for;
(ii) a certificate executed by the Chief Executive
Officer or President of Vanguard representing and warranting
to TACT that each of the representations and warranties of
Vanguard and its Subsidiaries in this Agreement was accurate
in all material respects as of the date of this Agreement and
is accurate in all material respects as of the Closing Date as
if made on the Closing Date (giving full effect to any
supplements to the Vanguard Disclosure Schedule that were
delivered by Vanguard to TACT prior to the Closing Date in
accordance with Section 6.5); provided, that any
representation or warranty that is qualified by materiality by
its terms shall be accurate in all respects as of the date of
this Agreement and as of the Closing Date;
-11-
(iii) duly executed counterparts of any report,
schedule or filing required to be filed with the SEC by any
Vanguard Stockholder in connection with the Exchange
Transaction or the other Contemplated Company Transactions;
and
(iv) duly executed counterparts of the Escrow
Agreement.
(b) TACT will deliver to Vanguard Stockholders:
(i) 6,312,796 of the Exchange Shares;
(ii) a certificate executed by the Chief Executive
Officer or President of TACT to the effect that each of TACT's
representations and warranties in this Agreement was accurate
in all material respects as of the date of this Agreement and
is accurate in all material respects as of the Closing Date as
if made on the Closing Date, (giving full effect to any
supplements to the TACT Disclosure Schedule that were
delivered by TACT to Vanguard prior to the Closing Date, in
accordance with Section 7.5); provided, that any
representation or warranty that is qualified by materiality by
its terms shall be accurate in all respects as of the date of
this Agreement and as of the Closing Date; and
(iii) duly executed counterparts of the Escrow
Agreement.
(c) Vanguard will deliver to the Vanguard Stockholders and
TACT a written statement signed by an officer of Vanguard, dated as of the
Closing Date, to the effect that (a) the Transferred Vanguard Shares do not
constitute a "U.S. real property interest" within the meaning of Section 897 of
the Code and (b) Vanguard has filed a notice with the IRS to such effect (in
compliance with Treas. Reg. ss. 1.897-2(h)(2)).
(d) TACT will deliver 1,000,000 shares to the Escrow Agent.
(e) TACT, Vanguard and the Vanguard Stockholders will each pay
its respective fees and expenses as provided in Section 13.1.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VANGUARD STOCKHOLDERS
The Vanguard Stockholders (other than Berenson) represent and warrant
to TACT as follows:
Section 3.1 Organization and Good Standing.
-12-
(a) Item 3.1(a) of the Vanguard Disclosure Schedule contains a
complete and accurate list for each Vanguard Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and the number of shares held by each). Each Vanguard Company is a corporation
or other business entity having a separate legal identity from the owners of its
equity securities, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, has all
requisite corporate power and authority to conduct its business as it is now
being conducted, and as proposed to be conducted to own or use the properties
and assets that it purports to own or use, and to perform all of its obligations
under Applicable Contracts. Each Vanguard Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to qualify would not have
a Material Adverse Effect.
(b) Vanguard has delivered to TACT true and complete copies of
the Organizational Documents of each Vanguard Company as currently in effect.
Section 3.2 No Conflict; No Consent; Enforceability.
(a) Except as set forth in Item 3.2(a) of the Vanguard
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time or both):
(i) Breach (A) any provision of the Organizational
Documents of the Vanguard Companies, or (B) any resolution
adopted by the board of directors or the shareholders of any
Vanguard Company;
(ii) Breach or give any Governmental Body or other
Person the right to challenge any of the Contemplated Company
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which any
Vanguard Company or any Vanguard Stockholder, or any of the
assets owned or used by any Vanguard Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by any Vanguard Company or that otherwise relates
to the business of, or any of the assets owned or used by, any
Vanguard Company;
(iv) cause any Vanguard Company to become subject to,
or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by any Vanguard
Company to be reassessed or revalued by any taxing authority
or other Governmental Body;
-13-
(vi) Breach, conflict with or result in any material
violation of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by any Vanguard Company.
(b) Except as set forth in Item 3.2(b) of the Vanguard
Disclosure Schedule, no Vanguard Company is or will be required to give any
notice to or obtain any Consent from any Person or Governmental Body in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
(c) This Agreement constitutes the legal, valid and binding
obligation of Vanguard, enforceable against it in accordance with its terms.
Upon the execution and delivery of the Escrow Agreement and each other agreement
to be executed and delivered by Vanguard at the Closing, each of such agreements
will constitute the legal, valid and binding obligation of Vanguard, enforceable
against it in accordance with their respective terms. Vanguard has the absolute
and unrestricted right, power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, and such action
has been duly authorized by all necessary action by Vanguard's stockholders and
board of directors.
Section 3.3 Books and Records. The books of account, minute books,
stock record books and other records of the Vanguard Companies, all of which
have been made available to TACT, are complete and correct and have been
maintained in accordance with sound business practices and the requirements of
Section 13(b)(2) of the Exchange Act (regardless of whether the Vanguard
Companies are subject to that provision), including the maintenance of an
adequate system of internal controls. The minute books of the Vanguard Companies
contain accurate and complete records of all meetings held of, and corporate
actions taken by, the stockholders, the boards of directors and committees of
the board of directors of the Vanguard Companies. At the Closing, all of those
books and records will be in the possession of the Vanguard Companies.
Section 3.4 Capitalization.
(a) The authorized capital stock of Vanguard consists of
10,000 shares of common stock, without par value, 1,000 of which have been
designated Series A Voting Stock, all of which are issued and outstanding, and
9,000 of which have been designated Series B Non-Voting Stock, all of which are
issued and outstanding, and together, such shares constitute the Vanguard
Capital Stock. The Vanguard Stockholders are and will be on the Closing Date the
record and beneficial owners and holders of all of the issued and outstanding
Vanguard Capital Stock as set forth in Exhibit A, free and clear of all
Encumbrances. With the exception of the Vanguard Capital Stock (which is owned
by the Vanguard Stockholders), except as set forth in Item 3.4(a) of the
Vanguard Disclosure Schedule, all of the outstanding capital stock and other
securities of each Vanguard Company are owned of record and beneficially by one
or more Vanguard Companies, free and clear of all Encumbrances. No legend or
other reference to any purported Encumbrance appears on any certificate
representing capital stock of any Vanguard Company.
-14-
(b) All of the outstanding shares of capital stock of each
Vanguard Company have been duly authorized and validly issued and are fully paid
and nonassessable. Except as set forth in Item 3.4(b) of the Vanguard Disclosure
Schedule, there are no Contracts relating to the issuance, sale, transfer or
voting of any capital stock or other securities of any Vanguard Company. None of
the outstanding equity securities or other securities of any Vanguard Company
was issued in violation of the Securities Act or any other Legal Requirement.
(c) No Vanguard Company owns, or has any right or Contract to
acquire, any capital stock or other securities of any Person (other than
Vanguard Companies) or any direct or indirect equity or ownership interest in
any other business.
(d) Castor has no material assets other than the 4,892,900
shares of Vanguard Info-Solutions Ltd. registered in its name.
Section 3.5 Financial Statements. The Vanguard Stockholders have
delivered to TACT: (a) an audited consolidated balance sheet of the Vanguard
Companies as at December 31, 2001, 2002 and 2003 and the related audited
consolidated statements of income, changes in stockholders' equity, and cash
flow for the fiscal years then ended (including the notes thereto, the "Year-End
Financial Statements"), together with the report thereon of Mercadian, PC (the
"Certifying Accountants"), independent certified public accountants, and (b) an
audited consolidated balance sheet of the Vanguard Companies as at July 31, 2004
(the "Interim Balance Sheet") and the related audited consolidated statements of
income, changes in stockholders' equity and cash flow for the seven months then
ended, and the related consolidating financial statements for the seven months
then ended, including the notes thereto, together with the report of the
Certifying Accountants (the "Interim Financial Statements"). The Year-End
Financial Statements and the Interim Financial Statements (collectively, the
"Historical Financial Statements") fairly present the financial condition and
the results of operations, changes in stockholders' equity, and cash flows of
the Vanguard Companies as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP. The
Historical Financial Statements reflect consistent application of such
accounting principles throughout the periods involved, except as disclosed in
the notes to such financial statements. The Historical Financial Statements have
been prepared from and are in accordance with the accounting books and records
of the Vanguard Companies. Vanguard has also delivered to TACT copies of all
letters to Vanguard's board of directors or the audit committee thereof during
the thirty-six months preceding the execution of this Agreement, together with
copies of all responses thereto, from the Certifying Accountants and any other
independent public accountants engaged by Vanguard. No financial statements of
any Person other than the Vanguard Companies are required by GAAP to be included
in the consolidated financial statements of TACT.
Section 3.6 No Undisclosed Liabilities. Except as set forth in Item 3.6
of the Vanguard Disclosure Schedule, the Vanguard Companies have no Liability
except for Liabilities reflected or reserved against the Interim Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof. There were no material loss contingencies (as such
term is used in Statement of Financial Accounting Standards No. 5 issued by the
Financial Accounting Standards Board in March, 1975 ("FAS No. 5")) which were
not adequately provided for on the Interim Balance Sheet, respectively, as
required by FAS No. 5, with the result that the Interim Balance Sheet, as the
case may be, did not fairly present the financial condition of the Vanguard
Companies in accordance with GAAP at the respective dates thereof. Castor has no
material Liabilities.
-15-
Section 3.7 No Material Adverse Change. Except as set forth in Item
3.7 of the Vanguard Disclosure Schedule, since the date of the Interim Balance
Sheet, there has not been any material adverse change in the business, condition
(financial or otherwise), assets, properties, operations, results of operations,
prospects, affairs or Liabilities of any Vanguard Company, and no event has
occurred or circumstance exists that may result in such a Material Adverse
Effect.
Section 3.8 Absence of Certain Changes or Events. Except as
set forth in Item 3.8 of the Vanguard Disclosure Schedule, since the date of the
Interim Balance Sheet, the Vanguard Companies have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in any Vanguard Company's authorized or issued
capital stock or debt securities; grant of any stock option or right to purchase
shares of capital stock of any Vanguard Company; issuance of any security
convertible into capital stock of any Vanguard Company or any debt security;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Vanguard Company of any shares of any such capital stock; or
declaration of payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment or change to the Organizational Documents of any
Vanguard Company;
(c) payment or increase by any Vanguard Company of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, severance, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of any Vanguard Company;
(e) damage to or destruction or loss of any asset or property
of any Vanguard Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Vanguard Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any customer, license, distributorship, dealer, sales
representative, joint venture, credit, or other similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to any
Vanguard Company of at least $50,000;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of any
Vanguard Company or mortgage, pledge, or imposition of any lien or other
Encumbrance on any material asset or property of any Vanguard Company, including
the sale, lease, or other disposition of any of the Intellectual Property
Assets;
-16-
(h) cancellation or waiver of any claims or rights with a
value to any Vanguard Company in excess of $50,000;
(i) except as required by GAAP, a revaluation of any of the
assets or material change in the accounting methods, principles or practices
used by any Vanguard Company or any change in depreciation or amortization
policies or rates theretofore adopted;
(j) creation, assumption, guarantee or incurrence of any
Liability equal to or in excess of $50,000, individually or in the aggregate;
(k) payment, discharge or satisfaction of any Encumbrance or
Liability or any cancellation of any material debts or claims or any amendment,
termination or waiver of any rights of material value;
(l) premature termination of, or written indication of an
intention to prematurely terminate or not renew, any material contract, license,
commitment or other Contract;
(m) making of any loan, advance or capital contribution to or
investment in any Person or the engagement in any transaction with any employee,
officer, director or securityholder of any Vanguard Company, other than advances
to employees in the Ordinary Course of Business for travel and similar business
expenses;
(n) any change in the manner in which any Vanguard Company
extends discounts or credit to customers or otherwise deals with customers;
(o) any termination of employment of any officer or employee
or any expression of intention by any officer or employee to resign from such
office or employment;
(p) any labor dispute or any union organizing campaign;
(q) the filing or other commencement of any litigation or
other Proceeding by or against any Vanguard Company before any Governmental
Body; or
(r) any agreement, understanding, authorization or proposal,
whether in writing or otherwise, for any Vanguard Company to take any of the
actions specified in items (a) through (q) above.
Section 3.9 Taxes.
(a) The Vanguard Companies have filed or caused to be filed on
a timely basis all Tax Returns that are or were required to be filed by or with
respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Vanguard has delivered
to TACT copies of, and Item 3.9(a) of the Vanguard Disclosure Schedule contains
a complete and accurate list of, all such Tax Returns filed since January 1,
2001. The Vanguard Companies have paid, or made provision for the payment of,
all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by any Vanguard Company,
except such Taxes, if any, as are listed in Item 3.9(a) of the Vanguard
Disclosure Schedule and are being contested in good faith and as to which
adequate reserves have been provided in the Interim Balance Sheet.
-17-
(b) The charges, accruals, and reserves with respect to Taxes
on the respective books of each Vanguard Company are adequate and are at least
equal to that Vanguard Company's liability for Taxes (including Taxes for which
Tax Returns are not yet required to be filed). There exists no proposed tax
assessment against any Vanguard Company except as disclosed in the Interim
Balance Sheet or in Item 3.9(b) of the Vanguard Disclosure Schedule.
(c) No Vanguard Company is a party to any agreement extending
the time within which to file any Tax Return. Except as described in Item 3.9(c)
of the Vanguard Disclosure Schedule, no Vanguard Stockholder or Vanguard Company
has given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of any Vanguard Company or for
which any Vanguard Company may be liable.
(d) No Vanguard Company has Knowledge that any claim has been
made by any state or governmental jurisdiction in which any Vanguard Company has
not filed Tax Returns that such Vanguard Company is or may be subject to
taxation by, or is or may be liable for Taxes due to, such state or governmental
jurisdiction.
(e) All Taxes that any Vanguard Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(f) The United States federal and state income Tax Returns of
each Vanguard Company subject to such Taxes are closed by the applicable statute
of limitations for all taxable years through December 31, 2000. Item 3.9(f) of
the Vanguard Disclosure Schedule contains a complete and accurate list of all
audits of all Tax Returns not closed by the applicable statute of limitations,
including a reasonably detailed description of the nature and outcome of each
audit (if the audit has been concluded). All deficiencies proposed as a result
of such audits have been paid, reserved against, settled, or, as described in
Item 3.9(f)of the Vanguard Disclosure Schedule, are being contested in good
faith by appropriate proceedings.
(g) All Tax Returns filed by (or that include on a
consolidated basis) any Vanguard Company are true, correct, and complete. There
is no tax sharing agreement that will require any payment by any Vanguard
Company (to a Person other than another Vanguard Company) after the date of this
Agreement.
(h) No Vanguard Company is an S corporation or a "qualified
subchapter S subsidiary" within the meaning of Code Section 1361(b)(3)(B). For
each of 2001, 2002 and 2003, Vanguard was a validly electing S corporation
within the meaning of Code Section 1361 and 1362 (and applicable provisions of
state law in each jurisdiction in which Vanguard is subject to Tax).
-18-
(i) No withholding is required by TACT under Section 1445 of
the Code in connection with the Contemplated Transactions.
(j) No Vanguard Company is liable for the Taxes of another
Person (other than another Vanguard Company) under (a) Treas. Reg. ss.1.1502-6
(or comparable provisions of state, local or foreign Law), (b) as a transferee
or successor, or (c) by contract, indemnity or otherwise. No Vanguard Company
has made any payments, is obligated to make payments or is a party to an
agreement that could obligate it to make any payments that would not be
deductible under Section 280G of the Code. No Vanguard Company will be required
to include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing as a
result of any (i) change in method of accounting for a taxable period ending on
or prior to the Closing under Section 481(c) of the Code (or any corresponding
or similar provision of state, local or foreign income Tax law); (ii) "closing
agreement" as described in ss.7121 of the Code (or any corresponding or similar
provision of state, local or foreign income Tax law); or (iii) installment sale
made prior to the Closing.
Section 3.10 Accounts and Notes Receivable. All trade accounts
receivable and other rights to payment from customers of the Vanguard Companies,
including the full benefit of all security for such accounts or rights to
payment, together with all other accounts or notes receivable of the Vanguard
Companies and the full benefit of all security for such accounts or notes, as
well as any claim, remedy or other right related to any of the foregoing, that
are reflected on the Interim Balance Sheet or on the accounting records of the
Vanguard Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Except to the extent paid prior to the Closing Date, such Accounts Receivable
are or will be as of the Closing Date current and collectible net of the
respective reserves shown on the Interim Balance Sheet (which reserves are
adequate and calculated consistent with past practice). There is no contest,
claim, defense or right of setoff, other than returns in the Ordinary Course of
Business of the Vanguard Companies under any Contract with any account debtor of
an Account Receivable relating to the amount or validity of such Account
Receivable.
Section 3.11 Title to Properties; Encumbrances.
(a) Item 3.11(a) of the Vanguard Disclosure Schedule contains
a complete and accurate list of all real property, leaseholds, or other interest
in real property owned by any Vanguard Company. Vanguard has made available for
inspection by TACT and its counsel complete copies of each real property lease
to which any Vanguard Company is a party. The Vanguard Companies are in
compliance with all material terms of each such real property lease, and to the
Knowledge of the Vanguard Companies, there exists no default or event which,
with notice or the passage of time, would constitute an event of default
thereunder.
(b) Vanguard has delivered or made available to TACT copies of
the deeds and other instruments (as recorded) by which the Vanguard Companies
own or lease real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of the Vanguard
Companies and relating to such real property or interests. Except as set forth
in Item 3.11(b) of the Vanguard Disclosure Schedule, the Vanguard Companies own
(with good and marketable title in the case of real property, subject only to
the matters permitted by the following sentence) all the properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that they
purport to own, including all of the properties and assets reflected in the
Interim Balance Sheet (except for personal property sold since the date of the
Interim Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by the
Vanguard Companies since the date of the Interim Balance Sheet (except for
personal property of the Vanguard Companies sold since the date of the Interim
Balance Sheet in the Ordinary Course of Business and consistent with past
practice), which subsequently purchased properties and assets (other than
inventory and short-term investments) are listed in Item 3.11(b) of the Vanguard
Disclosure Schedule.
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(c) All material properties and assets reflected in the
Interim Balance Sheet are owned free and clear of all Encumbrances and are not,
in the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests shown on the Interim Balance Sheet or in Item 3.11(b) of the
Vanguard Disclosure Schedule as securing specified liabilities or obligations,
with respect to which no default (or event that, with notice or lapse or time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such mortgages and security interests being limited
to the property or assets of Vanguard) or in Item 3.11(b) of the Vanguard
Disclosure Schedule, with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) Liens
for current taxes not yet due and payable, and (d) with respect to real property
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of any Vanguard Company, and (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.
Section 3.12 Condition and Sufficiency of Assets. The buildings,
plants, structures, and equipment of the Vanguard Companies are structurally
sound, are in good operating condition and repair, and are adequate for the uses
to which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repair except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The building,
plants, structures, and equipment of the Vanguard Companies are sufficient for
the continued conduct of the Vanguard Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
Section 3.13 Intellectual Property.
(a) The term "Intellectual Property Assets" means all
intellectual property owned or licensed (as licensor or licensee) by the
Vanguard Companies in which any Vanguard Company has a proprietary interest (as
owner, licensor or licensee), including:
(i) the name of each Vanguard Company, all assumed
fictional business names, trade names, registered and
unregistered trademarks, service marks and applications
(collectively, "Marks");
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(ii) all patents, patent applications and inventions
and discoveries that may be patentable (collectively,
"Patents");
(iii) all know-how, trade secrets, confidential or
proprietary information, customer lists, Software, technical
information, data, process technology, plans, drawings and
blue prints (collectively, "Trade Secrets");
(iv) all copyrightable subject matter relating to
computer software or printed or electronic publications or
materials ("Copyrights"); and
(v) all rights in internet web sites, internet domain
names and Class B IP addresses presently used by any Vanguard
Company (collectively "Net Names").
(b) Item 3.13(b) of the Vanguard Disclosure Schedule contains
a complete and accurate list and summary description, including any royalties
paid or received by the Vanguard Companies, of all Applicable Contracts relating
to the Intellectual Property Assets, including all software licenses and related
maintenance contracts but excluding any license implied by the sale of a product
and perpetual, paid-up licenses for commonly available off-the-shelf Software
programs with a value of less than $5,000 under which a Vanguard Company is the
licensee. There are no outstanding and, to the Knowledge of the Vanguard
Companies and the Vanguard Stockholders, no threatened disputes or disagreements
with respect to any such Contract or with respect to any Intellectual Property
Assets used by the Vanguard Companies in their businesses.
(c) Except as set forth in Item 3.13(c) of the Vanguard
Disclosure Schedule, no Contract listed or required to be listed in Section
3.13(b) of the Vanguard Disclosure Schedule contains any provision related to a
change of control or other circumstance that would cause the terms of any such
Contract to become invalid, terminate or otherwise change as a result of any of
the Contemplated Transactions.
(d) The Intellectual Property Assets are all those necessary
for the operation of businesses of the Vanguard Companies as currently
conducted. One or more of the Vanguard Companies is the owner or licensee of all
right, title and interest in and to each of the Intellectual Property Assets,
free and clear of all Encumbrances, and has the right to use without payment to
a Third Party all of the Intellectual Property Assets.
(e) Item 3.13(e) of the Vanguard Disclosure Schedule contains
a complete and accurate list and summary description of all Patents.
(i) All of the issued Patents are currently in
compliance with formal legal requirements (including payment
of filing, examination and maintenance fees and proofs of
working or use), are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling
due within ninety (90) days after the Closing Date.
(ii) Except as set forth in Item 3.13(e) of the
Vanguard Disclosure Schedule, (A) no Patent is infringed or,
to the Knowledge of the Vanguard Companies and the Vanguard
Stockholders, has been challenged or threatened in any way,
and (B) none of the products manufactured or sold, nor any
process or know-how used, nor any services offered or
performed by any Vanguard Company infringes or is alleged to
infringe any patent or other proprietary right of any other
Person.
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(iii) All products made, used or sold under the
Patents have been marked with the proper patent notice to the
extent feasible.
(iv) Except as set forth in Item 3.13(e) of the
Vanguard Disclosure Schedule, the Vanguard Companies own all
right, title and interest in the Patents and there are no
Encumbrances on the Patents.
(f) Item 3.13(f) of the Vanguard Disclosure Schedule contains
a complete and accurate list and summary description of all Marks.
(i) Except as set forth in Item 3.13(f)(i) of the
Vanguard Disclosure Schedule, all Marks have been registered
with the United States Patent and Trademark Office, are
currently in compliance with all formal Legal Requirements
(including the timely post-registration filing of affidavits
of use and incontestability and renewal applications), are
valid and enforceable and are not subject to any maintenance
fees or taxes or actions falling due within ninety (90) days
after the Closing Date.
(ii) Except as set forth in Item 3.13(f)(ii) of the
Vanguard Disclosure Schedule, no Mark has been or is now
involved in any opposition, invalidation or cancellation
Proceeding and, to the Knowledge of the Vanguard Companies and
the Vanguard Stockholders, no such action is threatened with
respect to any of the Marks.
(iii) To the Knowledge of the Vanguard Companies and
the Vanguard Stockholders, none of the Vanguard Companies are
using any term, mark, name or designation that infringes or
presents a likelihood of confusion with the name, Mark or
designation of any other Person.
(iv) No Mark is infringed or, to the Knowledge of the
Vanguard Companies and the Vanguard Stockholders, has been
challenged or threatened in any way. None of the Marks used by
any Vanguard Company infringes or is alleged to infringe any
trade name, trademark or service mark of any other Person.
(v) All products and materials containing a Mark bear
the proper federal registration notice where permitted by law.
(vi) Except as set forth on Item 3.13(f) of the
Vanguard Disclosure Schedule the Vanguard Companies own all
right, title and interests in the Marks and there are no
Encumbrances on the Marks.
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(g) With respect to each Trade Secret:
(i) The documentation relating to such Trade Secret
is current, accurate and sufficient in detail and content to
identify and explain it and to allow its full and proper use
without reliance on the knowledge or memory of any individual.
(ii) Each Vanguard Company has taken all reasonable
precautions to protect the secrecy, confidentiality and value
of its Trade Secrets (including the enforcement by the
Vanguard Companies of a policy requiring each employee or
contractor to execute proprietary information and
confidentiality agreements substantially in its standard form,
and all current and former employees and contractors of
Vanguard Stockholder have executed such an agreement).
