EXHIBIT 10.5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 21, 2000 (this
"AGREEMENT"), among PRECIS SMART CARD SYSTEMS, INC., an Oklahoma corporation
("PARENT"), PRECIS-FORESIGHT ACQUISITION, INC., an Oklahoma corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), FORESIGHT, INC., an Oklahoma
corporation (the "COMPANY"), and the sole shareholders of the Company, namely
Xxxx X. Xxxxxx and Xxxx X. Xxxx (the "COMPANY SHAREHOLDERS").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company have each determined that it is advisable and in the best interests of
their respective shareholders for Parent to cause the Company to merge with and
into Merger Sub upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of
Directors of Parent, Merger Sub and the Company and the Company Shareholders and
the Parent as the sole shareholder of Merger Sub have each approved (as
evidenced by their execution of this Agreement) the merger (the "MERGER") of the
Company with and into Merger Sub in accordance with the applicable provisions of
the Oklahoma General Corporation Act (the "OGCA"), and upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, Parent, Merger Sub and the Company intend, by
approving resolutions authorizing this Agreement, to adopt this Agreement as a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "CODE"), and the regulations promulgated
thereunder;
WHEREAS, Parent, Merger Sub and the Company intend that the
Merger be accounted for as a purchase acquisition of the Company by Parent under
the purchase method of accounting for financial reporting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share (each,
a "COMMON SHARE") of the Company's Common Stock, par value $1.00 per share (the
"COMPANY COMMON STOCK"), shall be converted into the right to receive the Merger
Consideration (as defined in Section 1.7(b)), upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Merger Sub and the Company hereby agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. (a) EFFECTIVE TIME. At the Effective
Time (as defined in Section 1.2), and subject to and upon the terms and
conditions of this Agreement and the OGCA, the Company shall be merged with and
into Merger Sub, the separate corporate existence of the Company shall cease,
and Merger Sub shall continue as the surviving corporation. Merger Sub as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
(b) CLOSING. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the consummation of the Merger will take place as promptly
as practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VI at the offices of Xxxx Swan &
Xxxxxxxxxx, 2800 Oklahoma Tower, 000 Xxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx (the
"CLOSING"), unless another date, time or place is agreed to in writing by the
parties hereto.
SECTION 1.2 EFFECTIVE TIME. As promptly as practicable after
the satisfaction or waiver of the conditions set forth in Article VI, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger as contemplated by the OGCA (the "CERTIFICATE OF MERGER"), together
with any required related certificates, with the Secretary of State of the State
of Oklahoma, in such form as required by, and executed in accordance with the
relevant provisions of, the OGCA (the time of such filing being the "EFFECTIVE
TIME").
SECTION 1.3 EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Certificate of
Merger and the applicable provisions of the OGCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.4 CERTIFICATE OF INCORPORATION; BY-LAWS. (a)
CERTIFICATE OF INCORPORATION. The Certificate of Merger shall provide for
amendment of the Certificate of Incorporation of the Surviving Corporation to
change the name of the Surviving Corporation to "Foresight, Inc." In all other
respects, the Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the OGCA and such Certificate of Incorporation.
(b) BYLAWS. The Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by the OGCA, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
SECTION 1.5 DIRECTORS AND OFFICERS. The directors of the
Company immediately prior to the Effective Time shall become the directors of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
Furthermore, from and after the
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Effective Time and until completion of the issuance and delivery of the
Contingent Shares to which the Company Shareholders are entitled to receive
pursuant to Section 1.6(a), Xxxx X. Xxxxxx, Xxxx Xxxxxxxxx and Xxxx X. Xxxx
(the "COMPANY DESIGNEES") shall serve as directors of Parent and the Board of
Directors of Parent shall be comprised of no more than seven members, unless
at least two of the Company Designees otherwise agree. In the event of the
resignation or death of any of the Company Designees, a person designated by
Xxxx X. Xxxxxx (or his successors in interest if he shall be deceased) shall
be named as a director of Parent to fill the vacancy created by such
resignation or death. In addition, subsequent to the Effective Time, Parent
or the Surviving Corporation and each of Xxxx X. Xxxxxx and Xxxx X. Xxxx
shall enter into an employment agreement providing for employee compensation
and benefits similar to the employee compensation and benefits being received
by each of Messrs. Kruger and Xxxx from the Company immediately prior to the
Effective Time.