(iii) One or more of the Vanguard Companies has good
title to and an absolute right (but not necessarily exclusive
within the Vanguard Companies, but exclusive as to other Third
Parties) to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature and, to the
Knowledge of the Vanguard Companies and the Vanguard
Stockholders, have not been used, divulged or appropriated
either for the benefit of any Person (other than one or more
of the Vanguard Companies) or to the detriment of the Vanguard
Companies. No Trade Secret is subject to any adverse claim or
has been challenged or threatened in any way or infringes any
intellectual property right of any other Person.
(h) Item 3.13(h) of the Vanguard Disclosure Schedule contains
a complete and accurate list and summary description of all Net Names.
(i) All Net Names have been registered in the name of
one or more of the Vanguard Companies and are in compliance
with all formal Legal Requirements.
(ii) No Net Name has been or is now involved in any
dispute, opposition, invalidation or cancellation Proceeding
and, to the Knowledge of the Vanguard Companies and the
Vanguard Stockholders, no such action is threatened with
respect to any Net Name.
(iii) To the Knowledge of the Vanguard Companies and
the Vanguard Stockholders, there is no domain name application
pending of any other Person which would or would potentially
interfere with or infringe any Net Name.
(iv) No Net Name is infringed or, to the Knowledge of
the Vanguard Companies and the Vanguard Stockholders, has been
challenged, interfered with or threatened in any way. No Net
Name infringes, interferes with or is alleged to interfere
with or infringe the trademark, copyright or domain name of
any other Person.
(i) With respect to each Copyright:
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(i) One or more of the Vanguard Companies has good
title to and an absolute right (but not necessarily exclusive
within the Vanguard Companies, but exclusive as to other Third
Parties) to use the Copyrights, except as set forth on Item
3.13(i) of the Vanguard Disclosure Schedule. To the Knowledge
of the Vanguard Companies and the Vanguard Stockholders, the
Copyrights have not been used or appropriated for the benefit
of any other Person other than one or more of the Vanguard
Companies except to the extent licensed to a Third Party as
identified on Item 3.13(i) of the Vanguard Disclosure
Schedule. No Copyright is subject to any adverse claim or has
been challenged or threatened in any way or infringes any
intellectual property right of any other Person.
(ii) Item 3.13(1) of the Vanguard Disclosure Schedule
contains a complete and accurate list and summary description
of all Copyrights material to the business of the Vanguard
Companies as presently conducted.
(iii) Except as set forth on Item 3.13(i) of the
Vanguard Disclosure Schedule, the Vanguard Companies own all
right, title and interest in the Copyrights and there are no
Encumbrances on the Copyrights.
Section 3.14 Contracts; No Defaults.
(a) Item 3.14(a) of the Vanguard Disclosure Schedule contains
an accurate and complete list, and the Vanguard Stockholders have delivered to
TACT accurate and complete copies, of:
(i) each Applicable Contract that involves the
payment of money, performance of services or delivery of goods
or materials by one or more Vanguard Companies of an amount or
value in excess of $50,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
one or more Vanguard Companies of an amount or value in excess
of $50,000;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Vanguard Companies in
excess of $50,000;
(iv) each Applicable Contract affecting the ownership
of, leasing of, title to, use of, or any leasehold or other
interest in any real or personal property (except personal
property leases and installment and conditional sales
agreements having a value per item or aggregate payments of
less than $50,000 and with a term of less than one year);
(v) each Applicable Contract with any labor union or
other employee representative of a group of employees relating
to wages, hours and other conditions of employment;
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(vi) each Applicable Contract (however named)
involving a sharing of profits, losses, costs or liabilities
by any one or more Vanguard Companies with any other Person;
(vii) each Applicable Contract containing covenants
that in any way purport to restrict any Vanguard Company's
business activity or limit the freedom of any Vanguard Company
to engage in any line of business or to compete with any
Person;
(viii) each Applicable Contract providing for
payments to or by any Person based on sales, purchases or
profits, other than direct payments for goods;
(ix) each power of attorney of any Vanguard Company
that is currently effective and outstanding;
(x) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or provides
for an express undertaking by any one or more Vanguard
Companies to be responsible for consequential damages;
(xi) each Applicable Contract for capital
expenditures in excess of $50,000;
(xii) each written warranty, guaranty and/or other
similar undertaking with respect to contractual performance
extended by any one or more Vanguard Companies other than in
the Ordinary Course of Business;
(xiii) any Applicable Contract for the development,
modification or enhancement of computer software products;
(xiv) any Applicable Contract that is a license
(whether as licensor or licensee), or sublicense, royalty,
permit, franchise agreement, including, without limitation,
any agreement pursuant to which any Vanguard Company licenses
any Intellectual Property Assets or licenses or delivers any
of its software or other products and services to any Third
Party (other than ordinary course licenses to end-users);
(xv) Applicable Contract that provides for the
employment of any officer, employee, consultant or agent or
any other type of Contract, commitment or understanding with
any officer, employee, consultant or agent which (except as
otherwise generally provided by applicable law) is not
immediately terminable without cost or other Liability at or
at any time after the Closing Date;
(xvi) Applicable Contract that provides for any
profit-sharing, bonus, stock option, stock appreciation right,
pension, retirement, disability, stock purchase,
hospitalization, insurance or similar plan or agreement,
formal or informal, providing benefits to any current or
former director, officer, employee, agent or consultant;
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(xvii) any Applicable Contract that is a material
indenture, mortgage, promissory note, loan agreement,
guarantee or other material agreement or commitment for the
borrowing of money, for a line of credit or for a leasing
transaction of a type required to be capitalized in accordance
with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board;
(xviii) each Applicable Contract that is a material
agreement, instrument or other arrangement granting or
permitting any Encumbrance on any of the properties, assets or
rights of any Vanguard Company;
(xix) each Applicable Contract that is a contract or
commitment for charitable contributions;
(xx) each Applicable Contract that is an agreement or
contract with a "disqualified individual" (as defined in
Section 280G(c) of the Code), which could result in a
disallowance of the deduction for any "excess parachute
payment" (as defined in Section 280G(b)(i) of the Code) under
Section 280G of the Code;
(xxi) each Applicable Contract that restricts any
Vanguard Company from engaging in any aspect of its business
or competing in any line of business in any geographic area;
(xxii) any other Applicable Contract that is material
to any Vanguard Company; and
(xxiii) each amendment, supplement and modification,
and each agreement to enter into any such amendment,
supplement or modification (whether oral or written), in
respect of any of the foregoing.
(b) Except as set forth in Item 3.14(b) of the Vanguard
Disclosure Schedule, no Vanguard Stockholder (and no Related Person of any
Vanguard Stockholder) has or may acquire any rights under, and no Vanguard
Stockholder has or may become subject to any obligation or liability under, any
Contract that relates to the business or any of the properties or assets owned
or used by any Vanguard Company.
(c) To the Knowledge of the Vanguard Companies and the
Vanguard Stockholders, no officer, director, agent, employee, consultant or
contractor of any Vanguard Company is bound by any Contract that purports to
limit the ability of such Person to (i) engage in or continue any conduct,
activity or practice relating to the business of any Vanguard Company, or (ii)
assign to any Vanguard Company or to any other Person any rights to any
invention, improvement or discovery.
(d) Except as set forth in Item 3.14(d) of the Vanguard
Disclosure Schedule, each Contract identified or required to be identified in
Section 3.14(a) of the Vanguard Disclosure Schedule is in full force and effect
and is valid and enforceable in accordance with its terms.
-26-
(e) Except as set forth in Item 3.14(e)of the Vanguard
Disclosure Schedule, and other than with regard to any Applicable Contract, the
termination of which would not, individually or in the aggregate, have a
Material Adverse Effect on the Vanguard Companies:
(i) Each Vanguard Company is in compliance with all
applicable terms and requirements of each Contract under which
such Vanguard Company has or had any obligation or Liability
or by which such Vanguard Company or any of the assets owned
or used by such Vanguard Company is or was bound;
(ii) each other Person that has or had any obligation
or Liability under any Contract under which any Vanguard
Company has or had any rights is in compliance with all
applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time or both) may
contravene, conflict with or result in a Breach of, or give
any Vanguard Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or payment under, or to cancel,
terminate or modify, any Applicable Contract; and
(iv) no Vanguard Company has given to or received
from any other Person, any notice or other communication
(whether oral or written) regarding any actual, alleged,
possible or potential violation or Breach of, or default
under, any Contract.
(f) There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any material amounts paid or payable to any
Vanguard Company under current or completed Applicable Contracts with any Person
having the contractual or statutory right to demand or require such
renegotiation and no such Person has made written demand for such renegotiation.
(g) Each Contract relating to the provision of services to
which any Vanguard Company is a party has been entered into in the Ordinary
Course of Business of such Vanguard Company and has been entered into without
the commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
Section 3.15 Employees.
(a) [Intentionally omitted.]
(b) There are no retired employees or directors of the
Vanguard Companies who are scheduled to receive benefits in the future.
(c) No officer, director, employee, agent, consultant or
contractor of any Vanguard Company is bound by any Contract that purports to
limit the ability of such officer, director, employee, agent, consultant or
contractor (i) to engage in or continue or perform any conduct, activity, duties
or practice relating to the business of the Vanguard Companies, or (ii) to
assign to any Vanguard Company or to any other Person any rights to any
invention, process, improvement, or discovery. No former or current employee of
any Vanguard Company is a party to, or is otherwise bound by, any Contract that
in any way adversely affected, affects, or will affect the ability of the
Vanguard Companies to conduct their businesses as heretofore conducted by them
and as proposed to be conducted. Each individual intended to be an independent
contractor of any Vanguard Company has been properly designated and treated as
such.
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(d) No employee or consultant of any Vanguard Company whose
services are material to any Vanguard Company has informed any officer of any
Vanguard Company that such employee or consultant will terminate his or her
employment or engagement.
Section 3.16 Labor Relations; Compliance.
(a) Each Vanguard Company has complied in all respects with
all Legal Requirements that are applicable thereto relating to employment
practices, terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar Taxes and occupational safety and
health. No Vanguard Company is liable for the payment of any Taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
(b) Except as disclosed in Item 3.16(a) of the Vanguard
Disclosure Schedule, (i) no Vanguard Company has been, and is not now, a party
to any collective bargaining agreement or other labor contract; (ii) there has
not been, there is not presently pending or existing, and to the Knowledge of
the Vanguard Companies and the Vanguard Stockholders there is not threatened,
any slowdown, work stoppage or employee grievance process involving any Vanguard
Company; (iii) to the Knowledge of the Vanguard Companies and the Vanguard
Stockholders, no event has occurred or circumstance exists that could provide
the basis for any work stoppage or other labor dispute; (iv) there is not
pending or, to the Knowledge of the Vanguard Companies and the Vanguard
Stockholders, threatened against or affecting any Vanguard Company, any
Proceeding relating to the alleged violation of any Legal Requirement pertaining
to labor relations or employment matters, and there is no organizational
activity or other labor dispute against or affecting any Vanguard Company or the
Facilities; (v) no application or petition for an election of or for
certification of a collective bargaining agent is pending; and (vi) to the
Knowledge of the Vanguard Companies and the Vanguard Stockholders there has been
no charge of discrimination filed against or threatened against any Vanguard
Company with the Equal Employment Opportunity Commission or similar Governmental
Body.
(c) No Vanguard Company is delinquent in payments to any of
its employees or consultants for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them to date or amounts
required to be reimbursed to such employees or consultants,
Section 3.17 Employee Plans.
(a) For purposes of this Section 3.17, references to Employee
Plans are references to Employee Plans of the Vanguard Companies.
-28-
(b) Item 3.17(b) of the Vanguard Disclosure Schedule provides
a complete and correct list of all Employee Plans for the Vanguard Companies,
identifying each Employee Plan that is (i) a "defined benefit plan" within the
meaning of Section 3(35) of ERISA (a "Defined Benefit Plan"), (ii) a plan
intended to meet the requirements of Section 401(a) of the Code, (iii) a
"multi-employer plan" within the meaning of Section 3(37) of ERISA, or (iv) a
plan subject to Title IV of ERISA other than a multi-employer plan. Item 3.17(a)
of the Vanguard Disclosure Schedule also provides a complete and correct list of
all ERISA Affiliates of the Vanguard Companies during the last six (6) years.
(c) The Vanguard Companies have delivered to TACT true,
accurate and complete copies of (i) the documents comprising each Employee Plan
(or, with respect to any Employee Plan which is unwritten, a detailed written
description of eligibility, participation, benefits, funding arrangements,
assets and any other matters which relate to the obligations of each Vanguard
Company or any ERISA Affiliate); (ii) all trust agreements, insurance contracts
or any other funding instruments related to the Employee Plans; (iii) all
rulings, determination letters, no-action letters or advisory opinions from the
IRS, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation
("PBGC") or any other Governmental Body that pertain to each Employee Plan and
any open requests therefor; (iv) the most recent actuarial and financial reports
(audited and/or unaudited) and the annual reports (including Forms 5500 and all
schedules thereto) filed with any Government Body with respect to the Employee
Plans during the current year and each of the three (3) preceding years; (v) the
most recent actuarial valuations and schedule of contributions for each Employee
Plan, whether or not filed with a Governmental Body; (vi) all contracts with
third-party administrators, actuaries, investment managers, consultants and
other independent contractors that relate to any Employee Plan, (vii) with
respect to Employee Plans that are subject to Title IV of ERISA, the Form PBGC-1
filed for each of the three (3) most recent plan years; and (viii) all summary
plan descriptions, summaries of material modifications and memoranda, employee
handbooks and other written communications regarding the Employee Plans.
(d) No Vanguard Company has adopted any amendments to, or is
considering adopting amendments to, any Employee Plan disclosed or required to
be disclosed to TACT pursuant to Section 3.17(a).
(e) Except as disclosed in Item 3.17(e) of the Vanguard
Disclosure Schedule, full payment has been made of all amounts that are required
under the terms of each Employee Plan to be paid as contributions with respect
to all periods prior to and including the last day of the most recent fiscal
year of such Employee Plan ended on or before the date of this Agreement and all
periods thereafter prior to the Closing Date, and no accumulated funding
deficiency or liquidity shortfall (as those terms are defined in Section 302 of
ERISA and Section 412 of the Code) has been incurred with respect to any such
Employee Plan, whether or not waived. The value of the assets of each Employee
Plan exceeds the amount of all benefit liabilities (determined, in the case of a
Defined Benefit Plan, on a plan termination basis using the actuarial
assumptions established by the PBGC as of the Closing Date) of such Employee
Plan. No Vanguard Company is required to provide security to an Employee Plan
under Section 401(a)(29) of the Code. The funded status of each Employee Plan
that is a Defined Benefit Plan is disclosed on Item 3.17(e) of the Vanguard
Disclosure Schedule in a manner consistent with the Statement of Financial
Accounting Standards No. 87. The Vanguard Companies have paid in full all
required insurance premiums, subject only to normal retrospective adjustments in
the ordinary course, with regard to the Employee Plans for all policy years or
other applicable policy periods ending on or before the Closing Date.
-29-
(f) Except as disclosed in Item 3.17(f) of the Vanguard
Disclosure Schedule, no Employee Plan, if subject to Title IV of ERISA, has been
completely or partially terminated, nor has any event occurred nor does any
circumstance exist that could result in the partial termination of such Employee
Plan. The PBGC has not instituted or threatened a Proceeding to terminate or to
appoint a trustee to administer any of the Employee Plans pursuant to Subtitle 1
of Title IV of ERISA, and no condition or set of circumstances exists that
presents a material risk of termination or partial termination of any of the
Employee Plans by the PBGC. None of the Employee Plans has been the subject of,
and no event has occurred or condition exists that could be deemed, a reportable
event (as defined in Section 4043 of ERISA) as to which a notice would be
required (without regard to regulatory monetary thresholds) to be filed with the
PBGC. The Vanguard Companies have paid in full all insurance premiums due to the
PBGC with regard to the Employee Plans for all applicable periods ending on or
before the Closing Date.
(g) No Vanguard Company or any ERISA Affiliate has any
liability or has Knowledge of any facts or circumstances that might give rise to
any liability, and the Contemplated Transactions will not result in any
liability, (i) for the termination of or withdrawal from any Employee Plan under
Sections 4062, 4063 or 4064 of ERISA, (ii) for any lien imposed under Section
302(f) of ERISA or Section 412(n) of the Code, (iii) for any interest payments
required under Section 302(e) of ERISA or Section 412(m) of the Code, (iv) for
any excise tax imposed by Section 4971 of the Code, (v) for any minimum funding
contributions under Section 302(c)(11) of ERISA or Section 412(c)(11) of the
Code or (vi) for withdrawal from any multi-employer plan under Section 4201 of
ERISA.
(h) The Vanguard Companies have, at all times, complied, and
currently comply, in all material respects with the applicable continuation
requirements for their welfare benefit plans, including (1) Section 4980B of the
Code (as well as its predecessor provision, Section 162(k) of the Code) and
Sections 601 through 608, inclusive, of ERISA, which provisions are hereinafter
referred to collectively as "COBRA" and (2) any applicable state statutes
mandating health insurance continuation coverage for employees.
(i) Except as set forth in Item 3.17(i) of the Vanguard
Disclosure Schedule, the form of all Employee Plans is in compliance with the
applicable terms of ERISA, the Code, and any other applicable laws, including
the Americans with Disabilities Act of 1990, the Family Medical Leave Act of
1993 and the Health Insurance Portability and Accountability Act of 1996, and
such plans have been operated in compliance with such laws and the written
Employee Plan documents. No Vanguard Company or any fiduciary of an Employee
Plan has violated the requirements of Section 404 of ERISA. All required reports
and descriptions of the Employee Plans (including Internal Revenue Service Form
5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions and
Summaries of Material Modifications) have been (when required) timely filed with
the IRS, the U.S. Department of Labor or other Governmental Body and distributed
as required, and all notices required by ERISA or the Code or any other Legal
Requirement with respect to the Employee Plans have been appropriately given.
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(j) Except as set forth in Item 3.17(j) of the Vanguard
Disclosure Schedule, each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS, has been established and maintained in accordance with its terms and in
compliance with all applicable Legal Requirements, including ERISA and the Code,
and no Vanguard Company has any Knowledge of any circumstances that will or
could result in revocation of any such favorable determination letter. Each
trust created under any Employee Plan has been determined to be exempt from
taxation under Section 501(a) of the Code, and no Vanguard Company is aware of
any circumstance that will or could result in a revocation of such exemption.
Each Employee Plan that is an Employee Welfare Benefit Plan (as defined in
Section 3(1) of ERISA) that utilizes a funding vehicle described in Section
501(c)(9) of the Code or is subject to the provisions of Section 505 of the Code
has been the subject of a notification by the IRS that such funding vehicle
qualifies for tax-exempt status under Section 501(c)(9) of the Code or that the
plan complies with Section 505 of the Code, unless the IRS does not, as a matter
of policy, issue such notification with respect to the particular type of plan.
With respect to each Employee Plan, no event has occurred or condition exists
that will or could give rise to a loss of any intended tax consequence or to any
Tax under Section 511 of the Code.
(k) There is no pending or threatened Proceeding relating to
any Employee Plan, nor is there any basis for any such Proceeding. No Vanguard
Company or any fiduciary of an Employee Plan has engaged in a transaction with
respect to any Employee Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject any Vanguard Company or
TACT to a Tax or penalty imposed by either Section 4975 of the Code or Section
502(l) of ERISA or a violation of Section 406 of ERISA. The Contemplated
Transactions will not result in the potential assessment of a Tax or penalty
under Section 4975 of the Code or Section 502(l) of ERISA nor result in a
violation of Section 406 of ERISA.
(l) The Vanguard Companies have maintained workers'
compensation coverage as required by applicable state law through purchase of
insurance and not by self-insurance or otherwise except as disclosed to TACT on
Item 3.17(l) of the Vanguard Disclosure Schedule.
(m) Except as set forth in Item 3.17(m) of the Vanguard
Disclosure Schedule or as required by Legal Requirements, the consummation of
the Contemplated Company Transactions will not accelerate the time of vesting or
the time of payment, or increase the amount, of compensation due to any
director, employee, officer, former employee or former officer of any Vanguard
Company. Except as set forth in Item 3.17(m) of the Vanguard Disclosure
Schedule, there are no Contracts or arrangements providing for payments that
could subject any Person to Liability for Tax under Section 4999 of the Code.
Except as set forth in Item 3.17(m) of the Vanguard Disclosure Schedule, each
Employee Plan can be amended, terminated or otherwise discontinued without
material Liability to any Vanguard Company.
(n) Except for the continuation coverage requirements of
COBRA, no Vanguard Company or any ERISA Affiliate has any obligations or
potential liability to provide life insurance, medical, severance or any other
welfare benefits to employees, former employees or their respective dependents
following termination of employment or retirement under any of the Employee
Plans.
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(o) None of the Contemplated Transactions will result in an
amendment, modification or termination of any of the Employee Plans. No written
or oral representations have been made to any employee or former employee of any
Vanguard Company promising or guaranteeing any employer payment or funding for
the continuation of medical, dental, life or disability coverage for any period
of time beyond the end of the current plan year (except to the extent of
coverage required under COBRA). No written or oral representations have been
made to any employee or former employee of any Vanguard Company concerning the
employee benefits of TACT.
Section 3.18 Compliance with Legal Requirements.
(a) Except as set forth in Item 3.18(a) of the Vanguard
Disclosure Schedule, (i) each Vanguard Company is in full compliance with each
Legal Requirement that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets; (ii) no event has
occurred or circumstance exists that (with or without notice or lapse of time)
may constitute or result in a violation by any Vanguard Company of, or a failure
on the part of any Vanguard Company to comply with, any Legal Requirement or may
give rise to any obligation on the part of any Vanguard Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature;
and (iii) no Vanguard Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible or potential violation of, or failure to
comply with, any Legal Requirement or any actual, alleged, possible or potential
obligation on the part of any Vanguard Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
(b) Item 3.18(a) of the Vanguard Disclosure Schedule contains
a complete and accurate list of each Governmental Authorization that is held by
the Vanguard Companies or that otherwise relates to the business of or the
assets owned by the Vanguard Companies. Each Governmental Authorization listed
or required to be listed in Item 3.18(a) of the Vanguard Disclosure Schedule is
valid and in full force and effect.
(c) Except as set forth in Item 3.18(a) of the Vanguard
Disclosure Schedule, (i) each Vanguard Company is in full compliance with all of
the terms and requirements of each Governmental Authorization identified or
required to be identified in Item 3.18(a) of the Vanguard Disclosure Schedule;
(ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Item 3.18(a) of
the Vanguard Disclosure Schedule or result directly or indirectly in the
revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Item 3.18(a) of the Vanguard Disclosure Schedule; (iii) no Vanguard Company
has received any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding any actual, alleged,
possible or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization or any actual, proposed, possible
or potential revocation, withdrawal, suspension, cancellation, termination of or
modification to any Governmental Authorization; and (iv) all applications
required to have been filed for the renewal of the Governmental Authorizations
listed or required to be listed in Item 3.18(a) of the Vanguard Disclosure
Schedule have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.
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(d) The Governmental Authorizations listed in Item 3.18(a) of
the Vanguard Disclosure Schedule collectively constitute all of the Governmental
Authorizations necessary to permit the Vanguard Companies to lawfully conduct
and operate, and currently propose to conduct and operate, their businesses, in
the manner in which they currently conduct and operate such businesses and to
permit the Vanguard Companies to own and use their assets in the manner in which
they currently own and use such assets.
Section 3.19 Legal Proceedings; Orders.
(a) Except as set forth in Item 3.19(a) of the Vanguard
Disclosure Schedule, (i) there is no pending or, to Knowledge of the Vanguard
Companies and the Vanguard Stockholders, threatened, Proceeding, that has been
commenced by or against any Vanguard Company or that otherwise relates to or may
affect the business of, or any of the assets owned or used by, any Vanguard
Company; or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To the Knowledge of the Vanguard Companies and the Vanguard
Stockholders, no event has occurred or circumstance exits that is reasonably
likely to give rise to or serve as a basis for the commencement of any such
Proceeding. Vanguard has delivered to TACT copies of all pleadings,
correspondence, and other documents relating to any Proceeding listed in Item
3.19(a) of the Vanguard Disclosure Schedule. The Proceedings listed in Item
3.19(a) of the Vanguard Disclosure Schedule will not have a Material Adverse
Effect.