SECTION 1.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the Parent, Merger
Sub, the Company or the holders of any of the following securities:
(a) CONVERSION OF SECURITIES. (i) The outstanding Common
Shares shall be exchanged, in the aggregate, for the following number of shares
of Parent Common Stock to be delivered as follows:
(A) At Closing , Parent shall issue and deliver
(i) to Xxxx X. Xxxxxx 166,667 shares of Parent's Series A
Convertible Preferred Stock ( the "PARENT PREFERRED STOCK")
and (ii) to the Company Shareholders 500,000 shares of Parent
Common Stock, of which 90 percent of the shares of Parent
Common Stock shall be issued and delivered to Xxxx X. Xxxxxx
and 10 percent of the shares of Parent Common Stock shall be
issued and delivered to Xxxx X. Xxxx; provided, however, that
in the event the net income before income tax expense of the
Company for the year ended December 31, 1999 as reflected in
the audited statement of income of the Company ("COMPANY 1999
NET INCOME BEFORE INCOME TAXES"), is less than $450,000, the
500,000 shares of Parent Common Stock delivered at Closing to
the Company Shareholders shall be reduced by one share for
each $1.00 increment that Company 1999 Net Income Before
Income Taxes is less than $500,000. For purposes of the
following subparagraphs (B), (C), and (D), the term "Company
1999 Base Income" shall mean the lesser of (i) the number of
shares of Parent Common Stock issued at the Closing multiplied
by $1.00 or (ii) $500,000.
(B) Parent shall issue and deliver to the
Company Shareholders one share of Parent Common Stock for each
$1.00 that Consolidated Adjusted Income Before Taxes of Parent
for the year ended December 31, 2000, assuming the Merger
occurred on January 1, 2000, plus the loss of Parent during
the period commencing January 1, 2000, and ending on the
Effective Date, exceeds Company 1999 Base Income.
(C) Parent shall issue and deliver to the
Company Shareholders one share of Parent Common Stock for each
$1.00 that Consolidated Adjusted Income Before Taxes of Parent
for the year ended December 31, 2001, exceeds the greater of
(i) Company 1999 Base Income or (ii) Consolidated Adjusted
Income Before Taxes of Parent for the year ended December 31,
2000, assuming the Merger occurred on January 1, 2000, plus
the loss of Parent during the period commencing January 1,
2000, and ending on the Effective Date.
(D) Parent shall issue and deliver to the
Company Shareholders one share of Parent Common Stock for each
$1.00 that Consolidated Adjusted Income Before Taxes of Parent
for
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the year ended December 31, 2002, exceeds greater of (i)
Company 1999 Base Income or (ii) Consolidated Adjusted Income
Before Taxes of Parent for the year ended December 31, 2000,
assuming the Merger occurred on January 1, 2000, plus the loss
of Parent during the period commencing January 1, 2000, and
ending on the Effective Date, or (iii) Consolidated Adjusted
Income Before Taxes of Parent for the years ended December 31,
2001.
For purposes of this Agreement, "CONSOLIDATED ADJUSTED INCOME BEFORE TAXES"
shall mean the net income before income tax expense for the applicable fiscal
year (determined in accordance with generally accepted accounting principles for
financial reporting purposes under the rules and regulations of the U.S.
Securities and Exchange Commission), plus the amount of amortization during the
fiscal year attributable to the acquisition of the Company by Parent pursuant to
this Agreement. Furthermore, any shares of Parent Common Stock to be issued and
delivered to the Company Shareholders pursuant to Section 1.6(a), other than
those shares of Parent Common Stock issued and delivered at Closing, are
referred to herein as the "CONTINGENT SHARES."