(b) Except as set forth in Item 3.19(b) of the Vanguard
Disclosure Schedule, (i) there is no Order to which any of the Vanguard
Companies, or any of the assets owned or used by any Vanguard Company, is
subject; (ii) no Vanguard Stockholder is subject to any Order that relates to
the business of, or any of the assets owned or used by, any Vanguard Company;
and (iii) to the Knowledge of the Vanguard Companies and the Vanguard
Stockholders, no officer, director, agent, or employee of any Vanguard Company
is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of any Vanguard Company.
(c) Except as set forth in Item 3.19(c) of the Vanguard
Disclosure Schedule, (i) each Vanguard Company is in full compliance with all of
the terms and requirements of each Order to which it, or any of the assets owned
or used by it, is or has been subject; (ii) no event has occurred or
circumstance exists that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any term or requirement
of any Order to which any Vanguard Company, or any of the assets owned or used
by any Vanguard Company, is subject; and no Vanguard Company has received any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which any Vanguard Company, or any of the assets owned or used by any Vanguard
Company, is or has been subject.
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Section 3.20 Relationships with Related Persons. Except as disclosed in
Item 3.20 of the Vanguard Disclosure Schedule, no Vanguard Stockholder or any
Related Person of any Vanguard Stockholder or of any Vanguard Company has, or
previously had, any interest in any property (whether real, personal or mixed
and whether tangible or intangible) used in or pertaining to the businesses of
the Vanguard Companies. No Vanguard Stockholder or any Related Person of any
Vanguard Stockholder or of any Vanguard Company owns or previously owned, of
record or as a beneficial owner, an equity interest or any other financial or
profit interest in any Person that has (a) had business dealings or a material
financial interest in any transaction with any Vanguard Company other than
business dealings or transactions disclosed in Item 3.20 of the Vanguard
Disclosure Schedule, each of which has been conducted in the Ordinary Course of
Business with the Vanguard Companies at substantially prevailing market prices
and on substantially prevailing market terms or (b) engaged in competition with
any Vanguard Company with respect to any line of the products or services of
such Vanguard Company (a "Competing Business") in any market presently served by
such Vanguard Company, except for ownership of less than one percent (1%) of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market. Except as set forth
in Item 3.20 of the Vanguard Disclosure Schedule, no Vanguard Stockholder or any
Related Person of any Vanguard Stockholder or of any Vanguard Company is a party
to any Contract with, or has any claim or right against, any Vanguard Company.
Section 3.21 Accounts and Notes Payable. All material accounts payable
and notes payable by the Vanguard Companies to Third Parties as of the date
hereof arose, and as of the Closing Date will have arisen, in the Ordinary
Course of Business, and there is no such account payable or note payable
delinquent in its payment.
Section 3.22 Certain Agreements. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) result in any payment (including, without limitation, severance, golden
parachute, bonus or otherwise) becoming due to any director, officer, employee
or consultant of any Vanguard Company under any Employee Plan, benefit
arrangement or otherwise, (ii) with respect to any current or former director,
officer, employee or consultant of any Vanguard Company materially increase any
benefits otherwise payable under any Employee Plan or any benefit arrangement,
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
Section 3.23 Insurance. Item 3.23 of the Vanguard Disclosure Schedule
contains a list of all policies of liability, theft, fidelity, fire, product
liability, errors and omissions, workmen's compensation, indemnification of
directors and officers and other similar forms of insurance held by the Vanguard
Companies (specifying the insurer, the amount of coverage, the type of
insurance, the policy number and any pending claims thereunder) and a history of
all claims made by the Vanguard Companies thereunder and the status thereof. All
such policies of insurance are in full force and effect and all premiums with
respect thereto are currently paid and, no basis exists for early termination of
any thereof on the part of the insurer. The amounts of coverage under such
policies of insurance are of the type and in amounts customarily carried by
Persons conducting businesses similar to Vanguard Companies.
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Section 3.24 Bank Accounts. Item 3.24 of the Vanguard Company
Disclosure Schedule sets forth a true and complete list of all bank accounts and
safe deposit boxes of the Vanguard Companies and all Persons who are signatories
thereunder or who have access thereto.
Section 3.25 Brokers or Finders. Except as disclosed in Item 3.25 of
the Vanguard Disclosure Schedule, no Vanguard Stockholder nor any agent of any
Vanguard Stockholder has incurred any liability or obligation for brokerage or
finders' fees or agents' commissions or other similar payments in connection
with this Agreement or the Contemplated Transactions.
Section 3.26 Disclosure. No representation or warranty or other
statement made by the Vanguard Stockholders in this Agreement, the Vanguard
Disclosure Schedule, any supplement to the Vanguard Disclosure Schedule, the
certificates delivered pursuant to Section 2.4(a) or otherwise in connection
with the Contemplated Transactions contains any untrue statement or omits to
state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading. No Vanguard Stockholder has
Knowledge of any fact that has specific application to the Vanguard Companies
(other than general economic or industry conditions) and that may have a
Material Adverse Effect that has not been set forth in this Agreement or in the
Vanguard Disclosure Schedule.
ARTICLE 4
ADDITIONAL REPRESENTATIONS OF THE VANGUARD STOCKHOLDERS
The Vanguard Stockholders hereby represent and warrant to TACT,
severally and not jointly and only as to such Vanguard Stockholder itself, as
follows:
Section 4.1 Title to Vanguard Capital Stock; No Agreements. The
Vanguard Stockholders own of record and beneficially all of the issued and
outstanding shares of Vanguard Capital Stock free and clear of any Encumbrance,
have good and marketable title thereto, and upon delivery of the Exchange Shares
as consideration for the transfer of the Vanguard Capital Stock as provided in
this Agreement, TACT will acquire good and valid title thereto, free of any
Encumbrance. Except as set forth in Item 4.1 of the Vanguard Disclosure
Schedule, no Vanguard Stockholder is a party to any agreement, understanding or
arrangement relating to the Vanguard Capital Stock other than this Agreement and
the other agreements pursuant to which the Contemplated Company Transactions are
proposed to be consummated.
Section 4.2 Organization, Good Standing and Power. In the case of any
Vanguard Stockholder that is not a natural person, such Vanguard Stockholder is
duly organized or formed and validly existing under the laws of the jurisdiction
of its incorporation or formation and has the corporate or other organizational
power and authority under such laws to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Section 4.3 Enforceability; Authority; No Conflict; No Consent.
(a) Each of this Agreement, the Stockholder's Certificate, the
Custody Agreement and the Escrow Agreement constitutes the legal, valid, and
binding obligation of each such Vanguard Stockholder, enforceable against each
of them in accordance with its terms. Upon the execution and delivery by such
Vanguard Stockholder of this Agreement, the Escrow Agreement (if applicable) and
its respective counterpart of the Stockholder's Certificate and the Custody
Agreement (collectively, the "Vanguard Stockholders' Closing Documents"), each
of the Vanguard Stockholders' Closing Documents will constitute the legal,
valid, and binding obligations of each such Vanguard Stockholder, enforceable
against each of them in accordance with its terms. Each Vanguard Stockholder has
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the Vanguard Stockholders' Closing Documents to
which it is a party and to perform its obligations hereunder and thereunder.
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(b) Neither the execution and delivery of any of the Vanguard
Stockholders' Closing Documents nor the consummation or performance of any of
the Contemplated Company Transactions by such Vanguard Stockholder will,
directly or indirectly (with or without notice or lapse of time or both):
(i) Breach or give any Governmental Body or other
Person the right to challenge any of the Contemplated Company
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which any
Vanguard Stockholder is subject:
(ii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by any Vanguard Stockholder;
(iii) cause TACT or any Vanguard Company to become
subject to, or to become liable for the payment of, any Tax
owed by such Vanguard Stockholder, provided that the foregoing
representation is limited as to each Vanguard Stockholder to
its own respective Transferred Vanguard Shares and its own
respective participation in the Contemplated Company
Transactions; or
(iv) result in the imposition or creation of any
Encumbrance upon or with respect to the Vanguard Capital Stock
owned by such Vanguard Stockholder.
(c) No Vanguard Stockholder is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Company Transactions.
Section 4.4 Certain United States Laws.
(a) If such Vanguard Stockholder is an individual, such
Vanguard Stockholder certifies that he or she is not, nor to his or her
Knowledge has he or she been designated as, a "suspected terrorist" as defined
in Executive Order 13224. If such Vanguard Stockholder is a corporation, trust,
partnership, limited liability company or other Organization, such Vanguard
Stockholder certifies that, to the best of its Knowledge, such Vanguard
Stockholder has not been designated as, and is not owned or controlled by or a
Related Person of, a "suspected terrorist" as defined in Executive Order 13224.
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(b) Each Vanguard Stockholder hereby acknowledges that TACT
seeks to comply with all applicable laws covering money laundering and related
activities. In furtherance of those efforts, each Vanguard Stockholder hereby
represents, warrants and agrees that: (i) none of the cash or property that such
Vanguard Stockholder will pay or will contribute to TACT has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by such Vanguard Stockholder to
TACT, to the extent that they are within such Vanguard Stockholder's control,
shall cause TACT to be in violation of the United States Bank Secrecy Act, the
United States Money Laundering Control Act of 1986 or the Untied States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. Such Vanguard Stockholder shall promptly notify TACT if any of these
representations ceases to be true and accurate regarding such Vanguard
Stockholder. Such Vanguard Stockholder agrees to provide TACT with any
additional information regarding such Vanguard Stockholder that TACT deems
necessary or convenient to ensure compliance with all applicable laws concerning
money laundering and similar activities. Such Vanguard Stockholder understands
and agrees that if at any time it is discovered that any of the foregoing
representations are incorrect, or if otherwise required by applicable law or
regulation related to money laundering similar activities, TACT may undertake
appropriate actions to ensure compliance with applicable law or regulation,
including but not limited to segregation and/or redemption of such Vanguard
Stockholder's investment in TACT. Such Vanguard Stockholder further understands
that TACT may release confidential information about such Vanguard Stockholder
and, if applicable, any underlying beneficial owners, to proper authorities if
TACT, in its sole discretion, determines that it is in the best interest of TACT
in light of relevant rules and regulations under the laws set forth in
subsection (ii) above.
Section 4.5 Investment Representations.
(a) Such Vanguard Stockholder:
(i) is acquiring the Exchange Shares being issued to
such Vanguard Stockholder for investment and for such Vanguard
Stockholder's own account and not as a nominee or agent for
any other Person and with no present intention of distributing
or reselling such shares or any part thereof in any
transactions that would be in violation of the Securities Act
or any state securities or "blue-sky" laws;
(ii) understands (A) that the Exchange Shares to be
issued to him or it have not been registered for sale under
the Securities Act or any state securities or "blue-sky" laws
in reliance upon exemptions therefrom, which exemptions depend
upon, among other things, the bona fide nature of the
investment intent of such Vanguard Stockholder as expressed
herein, (B) that such Exchange Shares must be held and not
sold until such shares are registered under the Securities Act
and any applicable state securities or "blue-sky" laws, unless
an exemption from such registration is available and (C) that
the certificates evidencing such Exchange Shares will be
imprinted with a legend in the form set forth in Section
6.8(b) that prohibits the transfer of such shares, except as
provided in Section 6.8.
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(iii) has been furnished with, and has read and
reviewed, the SEC Reports;
(iv) has had an opportunity to ask questions of and
has received satisfactory answers from the officers of TACT or
Persons acting on TACT's behalf concerning TACT and the terms
and conditions of an investment in TACT Common Stock;
(v) is aware of TACT's business affairs and financial
condition and has acquired sufficient information about TACT
to reach an informed and knowledgeable decision to acquire the
Exchange Shares to be issued to him or it;
(vi) can afford to suffer a complete loss of his or
its investment in such Exchange Shares;
(vii) is familiar with the provisions of Rule 144
promulgated under the Securities Act which, in substance,
permits limited public resale of "restricted securities"
acquired, directly or indirectly, from the issuer thereof, in
a non-public offering subject to the satisfaction of certain
circumstances which require among other things: (A) the
availability of certain public information about the issuer,
(B) the resale occurring not less than one year after the
party has purchased, and made full payment for, within the
meaning of Rule 144, the securities to be sold; and, in the
case of an affiliate, or of a non-affiliate who has held the
securities less than two years, the amount of securities being
sold during any three month period not exceeding the specified
limitations stated therein, if applicable and (C) in the event
certain holding requirements have not yet been met, the sale
being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker
(as said term is defined under the Exchange Act);
(viii) understands that in the event all of the
applicable requirements of Rule 144 are not satisfied,
registration under the Securities Act, compliance with
Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the SEC has expressed its opinion
that Persons proposing to sell private placement securities
other than in a registered offering and otherwise than
pursuant to Rule 144 will have a substantial burden of proof
in establishing that an exemption from registration is
available for such offers or sales, and that such Persons and
their respective brokers who participate in such transactions
do so at their own risk; and
(ix) has such knowledge and experience in financial
and business matters that he or it is capable of evaluating
the merits and risks of acquiring and holding shares of TACT
Common Stock.
(b) Such Vanguard Stockholder is an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act.
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(c) No Vanguard Stockholder has employed any broker or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby, other than as described
under Item 3.20 of the Vanguard Disclosure Schedule.
Section 4.6 Representation by Legal Counsel; Review of Agreement. Such
Vanguard Stockholder has been advised by TACT and the Vanguard Companies to
seek, and has sought, legal counsel in connection with the negotiation and
execution of this Agreement. Such Vanguard Stockholder has carefully read and
reviewed this Agreement and, to the extent he or it believed necessary, has
discussed with his legal, accounting and other professional advisors the
representations, warranties and agreements which the Vanguard Stockholder is
making herein and the terms and conditions of the Exchange Transaction.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TACT
TACT represents and warrants to the Vanguard Stockholders as follows:
Section 5.1 Organization and Good Standing. TACT and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all of its obligations hereunder. TACT and each of its
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except for
jurisdictions where the failure to qualify would not have a Material Adverse
Effect.
Section 5.2 Books and Records. The books of account, minute books,
stock record books and other records of TACT and each of its Subsidiaries, all
of which have been made available to Vanguard and the Vanguard Stockholders, are
complete and correct and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act,
including the maintenance of an adequate system of internal controls. The minute
books of TACT and each of its Subsidiaries contain accurate and complete records
of all meetings held of, and corporate action taken by, the stockholders, the
boards of directors and committees of the board of directors of TACT and its
Subsidiaries, and no meeting of any such stockholders, board of directors or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of TACT and its Subsidiaries.
Section 5.3 No Conflict; No Consent.
(a) Except as set forth in Item 5.3(a) of the TACT Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Company Transactions
will, directly or indirectly (with or without notice or lapse of time or both):
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(i) Breach (A) any provision of the Organizational
Documents of TACT or any of its Subsidiaries, or (B) any
resolution adopted by the board of directors or the
shareholders of TACT or any of its Subsidiaries;
(ii) Breach or give any Governmental Body or other
Person the right to challenge any of the Contemplated Company
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which TACT or any
of its Subsidiaries, or any of the assets owned or used by
TACT or any of its Subsidiaries, may be subject:
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by TACT or any of its Subsidiaries or that
otherwise relates to the business of, or any of the assets
owned or used by, TACT or any of its Subsidiaries;
(iv) cause TACT or any of its Subsidiaries to become
subject to, or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by TACT or any of
its Subsidiaries to be reassessed or revalued by any taxing
authority or other Governmental Body;
(vi) Breach, conflict with or result in any violation
of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or
modify, any Contract applicable to TACT or any of its
Subsidiaries; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by TACT or any of its Subsidiaries.
(b) [intentionally omitted]
Section 5.4 Capitalization.
(a) All of the outstanding equity securities and other
securities of each of TACT's Subsidiaries are owned of record and beneficially
by TACT, free and clear of all Encumbrances. No legend or other reference to any
purported Encumbrance appears on any certificate representing equity securities
of any TACT Subsidiary.
(b) All of the outstanding equity securities of each of TACT
and its Subsidiaries have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth in Item 5.4(b) of the TACT
Disclosure Schedule or in the SEC Reports, there are no options, warrants or
other Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of TACT or any of its Subsidiaries. None of the
outstanding equity securities or other securities of TACT or any of its
Subsidiaries was issued in violation of the Securities Act or any other Legal
Requirement.
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(c) Except as set forth in Item 5.4(c) of the TACT Disclosure
Schedule, neither TACT nor any of its Subsidiaries owns, or has any right or
Contract to acquire, any equity securities or other securities of any Person
(other than TACT or a Subsidiary of TACT) or any direct or indirect equity or
ownership interest in any other business.
(d) The Common Stock is listed for trading on the NASDAQ
SmallCap Market, the TACT and the Common Stock meet the criteria for continued
listing on the NASDAQ SmallCap Market (without giving effect to the transactions
contemplated by the TACT Stock Purchase Agreement or the TACT Share Exchange
Agreement) and no delisting or suspension of trading of the Common Stock has
been threatened by the NASDAQ Stock Market, Inc. and not addressed by TACT to
the satisfaction of the NASDAQ Stock Market, Inc., or is otherwise currently in
effect.
Section 5.5 No Material Adverse Change. Except as set forth in Item 5.5
of the TACT Disclosure Schedule or in the SEC Reports, since September 30, 2004,
there has not been any material adverse change in the business, operations,
properties, prospects, results of operations or condition (financial or
otherwise) of TACT or any of its Subsidiaries, and no event has occurred or
circumstance exists that may have a Material Adverse Effect.
Section 5.6 Absence of Certain Changes or Events. Except as set forth
in Item 5.6 of the TACT Disclosure Schedule or in the SEC Reports, since
September 30, 2004, TACT and its Subsidiaries have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in any of TACT's or any Subsidiary of TACT's
authorized or issued capital stock; grant of any stock option or right to
purchase shares of capital stock of TACT or any of its Subsidiaries; issuance of
any security convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by TACT or any of
its Subsidiaries of any shares of any such capital stock; or, except as provided
in Section 7.11, declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of TACT or any
of its Subsidiaries;
(c) payment or increase by TACT or any of its Subsidiaries of
any bonuses, salaries, or other compensation to any stockholder, director,
officer or employee of TACT or any of its Subsidiaries, or entry into any
employment, severance, or similar Contract with TACT or any other director,
officer, or employee of TACT or any of its Subsidiaries;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
TACT or any of its Subsidiaries;
(e) damage to or destruction or loss of any asset or property
of TACT or any of its Subsidiaries, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of TACT and its Subsidiaries, taken as a whole;
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(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to TACT or any of its Subsidiaries
of at least $100,000;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of TACT or
any of its Subsidiaries or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of TACT or any of its
Subsidiaries;
(h) cancellation or waiver of any claims or rights with a
value to TACT or any of its Subsidiaries in excess of $100,000;
(i) except as required by GAAP, a revaluation of any of the
assets or material change in the accounting methods, principles or practices
used by TACT or any of its Subsidiaries; or
(j) agreement, whether oral or written, by TACT or any of its
Subsidiaries to do any of the foregoing.
Section 5.7 Legal Proceedings; Orders.
(a) Except as set forth in Item 5.7(a) of the TACT Disclosure
Schedule or in the SEC Reports, (i) there is no pending or, to TACT's Knowledge,
threatened Proceeding, that has been commenced by or against TACT, any of its
Subsidiaries or any of its stockholders that own more than 10% of the TACT
Common Stock, or that otherwise relates to or may affect the business of, or any
of the assets owned or used by, TACT or any of its Subsidiaries; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To TACT's
Knowledge and the Knowledge of TACT's Subsidiaries, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any such Proceeding. TACT has delivered to
Vanguard and the Vanguard Stockholders copies of all pleadings, correspondence,
and other documents relating to each Proceeding listed in Item 5.7(a) of the
TACT Disclosure Schedule. The Proceedings listed in Item 5.7(a) of the TACT
Disclosure Schedule will not have a material adverse effect on the business,
operations, assets, condition, or prospects of TACT or any of its Subsidiaries.
(b) Except as set forth in Item 5.7(b)of the TACT Disclosure
Schedule or in the SEC Reports, (i) there is no Order to which TACT or any of
its Subsidiaries, or any of the assets owned or used by TACT or any of its
Subsidiaries, is subject; (ii) TACT is not subject to any Order that relates to
the business of, or any of the assets owned or used by, TACT or any of its
Subsidiaries; and (iii) to the Knowledge of TACT and the knowledge of the
Subsidiaries, no officer, director, agent, or employee of TACT or any of its
Subsidiaries is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of TACT or any of its Subsidiaries.
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(c) Except as set forth in Item 5.7(c) of the TACT Disclosure
Schedule or in the SEC Reports, (i) TACT and each of its Subsidiaries is, and at
all times since January 1, 2004, has been, in full compliance with all of the
terms and requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject; (ii) no event has occurred or circumstance
exists that may constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which TACT or any of its Subsidiaries, or any of the assets owned or
used by TACT or any of its Subsidiaries, is subject; and neither TACT nor any of
its Subsidiaries has received, at any time since January 1, 2001, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any term or requirement of any Order to which TACT or
any of its Subsidiaries, or any of the assets owned or used by TACT or any of
its Subsidiaries, is or has been subject.
Section 5.8 SEC Reports. TACT has previously made available to Vanguard
and the Vanguard Stockholders each communication sent by TACT to its
stockholders generally since January 1, 2001, and will continue to make such
filings and communications available to Vanguard and the Vanguard Stockholders
until the Closing. Since January 1, 2001, TACT has timely filed all SEC Reports
required to be filed by it under the Exchange Act and any other reports or
documents required to be filed with the Commission. At the time of filing,
mailing, or delivery thereof, the SEC Reports were prepared in accordance with
the applicable requirements of the Exchange Act and the regulations promulgated
thereunder and complied with the then applicable accounting requirements, and
none of such documents or information contained or will contain an untrue
statement of a material fact or omitted or will omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading except for such
statements, if any, as have been modified by subsequent filings with the
Commission prior to the date hereof. Each of the consolidated balance sheets
included in or incorporated by reference into the SEC Reports (including the
related notes and schedules) fairly presents in all material respects the
consolidated financial position of TACT and its Subsidiaries as of its date and
each of the consolidated statements of income, cash flows and stockholders'
equity included in or incorporated by reference into the SEC Reports (including
any related notes and schedules) fairly presents in all material respects the
results of operations, cash flows or changes in stockholders' equity, as the
case may be, of TACT and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to such exceptions as may be
permitted by Form 10-Q under the Exchange Act), in each case in accordance with
GAAP consistently applied during the periods involved, except as may be noted
therein. Upon written request of the Vanguard Stockholders, TACT will furnish to
Vanguard and the Vanguard Stockholders copies of (i) all correspondence received
from the Commission, and (ii) any of the agreements and instruments filed as
exhibits to the SEC Reports. TACT has furnished to Vanguard and the Vanguard
Stockholders a complete and accurate copy of any amendments or modifications,
which have not yet been filed with the Commission but which are required to be
filed, to agreements, documents or other instruments which previously had been
filed by TACT with the Commission pursuant to the Securities Act or Exchange
Act.
Section 5.9 Brokers or Finders. Except as set forth in Item 5.9 of the
TACT Disclosure Schedule, neither TACT nor any agent of TACT has incurred any
Liability or obligation for brokerage or finders' fees or agents' commissions or
other similar payments in connection with this Agreement or the Contemplated
Company Transactions.
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ARTICLE 6
COVENANTS OF VANGUARD PRIOR TO CLOSING DATE
Section 6.1 Access and Investigation. Between the date of this
Agreement and the Closing Date and upon reasonable advance notice received from
TACT, the Vanguard Stockholders (other than Berenson) will, and will cause each
Vanguard Company and its Representatives to, (a) afford TACT and its
Representatives (collectively, "TACT's Advisors") full and free access to each
Vanguard Company's personnel, properties, Contracts, books and records and other
documents and data, (b) furnish TACT and TACT's Advisors with copies of all such
Contracts, books and records, and other existing documents and data as TACT may
reasonably request, and (c) furnish TACT and TACT's Advisors with such
additional financial, operating and other data and information as TACT may
reasonably request.