As soon as reasonably practical following the determination of
Consolidated Adjusted Income Before Income Taxes of Parent for each of the years
ended December 31, 2000, 2001 and 2002, any issuances and deliveries of the
Parent Common Stock pursuant to this Section 1.6(a) and not made at Closing,
shall be made as soon as reasonably practicable following the applicable
determination. Provided, however, the Contingent Shares shall be issued and
delivered to the Company Shareholders in accordance with the separate agreement
to be executed and delivered simultaneously with this Agreement between Parent
and the Company Shareholders. All shares of Parent Common Stock and Parent
Preferred Stock shall be issued and distributed to the Company Shareholders
pursuant to Section 1.6(a) shall be fully paid and non-assessable shares,
subject to adjustment pursuant to Section 1.6(e).
The number of shares of Parent Common Stock and Parent Preferred Stock
into which each outstanding Common Share is converted pursuant to this Section
1.6(a) is referred to herein as the "EXCHANGE RATIO."
(b) CANCELLATION. Each Common Share held in the treasury
of the Company and each Common Share owned by Parent, Merger Sub or any direct
or indirect wholly-owned subsidiary of the Company or Parent immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist.
(c) ASSUMPTION OF OUTSTANDING STOCK OPTIONS AND WARRANTS.
Omitted.
(d) CAPITAL STOCK OF MERGER SUB. Omitted.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio
shall be appropriately adjusted to reflect fully the effect of any stock split,
reverse split or stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock), with respect to Parent Common
Stock having a record date after the date hereof and prior to the Effective
Time.
SECTION 1.7 EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT.
Parent shall instruct UMB Bank, N.A., its transfer agent and registrar of
Parent Common Stock (the "EXCHANGE AGENT"), to reserve and set aside for the
benefit of the Company Shareholders for exchange in accordance with this
Section 1.7, through the Exchange Agent, certificates evidencing the shares
of Parent Common Stock and Parent Preferred
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Stock, as applicable into which the outstanding Common Shares and Preferred
Shares, as applicable, have been converted pursuant to Section 1.6(a) in
exchange for outstanding Common Shares and Preferred Shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably
practicable after the Effective Time, Parent will instruct the Exchange Agent
to mail to each holder of record of the certificates evidencing and
representing the Common Stock and Preferred Stock (the "CERTIFICATES") (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Parent may reasonably specify), and (ii)
instructions to effect the surrender of the Certificates in exchange for the
certificates evidencing shares of Parent Common Stock or the Parent Preferred
Stock, as applicable. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to such
instructions, the Company Shareholders shall be entitled to receive in
exchange therefor (A) certificates evidencing that number of whole shares of
Parent Common Stock or the Parent Preferred Stock, as applicable which the
Company Shareholders has the right to receive in accordance with the Exchange
Ratio in respect of the Common Shares or Preferred Shares, as applicable,
formerly evidenced by such Certificate, (B) any dividends or other
distributions to which such holder is entitled pursuant to Section 1.7(c),
and (C), if applicable, Contingent Shares, in each case without any interest
thereon (the shares of Parent Common Stock, Parent Preferred Stock and
Contingent Shares being, collectively, the "MERGER CONSIDERATION"), and the
Certificate so surrendered shall forthwith be canceled.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.
No dividends or other distributions declared or made after the Effective Time
with respect to shares of Parent Common Stock or Parent Preferred Stock, as
applicable, payable to shareholders of record as of a date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock or Parent Preferred Stock
they are entitled to receive pursuant to the provisions hereof until the
holder of such Certificate shall surrender such Certificate pursuant to
Section 1.7(b). Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Parent Common Stock or Parent Preferred Stock,
as applicable, issued in exchange therefor, without interest, at the time of
such surrender, the amount of dividends or other distributions payable to
shareholders of record as of a date after the Effective Time and theretofore
paid with respect to such whole shares of Parent Common Stock or Parent
Preferred Stock, as applicable.
(d) TRANSFERS OF OWNERSHIP. If any certificate for
shares of Parent Common Stock or Parent Preferred Stock, as applicable, is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance
thereof that the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the Person requesting such
exchange will have paid to Parent or any agent designated by it any transfer
or other taxes required by reason of the issuance of a certificate for shares
of Parent Common Stock or Parent Preferred Stock, as applicable, in any name
other than that of the registered holder of the certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(e) NO LIABILITY. Neither Parent, Merger Sub nor the
Company shall be liable to any holder of Company Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) WITHHOLDING RIGHTS. Parent or the Exchange Agent
shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of
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Company Common Stock, such amounts as Parent or the Exchange Agent is
required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such
deduction and withholding was made by Parent or the Exchange Agent.
SECTION 1.8. DISSENTING SHARES. Omitted.
SECTION 1.9 STOCK TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Company shall be closed, and there shall be
no further registration of transfers of the Company Common Stock thereafter
on the records of the Company.
SECTION 1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY
CAPITAL STOCK. The Merger Consideration delivered upon the surrender for
exchange of Common Shares or Preferred Shares, as applicable, in accordance
with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Common Shares or Preferred
Shares, as applicable, and there shall be no further registration of
transfers on the records of the Surviving Corporation of such Common Shares
or Preferred Shares, as applicable, which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article I.
SECTION 1.11 LOST, STOLEN OR DESTROYED CERTIFICATES. In
the event any Certificate shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate, upon the making of an affidavit of that fact by the holder
thereof, such shares of Parent Common Stock or Parent Preferred Stock as may
be required pursuant to Section 1.7; provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificate to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may
be made against Parent or the Exchange Agent with respect to the Certificate
alleged to have been lost, stolen or destroyed.
SECTION 1.12 TAXES. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
SECTION 1.13 TAKING OF NECESSARY ACTION; FURTHER ACTION.
Each of Parent, Merger Sub and the Company will take all such reasonable and
lawful action as may be necessary or appropriate in order to effectuate the
Merger in accordance with this Agreement as promptly as possible. If, at any
time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Company and Merger Sub immediately
prior to the Effective Time are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful
and necessary action.
SECTION 1.14 MATERIAL ADVERSE EFFECT. When used in
connection with the Company or any of its subsidiaries or Parent or any of
its subsidiaries, as the case may be, the term "MATERIAL ADVERSE EFFECT"
means any change, effect or circumstance that, individually or when taken
together with all other such changes, effects or circumstances that have
occurred prior to the date of determination of the occurrence of the Material
Adverse Effect, is or is reasonably likely to be materially adverse to the
business, operations, assets (including
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intangible assets), condition (financial or otherwise), liabilities or
results of operations of the Company and its subsidiaries or Parent and its
subsidiaries, as the case may be, in each case taken as a whole.
SECTION 1.15 INVESTMENT INTENT. The Company Shareholders
represents to Parent and its officers and directors that the Parent Common
Stock and Parent Preferred Stock, as applicable, that may be issued to such
Company Shareholders pursuant to Section 1.6, at the time of issuance, will
be acquired by such Company Shareholders for investment purposes only without
the intent to resell such Parent Common Stock and Parent Preferred Stock, as
applicable, and will not be transferred except pursuant to registration under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), and the
applicable state securities laws unless pursuant to exemption from
registration under such acts. Each of the Company Shareholders hereby
acknowledges that the Parent Common Stock or Parent Preferred Stock, as
applicable, that may be issued to such Company Shareholder pursuant to
Section 1.6 will be issued pursuant to exemption from registration under the
Securities Act and the applicable state securities laws and the certificates
evidencing the such Parent Common Stock or Parent Preferred Stock, as
applicable, will bear appropriate restrictive transfer legends as required
pursuant to the Securities Act and the applicable state securities laws.