Section 6.2 Required Approvals. As promptly as practicable after the
date of this Agreement, the Vanguard Stockholders (other than Berenson) will,
and will cause each Vanguard Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated Company
Transactions. Between the date of this Agreement and the Closing Date and
thereafter, the Vanguard Stockholders will, and will cause each Vanguard Company
to, (a) cooperate with TACT with respect to all filings that TACT elects to make
or is required by Legal Requirements to make in connection with the Contemplated
Company Transactions and (b) cooperate with TACT with respect to all filings
that TACT elects to make or is required by Legal Requirements to make in
connection with the rights granted to the Vanguard Stockholders pursuant to
Section 7.10.
Section 6.3 Business Operations of the Acquired Companies. Between the
date of this Agreement and the Closing Date, the Vanguard Stockholders (other
than Berenson) will, and will cause each Vanguard Company to:
(a) conduct the business of each Vanguard Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of each Vanguard Company, keep available the services of
the current officers, employees, and agents of each Vanguard Company, and
maintain its relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with each
Vanguard Company;
(c) confer with TACT prior to implementing operational
decisions of a material nature;
(d) make no material changes in management personnel or
management compensation arrangements without prior consultation with TACT;
(e) except as required to comply with ERISA or to maintain
qualification under Section 401(a) of the Code, not amend, modify or terminate
any Employee Plan without the express written consent of TACT and, except as
required under the provisions of any Employee Plan, not make any contribution to
or with respect to any Employee Plan without the express written consent of
TACT, provided, such Vanguard Company shall contribute that amount of cash to
each Employee Plan necessary to fully fund its obligations under such Employee
Plan; and
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(f) otherwise report periodically to TACT concerning the
status of the business, operations, and finances of each Vanguard Company.
Section 6.4 Negative Covenant. Except as otherwise expressly permitted
by this Agreement, between the date of this Agreement and the Closing Date, the
Vanguard Stockholders (other than Berenson) will not, and will cause each
Vanguard Company not to, without the prior consent of TACT, take any affirmative
action, or fail to take any reasonable action within their or its control, as a
result of which any of the changes or events listed in Section 3.7 or Section
3.8 is likely to occur.
Section 6.5 Notification. Between the date of this Agreement and the
Closing Date, Vanguard will promptly notify TACT and each Vanguard Stockholder
in writing if Vanguard becomes aware of any fact or condition that causes or
constitutes a Breach of any of the representations and warranties of the
Vanguard Stockholders as of the date of this Agreement, or if Vanguard becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Vanguard Disclosure Schedule if the Vanguard Disclosure Schedule were
dated the date of the occurrence or discovery of any such fact or condition, the
Vanguard Stockholders will promptly deliver to TACT a supplement to the Vanguard
Disclosure Schedule specifying such change. Such delivery shall not affect any
rights of TACT under Section 9.1 and ARTICLE 11. During the same period, the
Vanguard Stockholders will promptly notify TACT of the occurrence of any event
that may make the satisfaction of the conditions in ARTICLE 9 impossible or
unlikely.
Section 6.6 Payment of Indebtedness by Related Persons. Except as
expressly provided in this Agreement, all indebtedness owed to any Vanguard
Company by any Vanguard Stockholder or any Related Person of any Vanguard
Stockholder to be paid in full or discharged prior to Closing.
Section 6.7 Best Efforts. Between the date of this Agreement and the
Closing Date, the Vanguard Stockholders will use their Best Efforts to cause the
conditions in ARTICLE 9 to be satisfied.
Section 6.8 Restriction on Transfer of Exchange Shares
(a) The Exchange Shares to be issued to each Vanguard
Stockholder and any shares of capital stock or other securities received with
respect thereto (collectively, the "Restricted Securities") shall not be sold,
transferred, assigned, pledged, encumbered or otherwise disposed of (each, a
"Transfer") except upon the conditions specified in this Section 6.8, which
conditions are intended to insure compliance with the provisions of the
Securities Act. Each Vanguard Stockholder of the Company shall observe and
comply with the Securities Act and the rules and regulations promulgated by the
SEC thereunder as now in effect or hereafter enacted or promulgated, and as from
time to time amended, in connection with any Transfer of Restricted Securities
beneficially owned by the Vanguard Stockholder.
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(b) Each certificate representing Restricted Securities issued
to a Vanguard Stockholder and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 6.8(c) and 6.8(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY"
LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM. ADDITIONALLY, THE TRANSFER OF THESE
SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 6.8 OF THE
EXCHANGE AGREEMENT DATED AS OF JANUARY 21, 2005, AMONG VANGUARD
INFO-SOLUTIONS COPRORATION, THE VANGUARD STOCKHOLDERS NAMED THEREIN,
THE AUTHORIZED REPRESENTATIVE NAMED THEREIN AND TACT, INC., AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH
CONDITIONS, TACT, INC. HAS AGREED TO DELIVER TO THE HOLDER HEREOF A
TACT, INC. CERTIFICATE NOT BEARING THIS LEGEND, FOR THE SECURITIES
REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF TACT,
INC."
(c) Prior to any Transfer of Restricted Securities that occurs
subsequent to the Closing, each Vanguard Stockholder will give written notice to
TACT of such Vanguard Stockholder's intention to effect such Transfer and to
comply in all other respects with the provisions of this Section 6.8. Each such
notice shall describe the manner and circumstances of the proposed Transfer and,
if requested by TACT, shall be accompanied by the written opinion, addressed to
TACT, of counsel for the holder of such Restricted Securities, stating that in
the opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to TACT) such proposed transfer does not involve a transaction
requiring registration or qualification of such Restricted Securities under the
Securities Act or the securities or "blue-sky" laws of any relevant state of the
United States. The holder thereof shall thereupon be entitled to Transfer such
Restricted Securities in accordance with the terms of the notice delivered by it
to TACT. Each certificate or other instrument evidencing the securities issued
upon the Transfer of any such Restricted Securities (and each certificate or
other instrument evidencing any untransferred balance of such Restricted
Securities) shall bear the legend set forth in Section 6.8(b) unless (x) in such
opinion of counsel of TACT registration of any future Transfer is not required
by the applicable provisions of the Securities Act or (y) TACT shall have waived
the requirement of such legends. No Vanguard Stockholder shall Transfer any
Restricted Securities until such opinion of counsel has been given (unless
waived by TACT or unless such opinion is not required in accordance with the
provisions of this Section 6.8(c)).
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(d) Notwithstanding the foregoing provisions of this Section
6.8, the restrictions imposed by this Section 6.8 upon the transferability of
Restricted Securities shall cease and terminate when (i) any such shares are
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act or as otherwise contemplated by Section 6.8(c), (ii)
pursuant to Section 6.8(c), the shares so transferred are not required to bear
the legend set forth in Section 6.8(b), or (iii) the holder of such Restricted
Securities has met the requirements for Transfer of such Restricted Securities
pursuant to subparagraph (k) of Rule 144. Whenever the restrictions imposed by
this Section 6.8 shall terminate, as herein provided, the holder of Restricted
Securities as to which such restrictions have terminated shall be entitled to
receive from TACT, without expense, a new certificate not bearing the
restrictive legend set forth in Section 6.8(b) and not containing any other
reference to the restrictions imposed by this Section 6.8.
(e) Each Vanguard Stockholder understands and agrees that
TACT, at its discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to certificates for Restricted Securities owned by
such Vanguard Stockholder, but not as to certificates for such shares of TACT
Common Stock as to which the legend set forth in paragraph (b) of this Section
6.8 is no longer required because one or more of the conditions set forth in
Section 6.8(d) shall have been satisfied, in the event of a proposed Transfer in
violation or breach of this Section 6.8.
Section 6.9 Restrictions on Transfer of Transferred Vanguard Shares
Prior to Closing. Prior to any Transfer of the Transferred Vanguard Shares that
is to occur prior to the Closing, the Vanguard Shareholder intending to effect
any such Transfer will give written notice to Vanguard and TACT of such Vanguard
Stockholder's intention to effect such Transfer and will comply in all other
respects with the provisions of this Section 6.9. Each such notice shall
describe the manner and circumstances of the proposed Transfer and shall be
accompanied by (a) a statement executed by the proposed transferee of such
Transferred Vanguard Shares stating that such proposed transferee has been
provided with a copy of this Agreement (including the Exhibits and Schedules
hereto) and has read the same, (b) a questionnaire completed and verified by the
proposed transferee containing such information as TACT and Vanguard may
reasonably request, (c) a written agreement, in form and substance reasonably
satisfactory to TACT, providing that the transferee of the Transferred Vanguard
Shares thereby assumes all of the rights and obligations of the transferor of
such Transferred Vanguard Shares under this Agreement, including the obligation
to deliver such shares at the Closing and to execute the Escrow Agreement and
deliver such proposed transferee's proportionate share of Escrow Shares into
Escrow at the Closing, (d) each of the Custody Agreement and the Stockholder
Certificate duly executed by the proposed transferee and (e) if requested by
Vanguard, the written opinion, addressed to Vanguard, of counsel for the holder
of such Transferred Vanguard Shares, stating that in the opinion of such counsel
(which opinion and counsel shall be reasonably satisfactory to Vanguard) such
proposed transfer does not involve a transaction requiring registration or
qualification of such Restricted Securities under the Securities Act or the
securities or "blue-sky" laws of any relevant state of the United States. Upon
compliance with this Section 6.9, the holder thereof shall thereupon be entitled
to Transfer such Transferred Vanguard Shares in accordance with the terms of the
notice delivered by it to Vanguard. Each certificate or other instrument
evidencing the securities issued upon the Transfer of any such Transferred
Vanguard Shares (and each certificate or other instrument evidencing any
untransferred balance of such Transferred Vanguard Shares) shall bear the legend
set forth on the share certificate to be transferred. The parties agree that
Exhibit A attached hereto shall be updated to reflect any transfers that occur
pursuant to this Section.
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ARTICLE 7
COVENANTS OF TACT PRIOR TO CLOSING DATE
Section 7.1 Access and Investigation. Between the date of this
Agreement and the Closing Date and upon reasonable advance notice received from
Vanguard, TACT will, and will cause each of its Subsidiaries and their
Representatives to, (a) afford Vanguard and its Representatives (collectively,
"Vanguard Advisors") full and free access to TACT's and its Subsidiaries'
personnel, properties, Contracts, books and records and other documents and
data, (b) furnish Vanguard and Vanguard's Advisors with copies of all such
Contracts, books and records, and other existing documents and data as Vanguard
may reasonably request, and (c) furnish Vanguard and Vanguard's Advisors with
such additional financial, operating and other data and information as Vanguard
may reasonably request.
Section 7.2 Required Approvals. As promptly as practicable after the
date of this Agreement, TACT will, and will cause each of its Subsidiaries to,
make all filings required by Legal Requirements to be made by them in order to
consummate the Company Contemplated Transactions. Between the date of this
Agreement and the Closing Date, TACT will, and will cause each of its
Subsidiaries to, (a) cooperate with Vanguard with respect to all filings that
Vanguard elects to make or is required by Legal Requirements to make in
connection with the Company Contemplated Transactions, and (b) cooperate with
Vanguard in obtaining all consents identified in Item 3.2(b) of Vanguard's
Disclosure Schedule.
Section 7.3 Business Operations of the Acquired Companies. Between the
date of this Agreement and the Closing Date, TACT will, and will cause each of
its Subsidiaries to:
(a) conduct its business and the business of each of its
Subsidiaries only in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of TACT and the business organization of each of its
Subsidiaries, keep available the services of their current officers, employees,
and agents, and maintain their relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with TACT and its Subsidiaries;
(c) confer with Vanguard prior to implementing operational
decisions of a material nature;
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(d) make no material changes in management personnel or
management compensation arrangements without prior consultation with Vanguard;
(e) except as required to comply with ERISA or to maintain
qualification under Section 401(a) of the Code, not amend, modify or terminate
any Employee Plan without the express written consent of Vanguard, and, except
as required under the provisions of any Employee Plan, not make any contribution
to or with respect to any Employee Plan without the express written consent of
Vanguard, provided that TACT and its Subsidiaries shall contribute that amount
of cash to each Employee Plan necessary to fully fund its obligations under such
Employee Plan; and
(f) otherwise report periodically to Vanguard concerning the
status of the business, operations, and finances of TACT and its Subsidiaries.
Notwithstanding anything contained herein to the contrary or any
restrictions contained herein, TACT may accelerate the vesting of employee stock
options prior to the Closing.
Section 7.4 Negative Covenant. Except as otherwise expressly permitted
by this Agreement, between the date of this Agreement and the Closing Date, TACT
will not, and will cause each of its Subsidiaries not to, without the prior
consent of Vanguard, take any affirmative action, or fail to take any reasonable
action within their or its control, as a result of which any of the changes or
events listed in Section 5.5 or Section 5.6 would be likely to occur.
Section 7.5 Notification. Between the date of this Agreement and the
Closing Date, TACT will promptly notify the Authorized Representative if TACT or
any of its Subsidiaries becomes aware of any fact or condition that causes or
constitutes a Breach of any of TACT's representations and warranties as of the
date of this Agreement, or if TACT becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the TACT Disclosure Schedule if the TACT
Disclosure Schedule were dated the date of the occurrence or discovery of any
such fact or condition, TACT will promptly deliver to the Authorized
Representative a supplement to the TACT Disclosure Schedule specifying such
change. Such delivery shall not affect any rights of Vanguard, or any Vanguard
Stockholder under Section 10.1. During the same period, TACT will promptly
notify the Authorized Representative of the occurrence of any event that may
make the satisfaction of the conditions in ARTICLE 10 impossible or unlikely.
Section 7.6 Payment of Indebtedness by Related Persons. Except as
expressly provided in this Agreement, TACT will cause all indebtedness owed to
TACT or any of its Subsidiaries by any Related Person of TACT to be paid in full
prior to Closing.
Section 7.7 No Solicitation by TACT.
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(a) TACT agrees that it (i) will not (and it will not permit
its officers, directors, employees, agents or representatives, including any
investment banker, attorney or accountant retained by it to ) (A) solicit,
initiate or encourage (including by way of furnishing material non-public
information) any inquiry, proposal or offer, whether or not in writing
(including any proposal or offer to its shareholders), with respect to a third
party tender offer, merger, consolidation, business combination or similar
transaction involving all or more than 10% of the assets of TACT taken as a
whole or 10% or more of any class of capital stock of TACT, or any acquisition,
directly or indirectly, of 10% or more of the capital stock or assets of TACT
and its subsidiaries, taken as a whole, in a single transaction or a series of
related transactions, or any combination of the foregoing (any such proposal,
offer or transaction being hereinafter referred to as a "Company Acquisition
Proposal"), (B) participate or engage in any discussions or negotiations
concerning, furnish to any Person any information with respect to, or take any
action to facilitate any inquiries or the making of any proposal or offer that
constitutes or may reasonably be expected to lead to, a Company Acquisition
Proposal or (C) approve or recommend any Company Acquisition Proposal, accept
any Company Acquisition Proposal or enter into a letter of intent, agreement in
principle or agreement with respect to any Company Acquisition Proposal (or
resolve to or publicly propose to do any of the foregoing); and (ii) will
immediately cease and cause to be terminated any existing negotiations with any
third parties conducted heretofore with respect to any of the foregoing;
provided that, subject to Section 7.7(b), (A) nothing contained in clause (i)
above shall prohibit TACT or its board of directors from disclosing to TACT's
shareholders a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, further provided
that the board of directors of TACT shall not recommend that its shareholders of
TACT tender their shares of TACT in connection with any such tender or exchange
offer unless the board of directors shall have determined in good faith, after
consultation with its financial advisors and outside counsel, that the relevant
Company Acquisition Proposal is a Superior Proposal and (B) prior to the
Shareholders' Meeting, if TACT receives an unsolicited bona fide written Company
Acquisition Proposal from a third party that the board of directors of TACT
determines in good faith (after receiving the advice of its financial advisors)
is reasonably likely to be a Superior Proposal, TACT and its representatives may
conduct such discussions or provide such information as the board of directors
of TACT shall determine, but only if, prior to such provision of information or
conduct of such discussions, the board of directors of TACT determines in its
good faith judgment, after consultation with outside counsel, that it is
required to do so in order to comply with its fiduciary duties. For purposes of
this Agreement, "Superior Proposal" means any unsolicited bona fide written
Company Acquisition Proposal which (i) contemplates (A) a merger or other
business combination, reorganization, share exchange, recapitalization,
liquidation, dissolution, tender offer, exchange offer or similar transaction
involving TACT as a result of which TACT's shareholders prior to such
transaction in the aggregate cease to own at least 50% of the voting securities
of the ultimate parent entity resulting from such transaction or (B) a sale,
lease, exchange, transfer or other disposition (including, without limitation, a
contribution to a joint venture) of at least 50% of the value of the assets of
TACT and its Subsidiaries, taken as a whole, and (ii) is on terms which the
board of directors of TACT determines (after consultation with its financial
advisors and outside counsel), taking into account, among other things, all
legal, financial, regulatory and other aspects of the proposal and the Person
making the proposal, (A) would, if consummated, result in a transaction that is
more favorable to its shareholders from a financial point of view (in their
capacities as such) than the transactions contemplated by this Agreement
(including the terms of any proposal by the Parent to modify the terms of the
transactions contemplated by this Agreement) and (B) is reasonably likely to be
financed and otherwise completed without undue delay.
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(b) TACT will promptly (and in any event within one Business
Day) notify the Authorized Representative of any requests referred to in Section
7.7(a) for information or the receipt of any Company Acquisition Proposal,
including the identity of the Person or group engaging in such discussions or
negotiations, requesting such information or making such Company Acquisition
Proposal, and the material terms and conditions of any Company Acquisition
Proposal, and shall keep the Authorized Representative informed on a timely
basis (and in any event within one Business Day) of any material changes with
respect thereto. Prior to taking any action referred to in the proviso of
Section 7.7(a), if TACT intends to participate in any such discussions or
negotiations or provide any such information to any such third party, TACT shall
give prompt prior notice to the Authorized Representative of each such action.
Section 7.8 Shareholders' Meeting. TACT, acting through its board of
directors, shall, in accordance with applicable law and its Certificate of
Incorporation and Bylaws, (i) duly call, give notice of, convene and hold a
meeting of its shareholders as soon as reasonably practicable following the date
hereof for the purpose of considering and taking action to authorize and approve
the issuance of the Exchange Shares pursuant to this Agreement and the
transactions contemplated hereby and by the TACT Stock Purchase Agreement and
the transactions contemplated thereby (the "Shareholders' Meeting"); and (ii)
subject to its fiduciary duties under applicable law after consultation with
outside counsel, (A) include in the proxy soliciting materials for the
Shareholders' Meeting the recommendation of the board of directors that the
shareholders of TACT vote in favor of the approval and adoption of this
Agreement and the TACT Stock Purchase Agreement and the transactions
contemplated hereby and thereby, (B) use its reasonable best efforts to obtain
the necessary approval and adoption of this Agreement and the TACT Stock
Purchase Agreement and the transactions contemplated hereby and thereby from its
shareholders, (C) use its reasonable best efforts to obtain the necessary
approval to increase the number of shares subject to its 1997 Stock Option and
Award Plan from 300,000 to 1,200,000 and (D) change the name of the corporation
to Vanguard Info-Solutions International Inc. or, if such name is not available,
such other name as the Authorized Representative may approve. Notwithstanding
TACT's failure to include the recommendation contemplated by clause (A) of the
preceding sentence (in the circumstances permitted thereby), unless this
Agreement shall have been terminated pursuant to ARTICLE 12, TACT shall submit
this Agreement to its shareholders at the Shareholders' Meeting for the purpose
of adopting this Agreement and nothing contained herein shall be deemed to
relieve TACT of such obligation. The proxy soliciting materials and the
proposals contained therein shall comply with Regulation 14A of the regulations
under the Exchange Act and shall be in a form such that, if shareholder approval
is obtained, the requirements of Rule 4350(i) of the Marketplace Rules of The
NASDAQ Stock Market, Inc. shall have been complied with.
Section 7.9 Best Efforts. Between the date of this Agreement and the
Closing Date, TACT will use its Best Efforts to cause the conditions in ARTICLE
10 to be satisfied.
Section 7.10 Registration Rights. If TACT at any time after the Closing
Date proposes for any reason to register shares of TACT Common Stock under the
Securities Act (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), it shall give written notice to
the Vanguard Stockholders of its intention to so register such shares of TACT
Common Stock at least thirty (30) days before the initial filing of such
registration statement and, upon the written request, delivered to TACT within
twenty (20) days after delivery of any such notice by TACT, of the Vanguard
Stockholders to include in such registration Exchange Shares (which request
shall specify the number of Exchange Shares proposed to be included in such
registration and shall state that such Vanguard Stockholders desire to sell such
Exchange Shares in the public securities markets), TACT shall use commercially
reasonable efforts to cause all such Exchange Shares to be included in such
registration on the same terms and conditions as the securities otherwise being
sold in such registration; provided, that if the managing underwriter advises
TACT that the inclusion of all Exchange Shares requested to be included in such
registration would be materially detrimental to the successful marketing
(including pricing) of the TACT Common Stock proposed to be registered by TACT,
then the number of Exchange Shares proposed to be included in such registration
shall be reduced before any other shares of TACT Common Stock proposed to be
included in such registration.
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Section 7.11 Declaration and Payment of Dividend. Prior to the Closing
TACT shall declare and pay a cash dividend (the "Dividend") in the amount of
$0.75 per share of TACT Common Stock and TACT preferred stock (to the extent
that such preferred stock has not been converted to TACT Common Stock) issued
and outstanding on the record date; provided, that (i) payment of the Dividend
shall be contingent on the consummation of the Company Contemplated
Transactions; and (ii) the Dividend that is payable with regard to 30,000 shares
of TACT Common Stock that are to be issued to the independent members of TACT's
board of directors following the authorization thereof at the Shareholders'
Meeting may be reserved and set aside pending issuance of such shares.
ARTICLE 8
ADDITIONAL COVENANTS
Section 8.1 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Company
Transactions will be issued, if at all, at such time and in such manner as TACT
determines. Unless consented to by TACT in advance or required by Legal
Requirements, prior to the Closing, the Vanguard Companies, the Vanguard
Stockholders shall, keep this Agreement strictly confidential and may not make
any disclosure of this Agreement to any Person. The Authorized Representative
and TACT will consult with each other concerning the means by which the
employees, customers, and suppliers of the Vanguard Companies, TACT, its
Subsidiaries and others having dealings with the Vanguard Companies, TACT and
its Subsidiaries will be informed of the Contemplated Company Transactions.
Section 8.2 Confidentiality.
(a) Between the date of this Agreement and the Closing Date,
TACT, the Vanguard Companies, the Vanguard Stockholders will maintain in
confidence, and will cause the directors, officers, employees, agents, and
advisors of TACT and the agents and advisors of the Vanguard Stockholders to
maintain in confidence, and not use to the detriment of another party any
written, oral, or other information obtained in confidence from another party in
connection with this Agreement or the Contemplated Company Transactions, unless
(i) such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (ii) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Company Transactions, or (iii) the
furnishing or use of such information is required by or necessary or appropriate
in connection with any legal Proceedings.
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(b) If the Contemplated Company Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request. Whether or not the
Closing takes place, the Vanguard Companies, the Vanguard Stockholders waive,
and will upon TACT's request cause each of the Acquired Companies to waive, any
cause of action, right, or claim arising out of the access of TACT or its
representatives to any Trade Secrets or other confidential information of the
Acquired Companies except for the intentional competitive misuse by TACT of such
Trade Secrets or confidential information.
Section 8.3 Board Membership. Immediately after the Closing, the board
of directors of TACT shall elect to fill the vacancies on such board and by the
two resignations referenced in Section 10.8 with (a) those persons listed on
Exhibit E as directors of TACT and (b) to the extent that Exhibit E lists fewer
than three persons, persons who will be independent directors within the meaning
of Rule 4350(c) of the Marketplace Rules of The NASDAQ Stock Market, Inc. as
directors of TACT, in each case to serve until their successors are elected and
qualify.
ARTICLE 9
CONDITIONS PRECEDENT TO TACT'S OBLIGATION TO CLOSE
The obligation of TACT to issue the Exchange Shares to the Vanguard
Stockholders and to take the other actions required to be taken by TACT at the
Closing is subject to the fulfillment or written waiver by TACT at or prior to
the Closing of each of the following conditions:
Section 9.1 Accuracy of Representations.
(a) All of the representations and warranties of the Vanguard
Stockholders in this Agreement must have been accurate in all material respects
as of the date of this Agreement, and must be accurate in all material respects
as of the Closing Date as if made on the Closing Date, without giving effect to
any supplement to the Vanguard Disclosure Schedule delivered after the date
hereof.