SECTION 1.16 COMPANY SHAREHOLDERS APPROVAL. Each of the
Company Shareholders hereby covenants and agrees that he has read and has
been fully advised by legal counsel as to the meaning and effect of this
Agreement and the transactions to be effected by this Agreement, and that he
hereby approves this Agreement and the transactions contemplated in this
Agreement. By execution of this Agreement, (i) each of the Company
Shareholders hereby votes all of the issued and outstanding shares of the
Company Common Stock in favor of approval of this Agreement and the
transactions contemplated in this Agreement and (ii) each of the Company
Shareholders hereby consents to all corporate action required to consummate
the transactions contemplated in this Agreement without the necessity for a
meeting of the shareholders of the Company, to the extent and in the event
shareholder approval shall be required for approval of this Agreement and the
transactions contemplated in and to be effect by this Agreement.
SECTION 1.17 STOCK OPTION AMENDMENTS. Parent shall obtain
and deliver to the Company amendments or statements of clarification to each
agreement governing the Stock Options which state that for purposes of
determining the gross revenues of Parent and accordingly the vesting and
exercisability of the Stock Options shall be limited to the revenues of
either (i) Parent without consolidation with the revenues of the Company or
anyone of its subsidiaries or divisions or (ii) any subsidiaries or divisions
of Parent through which the smart card operations of Parent as currently
constituted and conducted are subsequently constituted and conducted as a
result of any corporate restructuring of Parent and its subsidiaries.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Company Shareholders hereby represent
and warrant to Parent and Merger Sub that, except as set forth in the written
disclosure schedule delivered by the Company to Parent (the "COMPANY
DISCLOSURE SCHEDULE"):
SECTION 2.1 CORPORATE ORGANIZATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and has all requisite corporate power and
authority to own, operate and lease its properties and assets as and where
the same are owned, operated or leased and to conduct its business as it is
now being conducted. The Company is in good standing and duly qualified or
licensed as a foreign corporation to do business in those juris dictions
listed in Section 2.1 of the Company Disclosure Schedule, such jurisdictions
being the only jurisdictions in which the location of
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the property and assets owned, operated or leased by the Company or the
nature of the business conducted by the Company makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
could not reasonably be expected to have a Material Adverse Effect. The
Company has heretofore delivered to the Parent complete and correct copies of
the Company's Certificate of Incorporation and Bylaws, as amended to and as
in effect on the date hereof.
SECTION 2.2 CAPITALIZATION. (a) The authorized capital
stock of the Company consists of 50,000 shares of Company Common Stock, par
value $1.00 per share. As of the date hereof, 500 shares of Company Common
Stock are issued and outstanding.
(b) All outstanding shares of Company Common Stock are
validly issued and outstanding, fully paid and non-assessable, and there are
no preemptive or similar rights in respect of the Company Common Stock. All
outstanding shares of Company Common Stock were issued in compliance with all
requirements of all applicable federal and state securities laws.
SECTION 2.3 SUBSIDIARIES. There are no entities of which
the Company owns 10% or more of the outstanding voting securities or other
equity interests, directly or indirectly through one or more intermediaries,
by the Company.
SECTION 2.4 NO COMMITMENTS TO ISSUE CAPITAL STOCK. There
are no outstanding options, warrants, calls, convertible securities or other
rights, agreements, commitments or other instru ments pursuant to which the
Company is or may become obligated to authorize, issue or transfer any shares
of its capital stock or any other equity interest. There are no agreements or
understandings in effect among any of the stockholders of the Company or with
any other Person and by which the Company is bound with respect to the
voting, transfer, disposition or registration under the Securities Act of any
shares of capital stock of the Company.