(b) Each of the representations and warranties of the Vanguard
Stockholders set forth in ARTICLE 4 (considered individually) must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date without giving effect to any supplement to the Vanguard Disclosure
Schedule delivered after the date hereof.
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Section 9.2 Vanguard Stockholders' Performance.
(a) All of the covenants and obligations that Vanguard or the
Vanguard Stockholders are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been duly performed and complied
with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.4(a) must have been delivered, and each of the other covenants and obligations
in Section 6.2 and Section 6.7 must have been performed and complied with in all
respects.
Section 9.3 Additional Documents. Each of the following documents must
have been delivered to TACT:
(a) Opinions of McGuireWoods LLP, and Patanjali Associates,
New Delhi, India, dated the Closing Date, addressing the matters listed in
Exhibit 9.4(a);
(b) The Organizational Documents and all amendments thereto of
each Vanguard Company, certified as of a recent date by the appropriate official
of the jurisdiction in which such Vanguard Company is incorporated as specified
in Item 3.1 of the Vanguard Disclosure Schedule;
(c) Certificates with respect to (i) in the case of Vanguard,
a date not earlier than the third Business Day prior to the Closing, and, in the
case of each other Vanguard Company, dated as of a date not earlier than the
thirtieth Business Day prior to the Closing, as to the good standing of such
Vanguard Company, executed by the appropriate official of each jurisdiction in
which the Vanguard Company is incorporated and in which it is qualified to do
business as a foreign corporation as specified in Item 3.1 of the Vanguard
Disclosure Schedule; and
(d) Such other documents as TACT may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion referred to in
Section 10.4(a), (ii) evidencing the accuracy of any of Vanguard Stockholders'
representations and warranties, (iii) evidencing the performance by Vanguard and
each Vanguard Stockholder of, or the compliance by Vanguard and each Vanguard
Stockholder with, any covenant or obligation required to be performed or
complied with by Vanguard or such Vanguard Stockholder, (iv) evidencing the
satisfaction of any condition referred to in this ARTICLE 9, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated Company
Transactions.
Section 9.4 Consummation of Other Transactions. The transactions
contemplated by the TACT Stock Purchase Agreement shall have been consummated
(subject to the consummation of the Contemplated Transactions).
Section 9.5 No Proceedings. Since the date of this Agreement, there
must not have been commenced or threatened against TACT or any Related Person of
TACT, any Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated Company Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Company Transactions.
Section 9.6 No Material Adverse Effect. Since the date of this
Agreement, no event has occurred that has a Material Adverse Effect on the
Vanguard Companies, taken as a whole, and no event has occurred or circumstance
exists that may cause a Material Adverse Effect on the Vanguard Companies, taken
as a whole.
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Section 9.7 Intentionally Omitted.
Section 9.8 Castor. Castor shall have sold or transferred, on terms
reasonably acceptable to TACT, all shares of Vanguard Info-Solution Limited
owned by Castor to Vanguard and Castor shall have been liquidated or its shares
distributed or sold.
ARTICLE 10
CONDITIONS PRECEDENT TO VANGUARD STOCKHOLDERS' OBLIGATION TO CLOSE
The obligation of the Vanguard Stockholders to exchange the Transferred
Vanguard Shares and to take the other actions required to be taken by the
Vanguard Stockholders at the Closing is subject to the fulfillment or written
waiver by the Vanguard Stockholders at or prior to the Closing of each of the
following conditions:
Section 10.1 Accuracy of Representations. All of TACT's representations
and warranties in this Agreement must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the TACT Disclosure Schedule delivered after the
date hereof.
Section 10.2 TACT's Performance.
(a) All of the covenants and obligations that TACT is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been performed and complied with in all material respects.
(b) TACT must have delivered each of the documents required to
be delivered by TACT pursuant to Section 2.4(b)(ii) and must have issued the
Exchange Shares required pursuant to Section 2.4(b)(i).
Section 10.3 Additional Documents. TACT must have caused the following
documents to be delivered to the Vanguard Stockholders:
(a) An opinion of Orrick, Herrington & Sutcliffe LLP, dated
the Closing Date, addressing the matters listed in Exhibit 10.4(a); and
(b) Such other documents as the Authorized Representative may
reasonably request for the purpose of (i) enabling counsel for the Vanguard
Stockholders to provide the opinion referred to in Section 9.4(a), (ii)
evidencing the accuracy of any representation or warranty of TACT, (iii)
evidencing the performance by TACT of, or the compliance by TACT with, any
covenant or obligation required to be performed or complied with by TACT, (iv)
evidencing the satisfaction of any condition referred to in this ARTICLE 10, or
(v) otherwise facilitating the consummation of any of the Contemplated Company
Transactions.
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Section 10.4 Consummation of Other Transactions. The transactions
contemplated by each of the Shareholder Stock Purchase Agreement and the TACT
Stock Purchase Agreement shall have been consummated (subject to the
consummation of the Contemplated Transactions).
Section 10.5 No Proceedings. Since the date of this Agreement, there
must not have been commenced or threatened against Vanguard or any Vanguard
Stockholder or any Related Person of Vanguard or any Vanguard Stockholder, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Company Transactions, or (b) that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Company Transactions.
Section 10.6 No Material Adverse Change. Since the date of this
Agreement, no event has occurred that has a Material Adverse Effect on TACT and
its Subsidiaries, taken as a whole, and no event has occurred or circumstance
exists that may cause a Material Adverse Effect on TACT and its Subsidiaries,
taken as a whole.
Section 10.7 Falcone Employment Agreement. TACT and Richard Falcone
shall have entered into an employment agreement in the form of Exhibit 10.8.
Section 10.8 Resignations. Shmuel BenTov and Reuven Battat shall have
resigned from TACT's board of directors.
ARTICLE 11
INDEMNIFICATION; REMEDIES; LIMITS ON LIABILITY
Section 11.1 Indemnification.
(a) Subject to the limitation contained in Section 11.2(a),
from and after the Closing Date, Excalibur shall protect, defend, indemnify and
hold harmless TACT and its affiliates (including the Vanguard Companies),
officers, directors, employees, representatives and agents (each a "TACT
Indemnified Person" and collectively, the "TACT Indemnified Persons") from and
against any and all losses, claims, costs, damages, liabilities, fees (including
without limitation attorneys' fees and expenses generally and attorney's fees
and expenses specifically related to enforcement of, or assertion of, claims
pursuant to this ARTICLE 11) (collectively, the "Losses") and expenses that any
of the TACT Indemnified Persons actually incurs arising out of or in connection
with (i) any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of the Vanguard
Stockholders contained in this Agreement, including any exhibits or schedules
attached hereto, or any fact or circumstance constituting a misrepresentation,
breach of or default in such representations or warranties, (ii) any Losses that
any of the TACT Indemnified Persons actually incurs arising out of or in
connection with any Proceeding affecting any of the Vanguard Companies or any
Vanguard Stockholder, and (iii) all Taxes imposed on, or resulting from the
operations of, the Vanguard Companies for all periods up to and including the
Closing Date (except with respect to the amount of Taxes that the Vanguard
Companies have properly reserved for on the Interim Balance Sheet). Each
Vanguard Stockholder's pro rata portion of any Losses shall be based upon such
Vanguard Stockholder's pro rata portion of the Exchange Shares received in
connection with the Exchange Transaction.
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(b) Subject to the limitation contained in Section 11.2(b),
from and after the Closing Date, TACT shall protect, defend, indemnify and hold
harmless each Vanguard Stockholder (each a "Vanguard Indemnified Person" and
collectively the "Vanguard Indemnified Persons") from and against any and all
Losses, that any of the Vanguard Indemnified Persons actually incurs arising out
of or in connection with any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of TACT contained in this
Agreement, including any exhibits or schedules attached hereto, or any factor or
circumstance constituting a misrepresentation, breach of or default in such
representations or warranties. The foregoing indemnification obligations of TACT
shall apply solely to Losses incurred by any of the Vanguard Indemnified Persons
in excess of an aggregate of the Threshold.
(c) No claim shall be brought under this ARTICLE 11 unless
either the TACT Indemnified Persons or the Vanguard Indemnified Persons
(hereinafter being referred to as the "Indemnified Persons," with each reference
being made to the applicable party or parties as appropriate in the context), or
any of them, at any time prior to the applicable Survival Date (as defined
herein), give, in the case of a claim for indemnification made under Section
11.1(b), TACT or, in the case of a claim for indemnification made under Section
11.1(a), the Escrow Agent and Excalibur (TACT and Excalibur hereinafter being
referred to as the "Indemnifying Persons," with each reference being made to the
applicable party or parties as appropriate in the context) prompt written notice
(a "Claim Notice") after the Indemnified Party has actual knowledge of the basis
for such claim, or of the existence of any such claim, specifying the nature and
basis of such claim and the amount thereof, to the extent known or prompt
written notice of any Third Party Claim, the existence of which might give rise
to such a claim, but the failure so to provide such notice to the Indemnifying
Persons and, if required, the Escrow Agent will not relieve the Indemnifying
Persons from any liability which they may have to the Indemnified Persons under
this Agreement (unless and only to the extent that such failure results in the
loss or compromise of any material rights (including in any event the right to
seek and obtain indemnification or contribution or to make a timely claim for
insurance coverage) or defenses of the Indemnifying Persons and they were not
otherwise aware of such action or claim) or otherwise.
(d) In case any Indemnifying Person shall object in writing to
any Claim Notice, the Indemnified Person that has sent the Claim Notice shall
respond in a written statement to the objection of such Indemnifying Person
within 15 days of the receipt of such objection. If after such 15-day period,
there remains a dispute as to the claim set forth in the Claim Notice, the
Indemnified Person and the Indemnifying Person shall attempt in good faith for
an additional 15 days to agree upon the rights of the respective parties with
respect to each of such claims (the "Good Faith Negotiation Period"). If the
Indemnified Person and the Indemnifying Person should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to
rely on any such memorandum and shall distribute the amount payable from the
fund held by the Escrow Agent in accordance with the terms of the memorandum and
the Escrow Agreement. If no such agreement can be reached after the Good Faith
Negotiation Period, the matter shall be settled by binding arbitration in New
York, New York. All claims shall be settled by three arbitrators in accordance
with the Commercial Arbitration Rules then in effect of the American Arbitration
Association (the "AAA Rules"). If the Indemnified Person and the Indemnifying
Person are unable to resolve the claim after the Good Faith Negotiation Period,
the Indemnified Person and the Indemnifying Person shall each designate one
arbitrator within 15 days after the termination of the Good Faith Negotiation
Period. The Indemnified Person and the Indemnifying Person shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, that if either the Indemnified Person and the Indemnifying Person
fails to timely designate an arbitrator, the dispute shall be resolved by the
one arbitrator timely designated. All of the fees and expenses of the three
arbitrators shall be shared equally by the Indemnified Person and the
Indemnifying Person. The Indemnified Person and the Indemnifying Person shall
cause the three arbitrators to decide the matters to be arbitrated pursuant
hereto within 30 days after the appointment of the third arbitrator. The final
decision of the majority of the arbitrators shall be furnished to the
Indemnified Person and the Indemnifying Person and the Escrow Agent in writing
and shall constitute the conclusive determination of the matters in question
binding upon the Indemnified Persons and the Indemnifying Persons, and shall not
be contested by any of them. Such decision may only be used in a court of law
for the purpose of seeking enforcement of the arbitrators' decision.
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(e) The obligations and liabilities of TACT and Excalibur, as
applicable, with respect to Losses resulting from the assertion of liability by
Third Parties that could render TACT's or Excalibur's, as applicable,
representations and warranties false or misleading (each, a "Third Party Claim")
shall be subject to the following terms and conditions:
(i) The Indemnified Persons shall promptly give
written notice to the Indemnifying Persons of any Third Party
Claim that might give rise to any Loss by the Indemnified
Persons, stating the nature and basis of such Third Party
Claim, and the amount thereof to the extent known. Such notice
shall be accompanied by copies of all relevant documentation
with respect to such Third Party Claim, including, without
limitation, any summons, complaint or other pleading that may
have been served, any written demand or any other document or
instrument. Notwithstanding the foregoing, the failure to
provide notice as aforesaid to the Indemnifying Persons will
not relieve the Indemnifying Persons from any liability which
they may have to the Indemnified Persons under this Agreement
(unless and only to the extent that such failure results in
the loss or compromise of any material rights (including in
any event the right to seek and obtain indemnification or
contribution or to make a timely claim for insurance coverage)
or defenses of the Indemnifying Persons and they were not
otherwise aware of such action or claim) or otherwise.
(ii) The Indemnifying Persons will have the right,
upon delivery of a written acknowledgement to the Indemnified
Persons of their indemnification liability pursuant to this
ARTICLE 11, to assume the defense of the Third Party Claim
with counsel of his or its choice within twenty (20) days
after the Indemnified Person has given notice of the Third
Party Claim; provided, that the Indemnifying Persons must
conduct the defense of the Third Party Claim actively and
diligently thereafter in order to preserve its rights in this
regard; and provided, further that Indemnified Person may
retain separate counsel, with the reasonable fees and expenses
to be paid by the Indemnifying Persons, if such Indemnified
Person upon advice of legal counsel shall have reasonably
concluded that representation of such Indemnified Person or
Persons by the counsel retained by the Indemnifying Persons
would be inappropriate due to actual or potential differing
interests between such Indemnified Person and any other party
represented by such counsel in such Proceeding (provided, that
the Indemnifying Person shall not be responsible for the fees
and expenses of more than one additional counsel for all
Indemnified Persons). No Indemnifying Person, in the defense
of any claim or litigation, shall, except with the consent of
each Indemnified Person, consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Person of a release from all
Liability in respect to such claim or litigation.
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(iii) In the event that the Indemnifying Persons do
not assume and conduct the defense of the Third Party Claim in
accordance with Section 11.1(e)(ii), the Indemnified Persons
shall defend any Third Party Claims with counsel of their own
choosing, which counsel shall be reasonably satisfactory to
the Indemnifying Persons, and shall act reasonably and in
accordance with their good faith business judgment in handling
such Third Party Claims and shall not effect any settlement
without the consent of the Indemnifying Persons, which consent
shall not unreasonably be withheld or delayed. The
Indemnifying Persons and the Indemnified Persons shall make
available to each other and their counsel and accountants all
books and records and information relating to any Third Party
Claims, keep each other fully apprised as to the details and
progress of all proceedings relating thereto and render to
each other such assistance as may be reasonably required to
ensure the proper and adequate defense of any and all Third
Party Claims.
Section 11.2 Limitations on Indemnification. Except as provided in
clauses (i) and (ii) of this Section 11.2, Excalibur shall not have any
liability nor be subject to any claim under Section 11.1(a), unless and until
the amount of any Losses subject to Section 11.1(a) exceeds $10,000 per claim
(the "Individual Claim Threshold") and $1,500,000 in the aggregate (the
"Aggregate Claim Threshold") with respect to Losses subject to indemnity under
Section 11.1(a). If the aggregate amount of Losses subject to Section 11.1(a)
exceeds the Aggregate Claim Threshold, then for each such Loss that is or was
subject to Section 11.1(a) and that exceeds the Individual Claim Threshold
(including those within the Aggregate Claim Threshold), TACT Indemnified Persons
shall be entitled to indemnification by Excalibur in the full amount of such
Loss (notwithstanding the Aggregate Claim Threshold), up to the Aggregate Claim
Limit. Claims that do not exceed the Individual Claim Threshold shall not be
entitled to indemnification under Section 11.1(a), but shall be included in any
determination of whether the aggregate amount of Losses subject to Section
11.1(a) exceeds the Aggregate Claim Threshold. Except as provided in clauses (i)
and (ii) of this Section 11.2, in no event shall Excalibur be liable under this
Agreement, whether with respect to Third Party Claims or non-Third Party Claims,
for any amounts in excess of $8,000,000 (the "Aggregate Loss Limit") in the
aggregate (or such lesser amount as corresponds to, as applicable, the Escrow
Shares then held by the Escrow Agent under the Escrow Agreement), nor shall any
liability of Excalibur hereunder be settled other than, as set forth in Section
11.3 by means of set-off against, as applicable, the Escrow Shares.
Notwithstanding the foregoing provisions of this Section 11.2:
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(i) (A) no breach of the representations and
warranties contained in Section 3.9 shall be included in the
computation of either the Aggregate Claim Threshold or the
Aggregate Loss Limit; and (B) any claim for any loss arising
from any breach of the representations and warranties
contained in Section 3.9 shall be settled by Excalibur by
payment of cash; and
(ii) no breach of the representation and warranties
contained in Section 3.17(e), 3.17(g) and the first sentence
of Section 3.17(i) shall be subject to the Individual Claim
Threshold of $10,000, but instead shall be subject to a
separate individual claim threshold of $2,500 and shall not be
subject to the Aggregate Loss Limit. For the avoidance of
doubt, the parties agree that, for up to an aggregate of
$150,000 of Losses, no claim arising from Vanguard's failure
to match employee contributions under its 401(k) Employee Plan
prior to the date of this Agreement (the "Vanguard 401(k)
Underpayment") may be the subject of a Claim Notice or
otherwise be entitled to the benefits of Section 11.1(a) or
included in the computation of either the Aggregate Claim
Threshold or the Aggregate Loss Limit. For the avoidance of
doubt, claims for or related to the Vanguard 401(k)
Underpayment shall be eligible for indemnification under
Section 11.1(a) and Section 11.2 only to the extent that such
claims exceed $150,000, in which case such excess amount of
claims shall be included in the computation of claims in
excess of the Aggregate Loss Threshold and shall be subject to
indemnification under Section 11.1(a) without limitation by
the Aggregate Loss Limit.
(b) Notwithstanding anything to the contrary contained in this
Agreement, TACT shall not have any liability nor be subject to any claim under
Section 11.1(b), unless and until the amount of any Losses subject to Section
11.1(b) exceeds $10,000 per claim and $1,500,000 in the aggregate with respect
to Losses subject to indemnity under Section 11.1(b). If the aggregate amount of
Losses subject to Section 11.1(b) exceeds the Aggregate Claim Threshold, then
for each such Loss subject to Section 11.1(b) that exceeds the Individual Claim
Threshold (including those within the Aggregate Claim Threshold), Seller
Indemnified Persons shall be entitled to indemnification by TACT in the full
amount of such Loss (notwithstanding the Aggregate Claim Threshold), up to the
Aggregate Claim Limit. Claims that do not exceed the Individual Claim Threshold
shall not be entitled to indemnification under Section 11.1(b), but shall be
included in any determination of whether the aggregate amount of Losses subject
to Section 11.1(b) exceed the Aggregate Claim Threshold. Notwithstanding
anything to the contrary contained in this Agreement, in no event shall any TACT
Indemnifying Person be liable under this Agreement, whether with respect to
Third Party Claims or non-Third Party Claims, for any amounts in excess of the
Aggregate Loss Limit.
Section 11.3 Set-Off Against Escrowed Shares. If Losses become payable
by Excalibur pursuant to Section 11.1(a), except as set forth in Section
11.2(a)(i)(C), then the amount of any such Loss shall be paid to TACT first by
rounding such amount to the nearest $8.00 and then setting off such rounded
amount of Losses, pro rata, at the rate of one share of TACT Capital Stock for
each $8.00 of Loss, against the Escrow Shares held by the Escrow Agent. In
furtherance thereof, within five (5) Business Days of the written request of
TACT to the Vanguard Stockholders, the Escrow Agent will tender to TACT for
cancellation one or more certificates representing the Escrow Shares to be
delivered by such person in exchange for one or more certificates in a number
that properly reflects the set-off made pursuant to the provisions of this
Section.
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Section 11.4 Survival of Representations and Warranties. The
representations and warranties contained in ARTICLE 3, ARTICLE 4 and ARTICLE 5
shall survive the Closing Date until the first anniversary of the Closing Date,
other than the representations and warranties contained in Sections 3.4, 3.9,
3.11 and 3.17, which shall survive in accordance with the applicable statute of
limitations related to any claims with respect thereto. For convenience of
reference, the date upon which any representation and warranty contained herein
shall terminate is referred to herein as the "Survival Date." No Third Party
other than the Indemnified Persons, and each of them, shall be a third party or
other beneficiary of such representations and warranties and no such third party
shall have any rights of contribution against TACT or the Vanguard Stockholders
with respect to such representations or warranties or any matter subject to or
resulting in indemnification under this ARTICLE 11, or otherwise.
Section 11.5 Claims. If TACT is required to pay any amounts to the
Vanguard Indemnified Persons pursuant to this ARTICLE 11, it shall do so in cash
pro rata based on the number of Exchange Shares received by such Vanguard
Indemnified Persons on the Closing Date. If Excalibur is required to pay any
amounts to the TACT Indemnified Persons pursuant to this ARTICLE 11, it shall do
so pursuant to the Escrow Agreement
Section 11.6 Limitation of Remedies as to Berenson. In no event shall
Berenson be liable to any Person for any Losses arising out of or in connection
with this Agreement or any of the Contemplated Transactions, other than for a
Breach by Berenson of any of its representations and warranties under Article 4
or of its agreements or covenants hereunder.
ARTICLE 12
TERMINATION
Section 12.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of
TACT and the Authorized Representative.
Section 12.2 Termination by the Authorized Representative or TACT. This
Agreement may be terminated by action of the board of directors of TACT (upon
payment of the Termination Amount, if payable pursuant to Section 12.5(a)) or by
the Authorized Representative, if:
(i) the Exchange shall not have been consummated by
5:00 pm (New York City time) on July 31, 2005; provided, that
the right to terminate this Agreement pursuant to this clause
(i) shall not be available to any party whose failure to
perform or observe in any material respect any of its
obligations under this Agreement in any manner shall have been
the cause of, or resulted in, the failure of the Exchange to
occur on or before such date; provided further that such time
period shall be tolled for any period during which any party
shall be subject to a non-final order, decree, ruling or
action restraining, enjoining or otherwise prohibiting the
consummation of the Exchange;
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(ii) if the requisite vote of the TACT shareholders
shall not have been obtained at the Shareholders' Meeting
(including adjournment and postponement thereof); or
(iii) a United States federal or state court of
competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or
otherwise prohibiting the Exchange and such order, decree,
ruling or other action shall have become final and
non-appealable.
Section 12.3 Termination by TACT. This Agreement may be terminated
prior to the Closing, by action of the board of directors of TACT (upon payment
of the Termination Amount, if payable pursuant to Section 12.5(a)) after
consultation with its legal advisors, if:
(i) prior to the Shareholders' Meeting, TACT receives
a Superior Proposal as described in Section 7.7(a) and
resolves to accept such Superior Proposal, but only if TACT
has acted in all material respects in accordance with, and has
otherwise complied in all material respects with the terms of,
Section 7.7, including the notice provisions therein; or
(ii) (A) there has been a breach by Vanguard or the
Vanguard Stockholders of any representation, warranty,
covenant or agreement set forth in this Agreement or if any
representation or warranty of the Vanguard Stockholders shall
have become untrue, in either case such that the conditions
set forth in Section 9.1 will not be satisfied at the Closing
Date and (B) such breach is not curable, or, if curable, is
not cured within 30 days after written notice of such breach
is given to the Authorized Representative by TACT; provided,
that the right to terminate this Agreement pursuant to clause
(ii) of this Section 12.3 shall not be available to TACT if
it, at such time, is in breach of any representation,
warranty, covenant or agreement set forth in this Agreement
such that the conditions set forth in Section 10.1 will not be
satisfied at the Closing Date.
Section 12.4 Termination by the Authorized Representative. This
Agreement may be terminated at any time prior to the Closing by the Authorized
Representative after consultation with his legal advisors, if:
(i) the board of directors of TACT shall have
withdrawn, modified or changed, in a manner adverse to the
Vanguard Stockholders, its approval or recommendation of the
Contemplated Company Transactions, or the transactions
contemplated in the Shareholder Stock Purchase Agreement, and
recommended approval of a Company Acquisition Proposal and at
the time of such withdrawal, modification or change a Company
Acquisition Proposal that is a Superior Proposal is pending;
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(ii) prior to the Shareholders Meeting, TACT receives
a Superior Proposal and TACT's board of directors shall have
resolved to accept any Superior Proposal;
(iii) (A) there has been a breach by TACT of any
representation, warranty, covenant or agreement set forth in
this Agreement or if any representation or warranty of TACT
shall have become untrue, in either case such that the
conditions set forth in Section 10.1 will not be satisfied at
the Closing Date and (B) such breach is not curable, or, if
curable, is not cured within 30 days after written notice of
such breach is given by the Vanguard Stockholders to TACT;
provided, that the right to terminate this Agreement pursuant
to clause (iii) of this Section 12.4 shall not be available to
the Authorized Representative if, at such time, Vanguard or
any Vanguard Stockholder is in breach of any representation,
warranty, covenant or agreement set forth in this Agreement
such that the conditions set forth in Section 9.1 will not be
satisfied at the Closing Date.
Section 12.5 Effect of Termination.
(a) If this Agreement is terminated:
(i) by TACT or the Authorized Representative pursuant
to clause (i) or (ii) of Section 12.2 or clause (iii) of
Section 12.4 and (A) (1) in the case of a termination pursuant
to clause (i) of Section 12.2 or clause (iii) of Section 12.4,
such termination results from the breach by TACT in a material
respect of any of its material agreements or covenants set
forth in this Agreement and, at the time of such breach, any
Person shall have made a Company Acquisition Proposal that had
become public and then remained pending or shall have publicly
announced and not withdrawn an intention (whether or not
conditional) to make a Company Acquisition Proposal, or (2) in
the case of a termination pursuant to clause (ii) of Section
12.2, at the time of the Shareholders' Meeting, any person
shall have made a Company Acquisition Proposal that had become
public and then remained pending or shall have publicly
announced and not withdrawn an intention (whether or not
conditional) to make a Company Acquisition Proposal, (B)
neither Vanguard nor any Vanguard Stockholder was in breach of
any of its representations, warranties or covenants in this
Agreement, (C) the board of directors of TACT at no time
withdrew, modified or changed, in any manner adverse to the
Vanguard Stockholders, the board's approval or recommendation
of the Exchange or recommended approval of a Company
Acquisition Proposal, or resolved to do any of the foregoing,
and (D) within 12 months after such termination TACT shall
consummate or enter into a definitive agreement which is
ultimately consummated with the proponent of such Company
Acquisition Proposal;
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(ii) by TACT pursuant to clause (i) of Section 12.3;
or
(iii) by the Authorized Representative pursuant to
clause (i) or (ii) of Section 12.4;
then, TACT shall pay the Authorized Representative U.S. $500,000.00 (the "TACT
Termination Amount") upon termination of this Agreement at the times and subject
to the conditions set forth in the following sentence. All payments required by
this Section 12.5(a)shall be made in cash by wire transfer to an account
designated by the Authorized Representative on (1) in the case of clause (ii) of
Section 12.5(a), on the date of termination of this Agreement, (2) in the case
of clause (iii) of Section 12.5(a), the date which is the third business day
following the date of termination of this Agreement if this Agreement is
terminated by the Authorized Representative, and (3) in the case of clause (i)
of Section 12.5(a), the date on which the Company Acquisition Proposal referred
to in subclause (D) thereof is consummated; provided, that TACT shall have no
obligation to pay the TACT Termination Amount upon a termination pursuant to
clause (i) of Section 12.5(a) unless and until the Company Acquisition Proposal
referred to in subclause (D) of clause (i) of Section 12.5(a) has been
consummated. TACT acknowledges that the agreements contained in this Section
12.5(a) are an integral part of the transactions contemplated by this Agreement
and constitute liquidated damages and not a penalty, and that, without these
agreements, the Authorized Representative would not enter into this Agreement;
accordingly, if TACT fails promptly to pay any amount due pursuant to this
Section 12.5(a), and, in order to obtain such payment, the Authorized
Representative commences a suit which results in a judgment against TACT for the
payment set forth in this Section 12.5(a), TACT shall pay to the Authorized
Representative its costs and expenses (including attorneys' fees) in connection
with such suit, together with interest on such amount from the date payment was
required to be made until the date such payment is actually made at the annual
prime lending rate of Citigroup, N.A. in effect from time to time from the date
such payment was required to be made, plus one percent (1%).
(b) In the event of termination of this Agreement and the
abandonment of the Exchange Transaction pursuant to this ARTICLE 12, all
obligations of the parties hereto shall terminate, except the obligations of the
parties pursuant to Section 12.5 and Section 13.1; provided, that nothing herein
shall relieve any party from any liability for any breach by such party of any
of its covenants or agreements set forth in this Agreement and all rights and
remedies of such non-breaching party under this Agreement in the case of such a
breach, at law or in equity, shall be preserved.
Section 12.6 Extension; Waiver. At any time prior to the Closing, TACT
may, by action taken by its board of directors, and the Authorized
Representative may, by action taken by him on behalf of the Vanguard
Stockholders, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
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ARTICLE 13
MISCELLANEOUS PROVISIONS
Section 13.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective fees and
expenses incurred in connection with the preparation, negotiation, execution,
and performance of this Agreement and the Contemplated Company Transactions,
including all fees and expenses of its Representatives including all fees and
expenses of its Representatives; provided, that all unpaid fees and expenses set
forth on Exhibit 13.1, as the same shall be prepared by and hereafter updated by
each of TACT, Vanguard and the Vanguard Stockholders between the execution of
this Agreement and the Closing so as to reflect the reasonable costs and
expenses of such Representatives, shall be paid at the Closing. Except as set
forth in ARTICLE 12, if this Agreement is terminated, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party.
Section 13.2 Notices.
(a) All notices, consents, waivers and other communications
hereunder must be in writing and either (i) delivered personally, (ii) sent by
facsimile transmission (with written confirmation of a successful transmission),
(iii) mailed by prepaid first class registered or certified mail, return receipt
requested, or (iv) delivered by a nationally recognized prepaid overnight
courier service (receipt requested), in each case to the appropriate addresses
or facsimile numbers set forth below (or to such other addresses or facsimile
numbers as a party may designate by notice to the other parties):
if to TACT:
77 Brant Avenue, Suite 320
Clark, New Jersey 07066
Attention: Chief Financial Officer
Telephone: (732) 499-8228
Facsimile: (732) 499-9310
with a copy (which shall not constitute notice) to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Lawrence B. Fisher, Esq.
Telephone: 212) 506-5385
Facsimile: (212) 506-5151
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if to the Authorized Representative or the Vanguard Stockholders:
T.V. Govindarajan
c/o Vanguard Info-Solutions Corporation
2088 Route 130 North
Monmouth Junction, NJ, USA 08852
Telephone: (732) 951-0701
Facsimile: (732) 951-0704
with a copy (which shall not constitute notice) to:
McGuireWoods LLP
1345 Avenue of the Americas, 7th Floor
New York, NY 10105
Attention: William A. Newman, Esq.
Telephone: (212) 548-2100
Facsimile: (212) 548-2150
if to Vanguard, to:
Vanguard Info-Solutions Corporation
2088 Route 130 North
Monmouth Junction, New Jersey 08852
Telephone: (973) 951-0701
Facsimile: (973) 951-0704
with a copy (which shall not constitute notice) to:
McGuireWoods LLP
1345 Avenue of the Americas, 7th Floor
New York, NY 10105
Attention: William A. Newman, Esq.
Telephone: (212) 548-2100
Facsimile: (212) 548-2150
(b) All such notices, consents, waivers and other
communications will (i) if delivered personally in the manner and to the address
provided in this section, be deemed given upon delivery, (ii) if delivered by
facsimile transmission in the manner and to the facsimile number provided in
this section, be deemed given on the earlier of receipt or the first business
day after transmission, (iii) if delivered by mail in the manner, and to the
address provided in this section, be deemed given on the earlier of the fourth
business day following mailing or upon receipt, and (iv) if delivered by
overnight courier in the manner and to the address provided in this section, be
deemed given on the earlier of receipt or the first business day following the
date sent by such overnight courier.
Section 13.3 Entire Agreement; Modifications. This Agreement supersedes
all prior agreements and understandings between the parties with respect to its
subject matter (including the letter of intent dated July 21, 2004) and
constitutes (along with the Disclosure Schedules, Exhibits and other documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
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Section 13.4 Governing Law; Submission to Jurisdiction; Venue. This
Agreement shall be governed by and construed in accordance with the domestic
laws of New York without giving effect to any choice of law or conflict of law
provision or rule (whether New York or any other jurisdiction) that would
require the application of any other law.
Section 13.5 Assignment; Successors; No Third Party Rights. Neither
party may assign any of its rights or delegate any of its obligations under this
Agreement (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that any Vanguard Stockholder may assign
its rights and obligations under this Agreement prior to the Closing subject to
compliance with Section 6.9. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
Section 13.6 Severability. If any portion of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
Section 13.7 No Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power or privilege under this Agreement
will operate as a waiver thereof, and no single or partial exercise by a party
of its rights hereunder shall preclude any other or future exercise thereof or
the exercise of any other right, power or privilege.
Section 13.8 Jurisdiction; Service of Process. Any Proceeding arising
out of or relating to this Agreement or any Contemplated Transaction may be
brought in the federal courts sitting in the County of New York, State of New
York, and each of the parties irrevocably submits to the exclusive jurisdiction
of each such court in any such Proceeding, waives any objection it may now or
hereafter have to venue or to convenience of forum, agrees that all claims in
respect of the Proceeding shall be heard and determined only in any such courts
and agrees not to bring any Proceeding arising out of or relating to this
Agreement or any Contemplated Transaction in any other court. The parties agree
that either or both of them may file a copy of this paragraph with any court as
written evidence of the knowing, voluntary and bargained agreement between the
parties irrevocably to waive any objections to venue or to convenience of forum.
Process in any Proceeding referred to in the first sentence of this section may
be served on any party anywhere in the world.
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Section 13.9 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
Section 13.10 Counterparts. This Agreement may be executed in one or
more counterpart copies, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement. The exchange of copies of this Agreement
and of signature pages by facsimile transmission shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in
lieu of the original Agreement for all purposes. Signatures of the parties
transmitted by facsimile shall be deemed to be their original signatures for all
purposes.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TACT:
By: /s/ Richard D. Falcone
--------------------------------
Name: Richard D. Falcone
Title: Chief Financial Officer
AUTHORIZED REPRESENTATIVE:
By: /s/ T.V. Govindarajan
--------------------------------
Name: T.V. Govindarajan
Title: Authorized Representative
EXCALIBUR INVESTMENT GROUP LIMITED:
By: /s/ Geeta Gajjar
--------------------------------
Name: Geeta Gajjar
Title: Authorized Signatory
By: /s/ Andrew Harry Ball
--------------------------------
Name: Andrew Harry Ball
BERENSON INVESTMENTS LLC
By: /s/ Steven Wayne
--------------------------------
Name: Steven Wayne
Title: Secretary & Treasurer
VANGUARD INFO-SOLUTIONS CORPORATION
By: /s/ Donald Kovalevich
--------------------------------
Name: Donald Kovalevich
Title: Chief Executive Officer
EXHIBIT A
LIST OF VANGUARD STOCKHOLDERS
VANGUARD STOCKHOLDERS
NUMBER OF
NUMBER OF SHARES
SHARES OF TACT INCLUDED IN
CAPITAL STOCK TO THE PRIOR COLUMN
NUMBER OF SHARES OF BE RECEIVED AT TO BE PLACED IN
NAME OF VANGUARD STOCKHOLDER VANGUARD STOCK OWNED CLOSING* ESCROW
- -------------------------------------------------- --------------------------------- ------------------ ---------------------
Excalibur Investment Group Limited 680 Series A Shares 4,972,701 1,000,000
6,120 Series B Shares
- -------------------------------------------------- --------------------------------- ------------------ ---------------------
Andrew Harry Ball 315 Series A Shares 2,303,531 0
2,835 Series B Shares
- -------------------------------------------------- --------------------------------- ------------------ ---------------------
Berenson Investments LLC 5 Series A Shares 36,564 0
45 Series B Shares
- -------------------------------------------------- --------------------------------- ------------------ ---------------------
- -------------------------------------------------- --------------------------------- ------------------ ---------------------
TOTAL: 7,312,796 1,000,000
- -------------------------------------------------- --------------------------------- ------------------ ---------------------
*Inclusive of shares to be placed in escrow.
EXHIBIT 10.7
FALCONE EMPLOYMENT AGREEMENT
[INTENTIONALLY OMITTED]
EXHIBIT B
FORM OF POWER OF ATTORNEY AND CUSTODY AGREEMENT
IRREVOCABLE POWER OF ATTORNEY AND CUSTODY AGREEMENT
T.V. Govindarajan
As Custodian and Attorney-in-Fact
c/o Vanguard Info-Solutions Corporation
2088 Route 130 North
Monmouth Junction, New Jersey 08852
Dear Mr. Govindarajan:
Each of the undersigned proposes to transfer and deliver the number of
shares (the "Shares") of Series A or Series B Common Stock, no par value (the
"Common Stock") of Vanguard Info-Solutions Corporation, a New Jersey corporation
formerly known as B2B Solutions, Inc., ("Vanguard"), that is shown under the
signature line for the undersigned, (such number representing all of the
undersigned's securities of Vanguard) in this Irrevocable Power of Attorney and
Custody Agreement (this "Agreement"), beneficially owned by the undersigned, to
TACT, Inc., a New York Company (the "Company"), in connection with the Exchange
Transaction as such term is defined in the Share Exchange Agreement (the
"Exchange Agreement"), dated as of January 21, 2005 between Vanguard and the
Company of which this Agreement is a part, all substantially on the terms and
subject to the conditions set forth in the Exchange Agreement.
The undersigned shall deliver to you as Attorney-in-Fact (as defined
below) one or more certificates representing the undersigned's interests in the
Shares and any such additional documentation as you, Vanguard or the Company may
reasonably request to effectuate or confirm compliance with any of the
provisions hereon all of the foregoing to be in form and substance reasonably
satisfactory in all respect to you, Vanguard and the Company.
Each certificate representing Shares shall be delivered to you in
negotiable form, except that the certificate may bear legends restricting
transferability to comply with the Securities Act of 1933, as amended.
Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Exchange Agreement.
1. APPOINTMENT OF ATTORNEY-IN-FACT. In connection with the foregoing,
each of the undersigned hereby appoints T.V. Govindarajan, with full power to
act in all respects hereunder in his sole discretion, as the true and lawful
attorney-in-fact and agent (the "Attorney-in-Fact"), of the undersigned, with
full power and authority in the name of and for and on behalf of the undersigned
with respect to all matters arising in connection with the sale of the Shares
owned by the undersigned to the Company pursuant to the Exchange Agreement and
the Escrow Agreement, (if the undersigned is a party to the Escrow Agreement)
including, but not limited to, the power and authority:
(a) to exchange, sell, assign and transfer to the Company the
Shares on the Closing Date, to deliver the Shares to the Escrow Agent (if the
undersigned is a party to the Escrow Agreement) and to perform all obligations
and functions of the Authorized Representative, each in accordance with the
terms and conditions of the Exchange Agreement and the Escrow Agreement (if the
undersigned is a party to the Escrow Agreement);
(b) for the purpose of effecting the Exchange Transaction, in
the capacity of the Authorized Representative for the undersigned, to execute
and deliver the Exchange Agreement substantially in the form previously
delivered to the undersigned. The execution and delivery of the Exchange
Agreement and the Escrow Agreement (if the undersigned is a party to the Escrow
Agreement) by such Attorney-in-Fact shall be conclusive evidence with respect to
the undersigned's approval hereto and to and comply with each and all of the
provisions of the Exchange Agreement;
(c) in the sole and absolute discretion of the Attorney-in-
Fact so acting, to exercise any power conferred upon and to take any action
authorized or required to be taken by the undersigned as a stockholder of
Vanguard transferring his or its Shares to the Company pursuant to the Exchange
Agreement or the Escrow Agreement (if the undersigned is a party to the Escrow
Agreement) and to take such action as the Attorney-in-Fact so acting may
determine with respect to (i) the transfer on the stock record books of Vanguard
of the Shares in order to effect such sale, (ii) the delivery to or for the
account of the Company of the certificates for the Shares against receipt by the
Custodian (as defined below) of that portion of the Exchange Shares ("Exchange
Shares") to which the undersigned is entitled under the Exchange Agreement and
(iii) the delivery to the undersigned of the Exchange Shares;
(d) if deemed necessary by the Attorney-in-Fact, to retain
legal counsel in connection with any and all matters referred to herein;
(e) to make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
letters and other writings, including amendments to the Exchange Agreement and
the Escrow Agreement (if the undersigned is a party to the Escrow Agreement),
and to take all action that the Attorney-in-Fact so acting may consider
necessary or appropriate in connection with or to carry out the aforesaid
transfer of the Shares to the Company as fully as the undersigned could if then
personally present with full capacity and authority;
(f) if necessary, to endorse (in blank or otherwise) on behalf
of the undersigned the certificate(s) representing the Shares; or a stock power
or powers attached to such certificate(s); and
(g) if and as applicable, to make payment, on behalf and for
the account of the undersigned, of all costs and expenses payable by the
undersigned pursuant to the provisions of the Exchange Agreement or the Escrow
Agreement (if the undersigned is a party to the Escrow Agreement) or otherwise
incurred and deemed appropriate by the Attorney-in-Fact so acting, including any
applicable stock transfer taxes chargeable to the undersigned and any fees and
expenses of the Custodian (as defined below), all in the sole and absolute
discretion of the Attorney-in-Fact so acting, the undersigned hereby expressly
promising to promptly repay such Attorney-in-Fact for any such payments made on
behalf and for the account of the undersigned by such Attorney-in-Fact.
2. APPOINTMENT OF CUSTODIAN; DEPOSIT OF SHARES; INSTRUCTIONS TO
CUSTODIAN.
(a) The undersigned hereby appoints T.V. Govindarajan to act
as custodian (the "Custodian") of the certificate(s) representing the Shares on
the terms and subject to the conditions set forth in this Agreement.
(b) The undersigned hereby agrees to deliver to the Custodian
a certificate or certificates representing the Shares, together with stock
powers executed in blank. These certificates are to be held by the Custodian for
the account of the undersigned and are to be disposed of by the Custodian in
accordance with this Agreement.
(c) The undersigned hereby authorizes and directs the
Custodian to hold the certificates deposited herewith in his custody with full
power in the name of and for and on behalf of the undersigned and:
(i) to deliver, or cause to be delivered,
certificates representing the Shares to the Company on the
Closing Date, fixed in accordance with the Exchange Agreement
against receipt by the Custodian, in his capacity of the
Attorney-in-Fact for the undersigned, of the Exchange Shares;
(ii) to determine, in the sole and absolute
discretion of the Custodian, whether and the time or times
when, the purpose for, and the manner in which, any power
conferred herein to the Custodian shall be exercised and the
conditions, provisions and covenants of any instrument or
document which may be executed by the Custodian pursuant
hereto; and
(iii) to do all things and perform all acts pursuant
to the terms of this Agreement as the Custodian may in his
sole and absolute discretion deem appropriate, including,
without limitation, the execution and delivery of all
certificates, receipts, instruments, letters of transmittal
and other documents and papers required, contemplated by, or
deemed by the Custodian appropriate in connection with this
Agreement to the Company or any other person, and the
employment of such counsel or other person or firms as the
Custodian in its sole and absolute discretion shall deem
necessary.
3. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents
warrants and agrees that:
(a) The undersigned has the legal authority to enter into this
Agreement, has read the draft of the Exchange Agreement, dated as of January 21,
2005, previously delivered to the undersigned and understands the same, and
hereby authorizes the Attorney-in-Fact to enter into such agreement with the
Company, on behalf of the undersigned, as Authorized Representative thereof, and
to provide all necessary performance in satisfaction of the terms and conditions
of the Exchange Agreement.
(b) This Agreement, when executed by the undersigned, will be
duly executed and delivered by the undersigned and shall constitute the legal,
valid and binding agreement of the undersigned, enforceable against the
undersigned in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights in general or by general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law), including those limiting the availability of specific
performance, injunctive relief and other forms of equitable relief, standards of
commercial reasonableness and good faith, and public policy.
(c) The undersigned has read the representations and
warranties contained in the Stockholder Certificate attached as Exhibit C (the
"Stockholder Certificate") to the draft of the Exchange Agreement previously
delivered to the undersigned and understands the same, confirms that the same
are, and will be as of the date of the execution of the Exchange Agreement and
at the Closing Date true and correct, and hereby authorizes the
Attorney-in-Fact, acting on behalf of the undersigned, to make such
representations and warranties to the Company as provided therein.
The undersigned further agrees that:
(i) The undersigned will notify the Attorney-in-Fact
in writing immediately of any changes as a result of
developments occurring after the date hereof and prior to the
Closing Date which could reasonably be expected to cause the
representations and warranties that the undersigned has made
in the Stockholder Certificate to be incorrect. The
Attorney-in-Fact may consider that there has not been any such
development unless advised to the contrary in writing;
(ii) The undersigned acknowledges that the
undersigned will pay or cause to be paid all costs and
expenses incident to the performance of the undersigned's
obligations under the Exchange Agreement that are not
specifically provided for therein or otherwise paid by
Vanguard; and
(iii) Until the Exchange Shares have been received by
the Custodian from the Company in consideration for the Shares
or until this Agreement has been terminated, the undersigned
agrees and acknowledges that the undersigned will not have the
right or power to give, sell, pledge, hypothecate, grant liens
on, deal with or contract with respect to, the Shares or any
interest therein.
Each of the forgoing representations and warranties are and at the
Closing Date will be, true and correct, and each of the foregoing
representations, warranties and agreements will survive termination of the
Exchange Agreement and the delivery of and payment for the Shares.
4. TERMINATION OF THIS AGREEMENT.
(a) All power and authority granted or conferred hereby is
granted and conferred subject to the interests of Vanguard and each of the other
undersigned stockholders of Vanguard and in consideration of those interests and
for the purpose of assuring completion of the transactions contemplated by the
Exchange Agreement and the Escrow Agreement (if the undersigned is a party to
the Escrow Agreement). This Agreement is coupled with an interest and is
irrevocable and shall not be terminated by any act of the undersigned or by
operation of law, whether by death or the occurrence of any other event, and, if
after the execution hereof the undersigned shall die or any other such event
shall occur before the completion of the transactions contemplated by the
Exchange Agreement, the Escrow Agreement and this Agreement (if the undersigned
is a party to the Escrow Agreement), the Attorney-in-Fact, also acting as the
Custodian, is nevertheless authorized and directed to complete all of such
transactions as if such death or other event had not occurred and regardless of
any notice thereof.
(b) Notwithstanding the foregoing, if all of the transactions
contemplated by the Exchange Agreement, the Escrow Agreement (if the undersigned
is a party to the Escrow Agreement) and this Agreement are not completed prior
to the Termination Date, this Agreement shall terminate, subject, however, to
all lawful action done or performed by the Attorney-in-Fact pursuant hereto
prior to the actual receipt of such notice.
5. LIMITATION OF LIABILITY; EXCULPATION AND INDEMNIFICATION.
(a) The undersigned agrees that the Custodian shall have no
duties or responsibilities other than those expressly set forth in this
Agreement, each of which are ministerial (and shall not be construed in any
other way) in nature, and no implied duties or obligations of any kind shall be
read into this Agreement against or on the part of the Custodian. The Custodian
shall have no duty to enforce any obligation of any person to make any payment
or delivery, or to direct or cause any payment or delivery to be made, or to
enforce any obligation of any person to perform any other act or to enforce or
compel compliance therewith. The Custodian shall be under no liability to the
other parties hereto or to anyone else by reason of any failure on the part of
any party hereto or any other signatory of any document or any other person to
perform such person's obligations under any such document. Except for
instructions given to Custodian Agent by the undersigned, the Custodian shall
not be obligated to recognize any agreement between any and all of the persons
referred to herein, notwithstanding that references thereto may be made herein
and whether or not the Custodian has knowledge thereof.
(b) The Custodian shall not be liable to the Company,
Vanguard, the undersigned or to anyone else for any action taken or omitted by
it, or any action suffered by it to be taken or omitted, in good faith and in
the exercise of its own best judgment except with respect to any losses, claims,
damages or liabilities which shall be finally adjudicated to be the result of
gross negligence or willful misconduct of the Attorney-in-Fact or Custodian. The
Custodian may rely conclusively and shall be protected in acting upon any order,
notice, demand, certificate, opinion or advice of counsel (including counsel
chosen by the Custodian), statement, instrument, report as other paper or
document (not only as to its due execution and the validity and effectiveness of
its provisions, but also as to the truth and acceptability of any information
therein contained), which is believed by the Custodian to be genuine and to be
signed or presented by the proper person or persons. The Custodian shall not be
bound by any notice or demand, or any waiver, modification, termination or
remission of this Agreement or any of the terms thereof unless evidenced by a
writing delivered to the Custodian signed by the proper party or parties and, if
the duties or rights of the Custodian are affected, unless the Custodian shall
give its prior written consent thereto.