SECTION 2.5 AUTHORIZATION; EXECUTION AND DELIVERY. The
Company has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by
all requisite corporate action on the part of the Company, including
unanimous approval of this Agreement by the Company Shareholders as evidenced
by their execution of this Agreement. This Agreement has been duly executed
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
SECTION 2.6 GOVERNMENTAL APPROVALS AND FILINGS. No
approval, authorization, consent, license, clearance or order of, declaration
or notification to, or filing or registration with, any governmental or
regulatory authority is required in order (a) to permit the Company to
consummate the Merger or perform its obligations under this Agreement or (b)
to prevent the termination of, or materially and adversely affect, any
governmental right, privilege, authority, franchise, license, permit or
certificate of the Company or any of its Subsidiaries (collectively
"GOVERNMENTAL LICENSES") to enable the Company and its Subsidiaries to own,
operate and lease their properties and assets as and where such properties
and assets are owned, leased or operated and to provide service and carry on
their business as presently provided and conducted, or to prevent any
material loss or disadvantage to the Company's business, by reason of the
Merger, except for (i) filing and recording of the Certificate of Merger as
required by the OGCA and an Agreement of Merger as required by the OGCA, and
(ii) as set forth in Section 2.6 of the Company Disclosure Schedule.
SECTION 2.7 NO CONFLICT. Subject to compliance with the
Governmental Licenses described in Section 2.6 of the Company Disclosure
Schedule and obtaining the other consents and waivers that are set
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forth and described in Section 2.7 of the Company Disclosure Schedule (the
"PRIVATE CONSENTS"), neither the execution, delivery and performance of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, will (i) conflict with, or result in a
breach or violation of, any provision of the Certificate of Incorporation (or
similar organizational document) or bylaws of the Company; (ii) conflict
with, result in a breach or violation of, give rise to a default, or result
in the acceleration of performance, or permit the acceleration of
performance, under (whether or not after the giving of notice or lapse of
time or both) any Encumbrance, note, bond, indenture, guaranty, lease,
license, agreement or other instrument, writ, injunction, order, judgment or
decree to which the Company or any of its Subsidiaries or any of their
respective properties or assets is a party or is subject; (iii) give rise to
a declaration or imposition of any Encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries; or (iv) impair the
Company's business or adversely affect any Governmental License necessary to
enable the Company to carry on its business as presently conducted, except,
in the case of clauses (ii), (iii) or (iv), for any conflict, breach,
violation, default, declaration, imposition or impairment that could not
reasonably be expected to have a Material Adverse Effect.
SECTION 2.8 SEC FILINGS. The Company does not have a class or
securities registered under the Securities Act of 1934, as amended, and does not
have any obligation to file forms, reports or other documents with the United
States Securities and Exchange Commission under such Act.
SECTION 2.9 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED
LIABILITIES; RECEIVABLES. (a) The Company has heretofore delivered to Parent
complete and correct copies of the following financial statements (the "COMPANY
FINANCIAL STATEMENTS"), all of which have been prepared from the books and
records of the Company in accordance with generally accepted accounting
principles ("GAAP") consis tently applied and maintained throughout the periods
indicated (except as may be indicated in the notes thereto) and fairly present
in all material respects the financial condition of the Company as at their
respec tive dates and the results of the Company's operations and cash flows for
the periods covered thereby:
(i) unaudited balance sheet (the "COMPANY
BALANCE SHEET") of the Company as of December 31, 1999 (the
"COMPANY BALANCE SHEET DATE") and statement of income for
the year then ended.
Such statement of income does not contain any items of special or nonrecurring
revenue or income or any revenue or income not earned in the ordinary course of
business, except as expressly specified therein.
(b) Except as and to the extent reflected or reserved
against on the Company Balance Sheet, the Company did not have, as of the
Company Balance Sheet Date, any liabilities, debts or obligations (whether
absolute, accrued, contingent or otherwise) of any nature that would be
required as of such date to have been included on a balance sheet prepared in
accordance with GAAP. Since the Company Balance Sheet Date, the Company had
not incurred or suffered to exist any liability, debt or obligation (whether
absolute, accrued, contingent or otherwise), except liabilities, debt and
obligations incurred in the ordinary course of business, consistent with past
practice, none of which will have a Material Adverse Effect. Since the Company
Balance Sheet Date, there has been no material adverse change in the business,
operations, assets (including intangible assets), condition (financial or
otherwise), liabilities or results of operations of the Company, taken as a
whole, and no event has occurred which is reasonably likely to cause any such
material adverse change.