(c) The Custodian shall not be responsible for the sufficiency
or accuracy of the form of, or the execution, validity, value or genuineness of,
any document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon, or for
any description therein; nor shall the Custodian be responsible or liable to the
other parties hereto or to anyone else in any respect on account of the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any document or property or this Agreement. The
Custodian shall have no responsibility with respect to the use or application of
any funds or other property paid or delivered by the Custodian pursuant to the
provisions hereof.
(d) The undersigned agrees that, whenever the Attorney-in-Fact
and Custodian may obtain the advice of any such counsel as he may select in
connection with any matter arising under the Exchange Agreement, the Escrow
Agreement (if the undersigned is a party to the Escrow Agreement) or this
Agreement, such Attorney-in-Fact and Custodian, as the case may be, shall not be
liable for any action taken or omitted in good faith in accordance with such
advice. The undersigned agrees, severally and not jointly, to indemnify and hold
harmless the Attorney-in-Fact and Custodian against any and all losses, claims,
damages or liabilities (including all costs, legal and other expenses) incurred
as a result of any action taken or omitted by the Attorney-in-Fact and Custodian
in accordance with the Exchange Agreement, the Escrow Agreement (if the
undersigned is a party to the Escrow Agreement) or this Agreement, whether or
not under the advice of counsel, except with respect to any losses, claims,
damages or liabilities which shall be finally adjudicated to be the result of
gross negligence or willful misconduct of the Attorney-in-Fact or Custodian.
6. APPLICABLE LAW. The validity, enforceability, interpretation
and construction of this Agreement shall be determined in accordance with the
laws of the State of New York, without regard to conflicts of laws principles,
and this Agreement shall inure to the benefit of, and shall be binding upon, the
undersigned and the undersigned's heirs, executors, administrators, successors
and assigns, as the case may be.
7. RETURN OF UNDELIVERED SHARES. If the Shares are not accepted
by the Company against consideration therefor in the form of Exchange Shares in
accordance with the terms and provisions of the Exchange Agreement or the Escrow
Agreement (if the undersigned is a party to the Escrow Agreement), or if the
Exchange Agreement and the Escrow Agreement (if the undersigned is a party to
the Escrow Agreement) shall be otherwise terminated pursuant to the provisions
thereof, the Custodian shall return to the undersigned the certificate(s)
referred to in Section 2 of this Agreement and held by it for the account of the
undersigned hereunder.
8. MISCELLANEOUS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument. A faxed copy of an
original signature shall be deemed an original signature. Until delivery of the
consideration provided for in the Exchange Agreement has been made to the
Attorney-in-Fact by or for the account of the Company, the undersigned shall
remain the owner of the Shares and shall have all rights thereto which are not
inconsistent with this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
CUSTODIAN AND ATTORNEY-IN-FACT VANGUARD STOCKHOLDER
Name:
- ----------------------------- ---------------------------------
T.V. Govindarajan By:
-----------------------------------
Title:
--------------------------------
Number of Shares:
---------------------
Certificate Number(s):
----------------
EXHIBIT C
FORM OF STOCKHOLDER'S CERTIFICATE
STOCKHOLDER CERTIFICATE
Reference is made to the Share Exchange Agreement (the "Exchange
Agreement"), dated as of January 21, 2005, between Vanguard Info-Solutions
Corporation, a New Jersey corporation ("Vanguard") formerly known as B2B
Solutions, Inc., and TACT, Inc., a New York corporation (the "Corporation"), of
which this Stockholder Certificate is a part. In connection with the proposed
transfer by the undersigned of all of the shares of Vanguard Common Stock held
by the undersigned (the "Shares") to the Corporation pursuant to the Exchange
Agreement and the related Escrow Agreement, the undersigned hereby represents to
the Corporation as follows (capitalized terms used herein but not defined shall
have the meanings ascribed thereto in the Exchange Agreement):
1. This Certificate is made with the knowledge that counsel for the
Corporation and Vanguard will rely on it in rendering their respective opinions
pursuant to the Exchange Agreement.
2. The undersigned is the record and beneficial owner of the Shares and
holds such Shares free and clear of any claims, charges, equities, liens,
security interests, and encumbrances whatsoever (including but not limited to
any marital or community property interest). The undersigned has sole management
over the disposition of the Shares. Upon delivery of the Shares to be exchanged
by the undersigned pursuant to the Exchange Agreement and the Escrow Agreement
(if the undersigned is a party to the Escrow Agreement), and delivery by the
Corporation of the Exchange Shares to be exchanged therefor, the Corporation
will receive on the Closing Date good and marketable title to such Shares, free
and clear of any and all claims, charges, equities, liens, security interests
and encumbrances whatsoever. The Shares have not been sold, conveyed,
encumbered, hypothecated or otherwise transferred except pursuant to the duly
executed Irrevocable Power of Attorney and Custody Agreement, between the
undersigned and T.V. Govindarajan (the "Attorney-in-Fact"), dated January 21,
2005 (the "Custody Agreement").
3. The undersigned has the legal authority and right to transfer the
Shares pursuant to the Custody Agreement and shall take any and all actions
required to transfer the Shares to the Attorney-in-Fact pursuant to the Custody
Agreement.
4. The Exchange Agreement will be duly authorized, executed and
delivered on behalf of the undersigned. Assuming the due authorization,
execution and delivery of the Exchange Agreement and the Custody Agreement by
the parties thereto, each constitutes the valid and binding agreement of the
undersigned enforceable against the undersigned in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforceability of creditors' rights in general
or by general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law), including those limiting the
availability of specific performance, injunctive relief and other forms of
equitable relief, standards of commercial reasonableness and good faith, and
public policy.
5. If the undersigned is a corporation, limited liability company or
other similar entity, the undersigned represents and warrants that it is
authorized and otherwise duly qualified to acquire and hold the Exchange Shares.
6. The undersigned further represents, with respect to the portion of
the Exchange Shares being acquired by the undersigned as follows:
(a) Such securities will be acquired for investment for his or
its own account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof; and the undersigned has no present intention
of selling, granting participation in or otherwise distributing the same, but
subject, nevertheless, to any requirement of law that the disposition of his or
its property shall at all times be within his or its control. By execution
hereof, the undersigned further represents that the undersigned does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person with
respect to any Exchange Shares to be received by the undersigned.
(b) The undersigned understands that the Exchange Shares at
the time of issuance will not be registered under the Securities Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Securities Act and state
law exemptions relating to offers and sales not by means of a public offering,
and that the Corporation's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that, prior to the registration of
the Exchange Shares for resale under the Securities Act, in no event will he or
it make a disposition of any Exchange Shares unless and until (i) he shall have
notified the Corporation of the proposed disposition and shall have furnished
the Corporation with a statement of the circumstances surrounding the proposed
disposition, and (ii) he shall have furnished the Corporation with an opinion of
counsel satisfactory to the Corporation and the Corporation's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available
and (B) the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the
Corporation is highly speculative and represents that he or it is able to fend
for himself or itself in the transactions contemplated by the Exchange Agreement
and hereby is either (i) an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended or (ii) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the undersigned's
investments, and has the ability to bear the economic risks (including the risk
of a total loss) of the undersigned's investment. The undersigned represents
that the undersigned has had the opportunity to ask questions of the Corporation
concerning the Corporation's business and assets and to obtain any additional
information which the undersigned considered necessary to verify the accuracy of
or to amplify the Corporation's disclosures and has had all questions which have
been asked satisfactorily answered by the Corporation.
(e) The undersigned acknowledges that the Exchange Shares must
be held indefinitely unless subsequently registered under the Securities Act or
an exemption from such registration is available. The undersigned is aware of
the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things the existence
of a public market for the shares, the availability of certain current public
information about the Corporation, the resale occurring not less than one year
after a party has purchased and paid for the security to be sold, the sale being
through a "broker's transaction" or in transactions directly with a "market
makers" (as provided by Rule 144(f)) and the number of shares being sold during
any three-month period not exceeding specified limitations.
Dated: January 21, 2005
VANGUARD STOCKHOLDER: -------------------------------
Name of Registered Holder
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Number of Vanguard Shares:
-----------
Certificate Number(s):
---------------
EXHIBIT D
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT, dated of _______ __, 2005, among THE A
CONSULTING TEAM, INC., a New York (the "Company"), Excalibur Investment Group
Limited (the "Escrowing Shareholder") a holder of issued and outstanding shares
of capital stock of Vanguard Info-Solutions Corporation, a New Jersey
corporation formerly known as B2B Solutions, Inc. ("Vanguard"), T. V.
Govindarajan, acting in his capacity as the authorized representative of the
Escrowing Shareholder (the "Authorized Representative") and U.S. BANK TRUST
NATIONAL ASSOCIATION, a national banking association (the "Escrow Agent"). The
Company and the Escrowing Shareholder are sometimes referred to herein
collectively as the "Interested Parties."
W I T N E S S E T H:
WHEREAS, the Company, Vanguard and the Escrowing Shareholder are
parties to that certain Share Exchange Agreement, dated as of January 21, 2005
(the "Share Exchange Agreement"); and
WHEREAS, the Escrowing Shareholder has appointed the Authorized
Representative to act on their behalf in certain matters relating to the Share
Exchange Agreement, including matters relating to this Agreement; and
WHEREAS, subject to the terms and conditions of the Share Exchange
Agreement, the Escrowing Shareholder is acquiring at the Closing (as defined in
the Share Exchange Agreement) an aggregate of 4,972,701 shares of the Company's
Common Stock, par value $0.01 (the "Transferred Shares"), in exchange for 9,950
of the 10,000 issued and outstanding shares of Vanguard, of which 1,000,000 of
the Transferred Shares (the "Escrow Shares") are to be delivered into escrow to
secure the indemnification obligations of the shareholders of Vanguard pursuant
to Article 11 of the Share Exchange Agreement; and
WHEREAS, the Company and the Escrowing Shareholder have agreed that the
Escrow Agent shall hold the Escrow Shares pursuant to the terms and conditions
of this Agreement and that the Escrow Shares are further subject to cancellation
pursuant to Section 11.3 of the Share Exchange Agreement and this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement without
definition shall have the meanings given them in the Share Exchange Agreement.
2. DEPOSIT OF ESCROWED PROPERTY.
(a) To secure the performance by the Escrowing Shareholder of
the Escrowing Shareholder' obligations to indemnify the Company pursuant to
Section 11.1(a) of the Share Exchange Agreement (the "Indemnification
Obligations"), the Company has delivered the Escrow Shares to the Escrow Agent
on behalf of the Escrowing Shareholder at the Closing. Subject to the terms and
conditions of this Agreement, the Escrow Agent shall hold and administer the
Escrow Shares and any dividends and distributions thereon or proceeds received
therefrom received by the Escrow Agent (collectively, the "Escrow Property") in
escrow. The number of Exchange Shares deposited in escrow on behalf of each
Escrowing Shareholder shall be in proportion to the number of shares of capital
stock of Vanguard held by each such Escrowing Shareholder on the Closing Date
and shall further be set forth below the signature of each Escrowing Shareholder
to this Agreement at the end hereof. The Escrow Agent shall have no
responsibility for the genuineness, validity, market value, title or sufficiency
for any intended purpose of the Escrow Property.
(b) The Escrow Agent hereby acknowledges receipt of the Escrow
Shares from the Escrowing Shareholder and the Company, and agrees to hold and to
deliver the same in accordance with this Agreement.
(c) So long as the Escrowing Shareholder is not in default in
respect of any of their Indemnification Obligations, the Escrowing Shareholder
shall exercise and enjoy all the rights accruing from the ownership of the
Escrowed Property.
3. CLAIMS AND PAYMENTS; RELEASE FROM ESCROW.
(a) Whenever the Escrow Agent receives a Claim Notice from the
Company that seeks indemnification from the Escrowing Stockholders, the Escrow
Agent shall send a copy of the Claim Notice to the Authorized Representative
together with a notice (the "Escrow Agent's Payment Notice") stating the Escrow
Agent's intention to deliver all or a portion of the Escrowed Property in
payment of the claim set forth in the Claim Notice. If on or prior to the tenth
Business Day after it has sent the Escrow Agent's Payment Notice to the
Authorized Representative, the Escrow Agent does not receive a written objection
from the Authorized Representative, the Escrow Agent shall deliver to the
Company (i) for cancellation Escrow Shares equal in value to the amount of the
Losses set forth in the Escrow Agent's Payment Notice, such value to be computed
as set forth in Section 11.3 of the Share Exchange Agreement and (ii), if no
Escrow Shares remain, then any and all other Escrowed Property, up to the amount
of the Losses stated in the Escrow Agent's Payment Notice, and the Escrow Agent
shall thereupon be discharged of and from all other and further responsibilities
with respect to the Escrowed Property as to the Losses set forth in the Escrow
Agent's Payment Notice.
(b) Upon the later to occur of (i) the first anniversary of
the Closing (the "Termination Date") and (ii) the date on which there shall have
been resolved any outstanding claims for indemnification from the Escrowing
Shareholder under the Share Exchange Agreement that are the subject of duly
delivered Claim Notices that are outstanding and unresolved on the Termination
Date, the Company shall deliver to the Escrow Agent a notice (the "Satisfaction
Notice"), which Satisfaction Notice shall state that all of the Indemnification
Obligations that are required to be satisfied during the period ending on the
date of the Satisfaction Notice have been satisfied. Upon receipt of the
Satisfaction Notice from the Company, the Escrow Agent shall deliver to the
Escrowing Shareholder (or the assignees of the Escrowing Shareholder) all of the
Escrowed Property then remaining with the Escrow Agent in proportion to the
number of Exchange Shares initially deposited under this Agreement, and
thereupon the Escrow Agent shall be discharged of and from all other and further
responsibilities with respect to the Escrowed Property.
(c) Anything in this Agreement notwithstanding, if at any time
the Escrow Agent receives written instructions signed by the Company and the
Authorized Representative, or a final order of a court of competent jurisdiction
that directs delivery of the Escrowed Property, the Escrow Agent shall, at the
expense of the Company and the Authorized Representative, comply with such
instructions or order. The Escrow Agent shall also be entitled to deposit the
Escrowed Property with the clerk of any court of competent jurisdiction upon
commencement of an action in the nature of interpleader or in the course of any
court proceedings. Upon any delivery or deposit of the Escrowed Property as
provided in this Section 3(c), the Escrow Agent shall thereupon be discharged of
and from all other and further responsibilities with respect to the Escrowed
Property.
4. OBJECTIONS TO PAYMENT. If the Escrow Agent receives a written
objection from the Authorized Representative to any Escrow Agent's Payment
Notice, then the Escrow Agent shall continue to hold the Escrowed Property equal
to the amount of Losses set forth in the Applicable Claim Notice until the
Escrow Agent receives one of the following:
(a) written instructions signed by the Company and the
Authorized Representative setting forth to whom any Escrowed Property shall be
delivered in respect of the Escrow Agent's Payment Notice as to which written
objection has been made; or
(b) following compliance with the provisions of Section
11.1(d) of the Share Exchange Agreement, a final decision of the majority of the
arbitrators rendered pursuant to Section 11.1.(d) of the Share Exchange
Agreement, constituting the conclusive determination of the arbitrators with
respect to the matters set forth in the Escrow Agent's Payment Notice and the
written objection thereto setting forth to whom the Escrowed Property shall be
delivered in respect of such Escrow Agent's Payment Notice.
The Escrow Agent shall not be a necessary party to any judicial proceeding in
which such an order is sought.
5. CERTAIN TERMS CONCERNING ESCROWED PROPERTY.
(a) No Duty to Vote or Preserve Rights to Escrow Property.
Neither the Escrow Agent nor its nominee shall be under any duty to take any
action to preserve, protect, exercise or enforce any rights or remedies under or
with respect to the Escrowed Property (including with respect to the exercise of
any voting rights, conversion or exchange rights, defense of title, preservation
of rights against prior matters or otherwise). Notwithstanding the foregoing, if
the Escrow Agent is so requested in a request of the Authorized Representative
received by the Escrow Agent at least two business days prior to the date on
which the Escrow Agent is requested therein to take such action (or such later
date as may be acceptable to the Escrow Agent), the Escrow Agent shall execute,
or shall cause its nominee to execute, and
deliver to the Authorized Representative a proxy or other instrument in the form
supplied to it by the Authorized Representative for voting or otherwise
exercising any right with respect to any of the Escrow Shares held by it
hereunder, to authorize therein the Authorized Representative to exercise such
voting or other authority in respect of the Escrow Shares (provided, that the
Escrow Agent shall not be obliged to execute any such proxy or other instrument
if, in its judgment, the terms thereof may subject the Escrow Agent to any
liabilities or obligations in its individual capacity). The Escrow Agent shall
not be under any duty or responsibility to forward to any Interested Party, or
to notify any Interested Party with respect to, or to take any action with
respect to, any notice, solicitation or other document or information, written
or otherwise, received from an issuer or other person with respect to the Escrow
Shares, including proxy material, tenders, options, the pendency of calls and
maturities and expiration of rights; it being understood that the intent of the
parties is for any such notice, solicitation or other document or information to
be sent directly to the underlying owner of Escrow Shares or, as applicable, to
the Company, and not to the Escrow Agent.
(b) Distribution of Escrow Shares. Any distribution of all or
any portion of the Escrow Shares made pursuant to Section 3 or Section 4 shall
be made by delivery of the applicable certificate(s) held by the Escrow Agent
representing such Escrow Shares, mailed by first class mail to the appropriate
person at such address as the Escrow Agent may have previously been instructed
in writing; and, if less than all of the Escrow Shares included on any such
certificate are to be so distributed, then the Escrow Agent shall instruct the
Company to, and the Company promptly shall, subdivide such certificate and (i)
issue and deliver to the appropriate person the appropriate number of Escrow
Shares to which such person is entitled and (ii) issue and return to the Escrow
Agent (or its nominee, if the Escrow Agent shall so instruct) one or more
certificates representing the Escrow Shares that remain subject to this
Agreement. The Escrow Agent shall have no liability for the actions or omissions
of, or any delay on the part of, the Interested Parties in connection with the
foregoing.
(c) Dividends and Distributions. Any dividends, whether cash
dividends or otherwise, splits and any other distributions made with respect to
the Escrow Shares received by the Escrow Agent from time to time during the term
of this Agreement shall be added to and become a part of the Escrow Property
(and, as such, shall become subject to the terms of this Agreement). The Escrow
Agent shall be under no obligation or duty to invest (or otherwise pay interest
on) any cash it may receive as part of the Escrow Property from time to time.
6. CONCERNING THE ESCROW AGENT. (a) Each of the Interested Parties
acknowledges and agrees that the Escrow Agent (i) shall not be responsible for
any of the agreements referred to or described herein, or for determining or
compelling compliance therewith, and shall not otherwise be bound thereby, (ii)
shall be obligated only for the performance of such duties as are expressly and
specifically set forth in this Agreement on its part to be performed, each of
which is ministerial (and shall not be construed to be fiduciary) in nature, and
no implied duties or obligations of any kind shall be read into this Agreement
against or on the part of the Escrow Agent, (iii) shall not be obligated to take
any legal or other action hereunder that might in its judgment involve or cause
it to incur any expense or liability unless it shall have been furnished with
acceptable indemnification, (iv) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction (including wire
transfer instructions, whether incorporated herein or provided in a separate
written instruction), instrument, statement, certificate, request or other
document furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper person or persons, and shall have no
responsibility for making inquiry as to or determining the genuineness, accuracy
or validity thereof, or of the authority of any person signing or presenting the
same, and (v) may consult counsel satisfactory to it, including in-house
counsel, and the opinion or advice of such counsel in any instance shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion or advice of such counsel.
(b) The Escrow Agent shall not be liable to any person for any
action taken or omitted to be taken by it hereunder except in the case of the
Escrow Agent's gross negligence or willful misconduct in breach of the terms of
this Agreement. In no event shall the Escrow Agent be liable for any indirect,
punitive, special or consequential damage or loss (including lost profits)
whatsoever, even if the Escrow Agent has been informed of the likelihood of such
loss or damage and regardless of the form of action.
(c) The Escrow Agent shall have no more or less responsibility
or liability on account of any action or omission of any book-entry depository,
securities intermediary or other sub-escrow agent employed by the Escrow Agent
than any such book-entry depository, securities intermediary or other sub-escrow
agent has to the Escrow Agent, except to the extent that such action or omission
of any book-entry depository, securities intermediary or other sub-escrow agent
was caused by the Escrow Agent's own gross negligence or willful misconduct in
breach of this Agreement.
(d) Notwithstanding any term in this Agreement to the
contrary, in no instance shall the Escrow Agent be required or obligated to
distribute any Escrow Property (or take other action that may be called for
hereunder to be taken by the Escrow Agent) sooner than two business days after
(i) it has received the applicable documents required under this Agreement in
proper form, or (ii) passage of the applicable time period (or both, as
applicable under the terms of this Agreement), as the case may be.
7. COMPENSATION, EXPENSE REIMBURSEMENT AND INDEMNIFICATION. (a) Each of
the Interested Parties covenants and agrees that the Interested Parties shall
share equally in, but in any event be jointly and severally liable for, (i)
paying to or reimbursing the Escrow Agent for its reasonable attorney's fees and
reasonable expenses incurred in connection with the preparation of this
Agreement; (ii) paying the Escrow Agent's compensation for its normal services
hereunder in accordance with the fee schedule attached hereto as Exhibit A and
made a part hereof, which may be subject to change hereafter by the Escrow Agent
on an annual basis (the "Escrow Fees"); and (iii) reimbursing the Escrow Agent
on demand for all reasonable costs and expenses incurred in connection with the
administration of this Agreement or the escrow created hereby or the performance
or observance of its duties hereunder that are in excess of the Escrow Fees,
including payment of any legal fees and reasonable expenses incurred by the
Escrow Agent in connection with resolution of any claim by any party hereunder.
(b) Each of the Interested Parties covenants and agrees that
the Interested Parties shall share equally in, but in any event be jointly and
severally liable for, indemnifying the Escrow Agent (and its directors, officers
and employees) and holding it (and such directors, officers and employees)
harmless from and against any loss, liability, damage, cost and expense of any
nature incurred by the Escrow Agent arising out of or in connection with this
Agreement or with the administration of its duties hereunder, including
attorney's fees and other reasonable costs and expenses of defending or
preparing to defend against any claim of liability unless and except to the
extent such loss, liability, damage, cost and expense shall be caused by the
Escrow Agent's gross negligence or willful misconduct. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
this Agreement.
(c) Notwithstanding anything herein to the contrary, the
Escrow Agent shall have and is hereby granted a possessory lien on and security
interest in the Escrow Property, and all proceeds thereof, to secure payment of
all amounts owing to it from time to time under this Agreement, whether now
existing or hereafter arising. The Escrow Agent shall have the right to deduct
from the Escrow Property, and proceeds thereof, any such sums, upon one business
day notice to the Interested Parties of its intent to do so.
(d) The Escrow Agent may present invoices for its services
hereunder (including for its fees and reimbursable expenses) and claims for
indemnification hereunder to the Interested Parties by delivery of same to the
Authorized Representative.
8. TAX INDEMNIFICATION. Each of the Interested Parties covenants and
agrees that the Interested Parties shall share equally in, but in any event be
jointly and severally liable for, (i) assuming any and all obligations imposed
now or hereafter by any applicable tax law with respect to any payment or
distribution of the Escrow Property or performance of other activities under
this Agreement, (ii) instructing the Escrow Agent in writing with respect to the
Escrow Agent's responsibility for withholding and other taxes, assessments or
other governmental charges, and instructing the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as escrow agent
under this Agreement, and (iii) indemnifying and holding the Escrow Agent
harmless from any liability or obligation on account of taxes, assessments,
additions for late payment, interest, penalties, expenses and other governmental
charges that may be assessed or asserted against the Escrow Agent in connection
with, on account of or relating to, the Escrow Property, the management
established hereby, any payment or distribution of or from the Escrow Property
pursuant to the terms hereof or other activities performed under the terms of
this Agreement, including any liability for the withholding or deduction of (or
the failure to withhold or deduct) the same, and any liability for failure to
obtain proper certifications or to report properly to governmental authorities
in connection with this Agreement, including costs and expenses (including
reasonable legal fees and expenses), interest and penalties. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
this Agreement.