(c) All receivables of the Company (including accounts
receivable, loans receivable and advances) which are reflected in the Company
Balance Sheet, and all such receivables which have arisen thereafter and prior
to the Effective Time, have arisen or will have arisen only from BONA FIDE trans
actions in the ordinary course of business and shall be fully collectible at the
aggregate recorded amounts thereof (except
-9-
to the extent of appropriate reserves therefor established in accordance with
prior practice and GAAP) and are not and will not be subject to defense,
counterclaim or offset.
SECTION 2.10 CERTAIN OTHER FINANCIAL REPRESENTATIONS. Since
the Company Balance Sheet Date, the Company's accounts payable have been accrued
and paid in a manner consistent with the Company's prior practice.
SECTION 2.11 ABSENCE OF CHANGES. Except as disclosed in the
Company Financial Statements or as set forth in Section 2.11 of the Company
Disclosure Schedule, since December 31, 1999, the Company has conducted its
business only in the ordinary course and the Company has not:
(a) amended or otherwise modified its Certificate of
Incorporation or Bylaws (or similar organizational document);
(b) issued or sold or authorized for issuance or sale, or
granted any options or warrants or amended or modified in any respect of any
previously granted option or warrant or made other agreements (other than this
Agreement) of the type referred to in Section 2.4 with respect to, any shares of
its capital stock or any other of its securities, or altered any term of any of
its outstanding securities or made any change in its outstanding shares of
capital stock or other ownership interests or its capitalization, whether by
reason of a reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, stock dividend or otherwise or redeemed,
purchased or otherwise acquired any of its or its parent's capital stock or
agreed to do any of the foregoing (whether or not legally enforceable);
(c) recorded or accrued any item of revenue, except as a
result of the provision of services in the ordinary course of business and
consistent with prior practice;
(d) incurred any indebtedness for borrowed money, entered
into any lease that should be capitalized in accordance with GAAP or subjected
to any Encumbrance or other restriction any of its properties, business or
assets except Encumbrances or other restrictions that could not reasonably be
expected to have a Material Adverse Effect;
(e) discharged or satisfied any Encumbrance, or paid any
obligation or liability, absolute, accrued, contingent or otherwise, whether due
or to become due, other than current liabilities shown on the Company's
consolidated balance sheet as of December 31, 1999 and current liabilities
incurred since that date in the ordinary course of business and consistent with
prior practice;
(f) sold, transferred, leased to others or otherwise
disposed of any material properties or assets or purchased, leased from others
or otherwise acquired any material properties or assets except in the ordinary
course of business;
(g) canceled or compromised any debt or claim or waived
or released any right of substantial value;
(h) terminated or received any notice of termination of
any contract, lease, license or other agreement or any Governmental License, or
suffered any damage, destruction or loss (whether or not covered by insurance)
that could reasonably be expected to have a Material Adverse Effect;
(i) made any change in the rate of compensation,
commission, bonus or other remuneration payable, or paid, agreed, or promised
(in writing or otherwise) to pay, provide or modify,
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conditionally or otherwise, any bonus, extra compensation, pension, severance
or vacation pay or any other benefit or perquisite of any other kind, to any
director, officer, employee, salesman or agent of the Company or any of its
Subsidiaries except in the ordinary course of business consistent with prior
practice and pursuant to or in accordance with plans disclosed in Section
2.14(a) of the Company Disclosure Schedule that were in effect as of December
31, 1999;
(j) made any increase in or commitment (whether or not
legally enforceable) to increase or communicated any intention to increase any
employee benefits, adopted or made any commitment to adopt any additional
employee benefit plan or made any contribution, other than regularly scheduled
contributions, to any Employee Benefit Plan (as defined in Section 2.14(a));
(k) lost the employment services of a senior manager or
other employee of equal or higher ranking;
(l) made any loan or advance to any Person other than
travel and other similar routine advances in the ordinary course of business
consistent with past practice, or acquired any capital stock or other securities
of any other corporation or any ownership interest in any other business
enterprise;
(m) instituted, settled or agreed to settle any material
litigation, action or proceeding before any court or governmental body relating
to the Company or its properties or assets;
(n) entered into any transaction, contract or commitment
other than in the ordinary course of business;
(o) changed any accounting practices, policies or
procedures utilized in the preparation of the Company Financial Statements
(including procedures with respect to revenue recognition, payment of accounts
payable or collection of accounts receivable); or
(p) entered into any agreement or made any commitment to
take any of the types of action described in subparagraphs (a) through (o) of
this Section 2.11.