9. RESIGNATION. The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving 30 days' prior written notice of resignation to the
Interested Parties. Prior to the effective date of the resignation as specified
in such notice, the Authorized Representative will issue to the Escrow Agent a
written instruction authorizing redelivery of the Escrow Property to a bank or
trust company that it selects as successor to the Escrow Agent hereunder,
subject to the consent of the Company (which consent shall not be unreasonably
withheld or delayed). If, however, the Authorized Representative fails to name
such a successor escrow agent within 20 days after the notice of resignation
from the Escrow Agent, then the Company shall be entitled to name such successor
escrow agent, subject to the consent of the Authorized Representative (which
consent shall not be unreasonably withheld or delayed). If no successor escrow
agent is named by the Company or the Authorized Representative, the Escrow Agent
may apply to a court of competent jurisdiction for appointment of a successor
escrow agent. Upon the resignation of the Escrow Agent, the Escrow Fees paid to
the Escrow Agent will be returned to the party or parties that made such
payment, on a pro-rated basis.
10. DISPUTE RESOLUTION. It is understood and agreed that, should any
dispute arise with respect to the delivery, ownership, right of possession
and/or disposition of the Escrow Property, or should any claim be made upon the
Escrow Agent or the Escrow Property by a third party, the Escrow Agent upon
receipt of notice of such dispute or claim is authorized and shall be entitled
(at its sole option and election) to retain in its possession without liability
to anyone, all or any of said Escrow Property until such dispute shall have been
settled either by the mutual written agreement of the parties involved or by a
final order, decree or judgment of a court of competent jurisdiction, the time
for perfection of an appeal of such order, decree or judgment having expired.
The Escrow Agent may, but shall be under no duty whatsoever to, institute or
defend any legal proceedings that relate to the Escrow Property.
11. CONSENT TO JURISDICTION AND SERVICE. The Company, the Escrow Agent
and the Authorized Representative hereby irrevocably and unconditionally agree
that any action, suit or proceeding, at law or equity, arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall only be brought in any federal court of the Southern District of New York,
and hereby irrevocably and unconditionally expressly submit to the personal
jurisdiction and venue of such courts for the purposes thereof and hereby
irrevocably and unconditionally waive (by way of motion, as a defense or
otherwise) any and all jurisdictional, venue and convenience objections or
defenses that any such party may have in such action, suit or proceeding. The
Company, the Escrow Agent and the Authorized Representative hereby irrevocably
and unconditionally consent to the service of process of any of the
aforementioned courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail, return receipt requested,
postage prepaid, to such party's address set forth herein, such service to
become effective ten days after such mailing. Nothing herein contained shall be
deemed to affect the right of any party to serve process in any manner permitted
by law or commence legal proceedings or otherwise proceed against any other
party in any other jurisdiction to enforce judgments obtained in any action,
suit or proceeding brought pursuant to this Section 11.
12. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES A TRIAL BY JURY OF ANY AND ALL ISSUES
ARISING IN ANY ACTION OR PROCEEDING BETWEEN THEM OR THEIR SUCCESSORS OR ASSIGNS
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF ITS PROVISIONS OR ANY
NEGOTIATIONS IN CONNECTION HEREWITH.
13. FORCE MAJEURE. The Escrow Agent shall not be responsible for delays
or failures in performance resulting from acts beyond its control. Such acts
shall include acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
14. NOTICES. Any notice to a party permitted or required hereunder
shall be in writing, and shall be sent to such party (i) by personal delivery,
(ii) by overnight delivery by a recognized courier or delivery service, or (iii)
by registered or certified mail, return receipt requested, postage prepaid, or
(iv) by confirmed telecopy accompanied by mailing of the original on the same
day by first class mail, postage prepaid, in each case to the party at its
address set forth below (or to such other address as such party may hereafter
designate by written notice to the other parties):
If to the Escrowing Shareholder, or to the Authorized Representative,
to:
T.V. Govindarajan
c/o Vanguard Info-Solutions Corporation
2088 Route 130 North
Monmouth Junction, New Jersey, USA 08852
Telephone: (732) 951-0701
Facsimile: (732) 951-0704
with a copy (which shall not constitute notice) to
McGuireWoods LLP
1345 Avenue of the Americas
New York, New York 10105
Attention: William A. Newman, Esq.
Telephone: (212) 548-2100
Facsimile: (212) 548-2150
if to the Company,
The A Consulting Team, Inc.
77 Brant Avenue
Clark, New Jersey 07066
Attention: Chief Financial Officer
Telephone: (732) 499-8228
Facsimile: (732) 499-9310
with copies (which shall not constitute notice) to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Lawrence B. Fisher, Esq.
Telephone: (212) 506-5385
Facsimile: (212) 506-5151
and to:
McGuireWoods LLP
1345 Avenue of the Americas
New York, New York 10105
Attention: William A. Newman, Esq.
Telephone: (212) 548-2100
Facsimile: (212) 548-2150
if to the Escrow Agent, to:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, NY 10005
Attention: Ms. Jean Clarke
Telephone: (212) 361-6173
Facsimile: (212) 361-6153
15. MISCELLANEOUS.
(a) Binding Effect; Successors. This Agreement shall be
binding upon the parties to this Agreement and their respective heirs,
executors, successors and assigns. If the Escrow Agent consolidates, merges or
converts into, or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation without any further
act shall be the successor Escrow Agent.
(b) Modifications; Waivers. This Agreement may not be altered
or modified without the express written consent of the Interested Parties and
the Escrow Agent. Waiver of any term or condition of this Agreement by any party
shall be effective only if in a writing signed by the party against whom such
waiver is asserted. Any such waiver shall not be construed as a waiver of any
subsequent breach or failure of the same term or condition, or a waiver of any
other term of this Agreement. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(c) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties to this Agreement and delivered to the other parties.
(e) General. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Unless the context of this Agreement otherwise
requires: (i) pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person or persons
may require; (ii) the words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; (iii) the word
"person" shall refer to any individual, corporation, general or limited
partnership, firm, joint venture, association, enterprise, joint stock company,
trust, unincorporated organization or other entity; (iv) article, section,
paragraph and schedule references are to the articles, sections, paragraphs and
schedules of this Agreement; (v) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation;"
(vi) the word "or" is not exclusive; and (vii) provisions apply to successive
events and transactions.
IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow
Agreement as of the date first above written.
THE ESCROWING SHAREHOLDER:
EXCALIBUR INVESTMENT GROUP LIMITED
By:
---------------------------------------------
Name: Matthew Charles Stokes
Title: Director
Escrow Shares: 1,000,000
THE AUTHORIZED REPRESENTATIVE:
----------------------------------------------
T.V. Govindarajan, acting as
Authorized Representative
THE COMPANY:
THE A CONSULTING TEAM, INC.
By:
---------------------------------------------
Name: Shmuel BenTov
Title: President and Chief Executive Officer
ESCROW AGENT:
U.S. BANK TRUST NATIONAL ASSOCIATION
By:
---------------------------------------------
Name: Jean Clark
Title: Assistant Vice President
Exhibit A to the Escrow Agreement
---------------------------------
ESCROW AGENT FEES
Escrow Agency Fee: $3,500, payable upon execution and delivery of this Escrow
Agreement by the Escrow Agent, plus reasonable out of pocket fees and expenses,
payable upon request from time-to-time to upon presentation of an invoice for
same to the Authorized Representative and/or the Company.
EXHIBIT E
BOARD MEMBERS
LIST OF BOARD NOMINEES
Andrew Harry Ball
William A. Newman
EXHIBIT 9.4(A)
VANGUARD'S COUNSEL'S OPINION
[Intentionally Omitted]
Exhibit 10.4(a)
TACT's Counsel's Opinion
[Intentionally Omitted]
Exhibit 9.1
EXECUTION COPY
PRINCIPAL SHAREHOLDER'S AGREEMENT
This PRINCIPAL SHAREHOLDER'S AGREEMENT (this "Agreement") dated as of
January 21, 2005, is made by and among Oak Finance Investments Limited, a
British Virgin Islands company (the "Buyer"), and Shmuel BenTov (the
"Shareholder"), a shareholder of The A Consulting Team, Inc., a New York
corporation (the "Company").
THE RECITALS
A. Simultaneously herewith the Buyer is entering into (a) a Stock
Purchase Agreement with the Shareholder, dated the date hereof (the "Shareholder
Stock Purchase Agreement"), pursuant to which the Buyer agrees to buy from the
Shareholder and Ronit BenTov, and the Shareholder and Ronit BenTov agree to sell
to the Buyer, 1,024,697 shares of the Company's Common Stock, par value $0.01
per share, on the terms and conditions set forth therein, and (b) a Stock
Purchase Agreement with the Company, dated the date hereof (the "Company Stock
Purchase Agreement"), pursuant to which the Buyer will purchase from the
Company, and the Company will sell to the Buyer, up to 1,250,000 shares of the
Common Stock, but not less than 625,000 shares of the Common Stock, on the terms
and conditions set forth therein.
B. Simultaneously herewith the Company is entering into a Share
Exchange Agreement, dated the date hereof (the "Company Share Exchange
Agreement"), with the shareholders of Vanguard Info-Solutions Corporation, a New
Jersey corporation ("Vanguard"), pursuant to which the shareholder of Vanguard
will exchange 100% of the issued and outstanding shares of all classes of
Vanguard with the Company for an aggregate of 7,312,796 shares of the Company's
Common Stock (the "Exchange"). Upon consummation of the Exchange, Vanguard will
be a wholly owned subsidiary of the Company.
C. The Shareholder beneficially owns 1,024,697 issued and outstanding
shares of Common Stock.
D. In order to induce the Buyer to enter into the Shareholder Stock
Purchase Agreement, the Buyer has required that the Shareholder agree, and the
Shareholder has agreed, among other things, to execute and deliver this
Agreement with respect to all shares of the Company's stock of all classes now
owned of record or beneficially or in the future acquired by the Shareholder
(all such shares, including those now owned and those acquired in the future
being referred to herein as the "Shares"), on the terms and conditions provided
for herein.
E. In this Agreement the term "Purchase Agreements" means the Company
Stock Purchase Agreement and the Company Share Exchange Agreement. Unless
otherwise stated in this Agreement, other capitalized terms used but not defined
herein shall have the meanings set forth in the Shareholder Stock Purchaser
Agreement.
THE AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
Section 1. Agreement to Vote the Shares. During the period commencing
on the date hereof and continuing until the termination of this Agreement in
accordance with its terms (the "Voting Period"), at any meeting (or any
adjournment or postponement thereof) of the holders of any class or classes of
the capital stock of the Company called with respect to any of the following or
in connection with the written consent of the holders of any class or classes of
the capital stock of the Company with respect to any of the following, the
Shareholder shall vote (or cause to be voted) the Shares (x) in favor of the
approval of the terms of the Purchase Agreements and each of the transactions
contemplated by the Purchase Agreements (and any actions required in furtherance
thereof), (y) against any action, proposal, transaction or agreement that to the
knowledge of the Shareholder would constitute a Breach in any material respect
of any covenant, representation or warranty or any other obligation or agreement
of the Company or any of its subsidiaries under this Agreement or each of the
Purchase Agreements or of the Shareholder under this Agreement and (z) against
the following actions or proposals (other than the transactions with the Buyer
and the shareholders of Vanguard that are contemplated by this Agreement or
either of the Purchase Agreements) (collectively, the "Restricted Proposals"):
(i) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries, and
any Company Acquisition Proposal (as defined in the Company Share Exchange
Agreement); (ii) a sale, lease or transfer of a significant part of the assets
of the Company or any of its subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of its
subsidiaries (each of the actions in clauses (i) or (ii), a "Business
Combination"); and (iii) (A) any change in the persons who constitute the board
of directors of the Company that is not approved in advance by at least a
majority of the persons who were directors of the Company as of the date of this
Agreement (or their successors who were so approved), (B) any change in the
present capitalization of the Company or any amendment of the Company's articles
of incorporation or bylaws, (C) any other material change in the Company's
corporate structure or business or (D) any other action or proposal involving
the Company or any of its subsidiaries that is intended, or to the knowledge of
the Shareholder would reasonably be expected, to prevent, impede or materially
interfere with, delay or postpone the transactions contemplated by this
Agreement or the Purchase Agreements. Any such vote shall be cast or consent
shall be given in accordance with such procedures relating thereto as shall
ensure that it is duly counted for purposes of determining that a quorum is
present and for purposes of recording the results of such vote or consent. The
Shareholder will not enter into any agreement, letter of intent, agreement in
principle or understanding with any person that violates or conflicts with, or
could reasonably be expected to violate or conflict with, the provisions and
agreements contained in this Agreement or the Purchase Agreements.
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Section 2. Grant of Irrevocable Proxy. The Shareholder hereby
irrevocably appoints the Buyer, or any designee of the Buyer, the lawful agent,
attorney and proxy of the Shareholder during the Voting Period (which proxy
shall be automatically revoked without any further action on the part of the
Shareholder at the end of the Voting Period) at any meeting of the shareholders
of the Company that may be called with respect to any of the following, or in
connection with any written consent of the shareholders of the Company with
respect to any of the following, to vote (or cause to be voted) the Shares held
of record or beneficially by the Shareholder (excluding the shares owned by
Ronit BenTov) (a) in favor of the approval of the terms of the Purchase
Agreements and each of the actions contemplated by the Purchase Agreements (and
any actions required in furtherance thereof); (b) against any action, proposal,
transaction or agreement that to the knowledge of the Shareholder would
constitute a Breach in any material respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under either of the
Purchase Agreements, or of the shareholder under this Agreement; and (c) against
any Restricted Proposal. The Shareholder intends this proxy to be irrevocable
and coupled with an interest and will take such further action or execute such
other instruments as may be necessary to effectuate the intent of this proxy and
hereby revokes any proxy previously granted by it with respect to the Shares.
The Shareholder shall not during the term of this Agreement purport to vote (or
execute a consent with respect to) the Shares in connection with any of the
matters specified in clauses (a), (b) or (c) of this Section 2 (the "Specified
Matters") (other than through this irrevocable proxy) or grant any other proxy
or power of attorney with respect to any of the Shares in respect of the
Specified Matters, deposit any of the Shares into a voting trust or enter into
any agreement (other than this Agreement), arrangement or understanding with any
person, directly or indirectly, to vote, grant any proxy or give instructions
with respect to the voting of any of the Shares in connection with any of the
Specified Matters.
Section 3. Representations and Warranties of the Buyer. The Buyer
hereby represents and warrants to the Shareholder as follows:
(a) Due Authorization; Binding Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Buyer, and no other corporate
proceedings on the part of the Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Buyer and constitutes a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(b) No Conflicts. Except for (i) applicable requirements of the
Securities Act and the Exchange Act , (ii) the applicable requirements of state
securities, takeover or blue sky laws and (iii) such notifications, filings,
authorizing actions, orders and approvals as may be required under other laws,
(A) no filing with, and no permit, authorization, consent or approval of, any
state, federal or foreign public body or authority is necessary for the
execution of this Agreement by the Buyer and the consummation by each of the
transactions contemplated hereby and (B) neither the execution and delivery of
this Agreement by the Buyer nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the provisions hereof shall
(1) conflict with or result in any breach of any provision of its certificate of
incorporation or by-laws (or similar documents), (2) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation to which it is a party or by which it or any
of its properties or assets may be bound or (3) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to it or any of its
properties or assets, except in the case of (2) or (3) for violations, breaches
or defaults which do not, individually or in the aggregate, materially impair
the ability of the Buyer to perform its obligations hereunder.
-3-
(c) Good Standing. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the British Virgin Islands and
has all requisite power and authority to execute and deliver this Agreement.
Section 4. Representations and Warranties of the Shareholder. The
Shareholder hereby represents and warrants to the Buyer as follows:
(a) Ownership of Shares. The Shareholder is the record or beneficial
owner of the Shares and has the power to vote and dispose of the Shares. No
other Person has any right to vote or dispose of the Shares either singly or on
a shared basis with the Shareholder.
(b) Due Authorization; Binding Agreement. This Agreement has been duly
and validly executed and delivered by the Shareholder and constitutes a valid
and binding agreement of the Shareholder enforceable against the Shareholder in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(c) No Conflicts. Except for (i) the applicable requirements of the
Exchange Act and the Securities Act, (ii) the applicable requirements of state
securities, takeover or blue sky laws and (iii) such notifications, filings,
authorizing actions, orders and approvals as may be required under other laws,
(A) no filing by the Shareholder with, and no permit, authorization, consent or
approval of, any state, federal or foreign public body or authority is necessary
for the execution of this Agreement by the Shareholder and the consummation by
the Shareholder of the transactions contemplated hereby and (B) neither the
execution and delivery of this Agreement by the Shareholder nor the consummation
by the Shareholder of the transactions contemplated hereby nor compliance by the
Shareholder with any of the provisions hereof shall result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation to which the Shareholder is a party or by
which it or any of its properties or assets may be bound or (3) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Shareholder or any of its properties or assets, except in the case of (2) or (3)
for violations, breaches or defaults which individually or in the aggregate
would not reasonably be expected to materially adversely affect the ability of
the Shareholder to perform its obligations hereunder.
Section 5. Certain Covenants of the Shareholder. The Shareholder hereby
covenants and agrees as follows:
(a) No Solicitation. During the term of this Agreement, the Shareholder
will not, directly or indirectly, solicit, facilitate, participate in or
initiate any inquiries or the making of any proposal by any person or entity
(other than the stockholder of Vanguard) which constitutes, or may reasonably be
expected to lead to any sale of the Shares or any Company Acquisition Proposal,
except to the extent that such action is taken by the Shareholder or such other
persons in connection with or relating to actions permitted to be taken by the
directors of the Company in compliance with Section 7.7 of the Company Share
Exchange Agreement. If the Shareholder receives an inquiry or proposal with
respect to the sale of Shares, then the Shareholder shall promptly inform the
Buyer of the terms and conditions, if any, of such inquiry or proposal and the
identity of the person making it. The Shareholder shall immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
-4-
(b) Restriction on Transfer, Proxies and Non-Interference. From the
date hereof through the earlier of (x) the Closing Date and (y) termination of
this Agreement pursuant to Section 9(g), and except as contemplated hereby, the
Shareholder will not (i) sell, transfer, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any of the Shares or (ii) take any action
that would make any representation or warranty of the Shareholder contained
herein untrue or incorrect or have the effect of preventing, impeding,
interfering with or adversely affecting the performance by the Shareholder of
his obligations under this Agreement.
Section 6. Legend. The Shareholder shall promptly cause the following
legend to be conspicuously noted on each certificate representing the Shares:
"The shares represented by this certificate are subject to a
Principal Shareholders Agreement, dated as of January 21, 2005.
The Principal Shareholders Agreement restricts the
transferability of the shares represented by this certificate
and includes a voting agreement and an irrevocable proxy to
vote the shares represented by this certificate."
Section 7. Further Assurances. From time to time, at the other party's
request and without further consideration, each party to this Agreement shall
execute and deliver such additional documents and take all such further action
as may be necessary or desirable to effectuate the transactions contemplated by
this Agreement.
Section 8. Fiduciary Duties. Nothing in this Agreement shall prevent
the Shareholder from taking any action which is required in his good faith
judgment to fulfill his fiduciary duties as a director of the Company in his
capacity as such.
Section 9. Miscellaneous.
(a) Entire Agreement; Assignment. This Agreement, together with the
Purchase Agreements and the other Documents (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof and (ii) shall not be assigned
by operation of law or otherwise, provided that the Buyer may assign its rights
and obligations hereunder to any Related Party of the Buyer, but no such
assignment shall relieve the Buyer of its obligations hereunder if such assignee
does not perform such obligations.
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(b) Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the Shareholder and the Buyer.
(c) Publication. The Shareholder hereby consents to disclosure in any
proxy statement to be filed by the Company in connection with any of the
transactions contemplated by this Agreement or the Purchase Agreements
(including all documents and schedules filed with the SEC) and press releases
with respect thereto, of the identity of the Shareholder and ownership of the
Shares and the nature of his commitments, arrangements and understandings
pursuant to this Agreement. The Company agrees to give the Shareholder a
reasonable opportunity to review the disclosures referenced in the immediately
preceding sentence. The Shareholder will amend the Schedule 13D heretofore filed
by it with the Commission to report the Contemplated Transactions and the
consummation thereof.
(d) Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally or by
documented courier or delivery service, (ii) transmitted by facsimile during
normal business hours or (iii) mailed by registered or certified mail (return
receipt requested and postage prepaid) to the following listed persons at the
addresses and facsimile numbers specified below, or to such other persons,
addresses or facsimile numbers as a party entitled to notice shall give, in the
manner hereinabove described, to the others entitled to notice:
If to the Shareholder, to:
Shmuel BenTov
130 Carthage Road
Scarsdale, New York 10583
Telephone: (914) 725-1948
Facsimile: ______________
with a copy to:
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
21st Floor
New York, NY 10018
Attention: Jeffrey J. Fessler, Esq.
Telephone: (212) 398-4627
Facsimile Number: (212) 930-9725
jfessler@srffllp.com
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If to the Buyer, to:
Oak Finance Investments Limited
c/o Arias Fabrega & Fabrega Trust Company BVI Ltd.
325 Waterfront Drive
Omar Hodge Building, 2nd Floor
Wickham's Cay
Road Town, Tortola,
British Virgin Islands
Telephone: _____________________
Facsimile Number: _______________
with a copy to:
McGuireWoods LLP
1345 Avenue of the Americas
7th Floor
New York, NY 10105
Attention: William A. Newman
Facsimile No.: 212-548-2150
If given personally or by documented courier or delivery service, or transmitted
by facsimile, a notice shall be deemed to have been given when it is received.
If given by mail, it shall be deemed to have been given on the third business
day following the day on which it was posted.
(e) Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York without regard to any laws or regulations
relating to choice of laws (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
(f) Cooperation as to Regulatory Matters. If so requested by The
Company, promptly after the date hereof, the Shareholder will use his reasonable
commercial efforts to make all filings that are required to be made by the
Shareholder to obtain any regulatory approvals that may be required in
connection with the transactions contemplated hereby.
(g) Termination. This Agreement shall terminate on the earlier of (i)
the Closing and (ii) the termination of this Agreement or either of the Purchase
Agreements in accordance with their respective terms; provided, that Section 1
and Section 2 of this Agreement shall terminate, and the Voting Period shall be
deemed to have ended, as to any Shares held by any Shareholder in excess of
500,000 if the board of directors of the Company in the exercise of its
fiduciary duties, withdraws, modifies or changes in any manner adverse to the
Buyer its approval with regard to the transactions contemplated by the
Shareholder Stock Purchase Agreement or its recommendation with regard to any of
the transactions contemplated by either of the Purchase Agreements.
-7-
(h) Third Party Beneficiary. The Shareholder acknowledges and agrees
that the stockholders of Vanguard are relying upon the Stockholder's performance
of and compliance with his obligations under this Agreement and are third party
beneficiaries of this Agreement.
(i) Specific Performance. Each of the parties to this Agreement
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore, each of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
(j) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other right,
power or remedy by such party.
(k) Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party to this
Agreement of a breach of any provision under this Agreement shall not operate or
be construed as a waiver of any prior or subsequent breach of the same or any
other provision under this Agreement.
(l) Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, and
delivered by means of facsimile transmission or otherwise, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute but one and the same agreement. If any party
hereto elects to execute and deliver a counterpart signature page by means of
facsimile transmission, it shall deliver an original of such counterpart to each
of the other parties hereto within ten days of the date hereof, but in no event
will the failure to do so affect in any way the validity of the facsimile
signature or its delivery.
(m) Headings. Headings of the Sections of this Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretative effect whatsoever.
(n) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
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(o) Signatures. This Agreement may be executed with original or
facsimile signatures in one or more counterparts, each of which will be deemed
to be an original copy of this Agreement and all of which, when taken together,
will be deemed to constitute one-and-the-same document.
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IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of
each of the parties hereto, all as of the date first above written.
OAK FINANCE INVESTMENTS LIMITED
By: /s/ Brenda Patricia Cocksedge
-----------------------------
Name: Brenda Patricia Cocksedge
Title: Director
SHAREHOLDER
By: /s/ Shmuel BenTov
--------------------
Name: Shmuel BenTov
Title: Shareholder
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