SECTION 2.12 TAX MATTERS. (a) For purposes of this Agreement,
"TAX" or "TAXES" shall mean taxes, fees, levies, duties, tariffs, imposts and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local or foreign taxing authority,
including (without limitation) (i) income, franchise, profits, gross receipts,
AD VALOREM, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, and (ii) interest, penalties, additional
taxes and additions to tax imposed with respect thereto; and "TAX RETURNS" shall
mean returns, reports, and information statements with respect to Taxes required
to be filed with the Internal Revenue Service (the "IRS") or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns, including returns required in connection
with any Employee Benefit Plan (as defined in Section 2.14(a)).
(b) The Company represents that, other than as disclosed
in Section 2.12(b) of the Company Disclosure Schedule, the Company has timely
filed all United States federal income Tax Returns and all other material Tax
Returns required to be filed by it. All such Tax Returns are complete and
correct in all material respects (except to the extent a reserve has been
established as reflected in the Company Balance Sheet). The Company has timely
paid and discharged all Taxes due in connection with or with respect to the
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periods or transactions covered by such Tax Returns and have paid all other
Taxes as are due, except such as are being contested in good faith by
appropriate proceedings (to the extent that any such proceedings are required),
and there are no other Taxes that would be due if asserted by a taxing
authority, except with respect to which the Company is maintaining reserves
unless the failure to do so could not have a Material Adverse Effect. Except as
does not involve or would not result in liability to the Company that could have
a Material Adverse Effect, (i) there are no tax liens on any assets of the
Company; (ii) the Company has not granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax; (iii) no unpaid (or unreserved) deficiencies for Taxes have been
claimed, proposed or assessed by any taxing or other governmental authority with
respect to the Company; (iv) there are no pending or threatened audits,
investigations or claims for or relating to any liability in respect of Taxes of
the Company; and (v) the Company has not requested any extension of time within
which to file any currently unfiled Tax Returns. The accruals and reserves for
Taxes (including deferred taxes) reflected in the Company Balance Sheet are in
all material respects adequate to cover all Taxes accruable through the date
thereof (including Taxes being contested) in accordance with GAAP.
(c) The Company represents that, other than as disclosed
in Section 2.12(c) of the Company Disclosure Schedule and other than with
respect to items the inaccuracy of which could not have a Material Adverse
Effect: (i) the Company has not filed or been included in a combined,
consolidated or unitary return (or substantial equivalent thereof) of any Person
other than the Company; (ii) the Company is not liable for Taxes of any Person
other than the Company, or currently under any contractual obligation to
indemnify any Person with respect to Taxes, or a party to any tax sharing
agreement or any other agreement providing for payments by the Company with
respect to Taxes; (iii) the Company is not a party to any joint venture,
partnership or other arrangement or contract which could be treated as a
partnership for United States federal income tax purposes; (iv) the Company is
not a party to any agreement, contract, arrangement or plan that would result
(taking into account the transactions contemplated by this Agreement),
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code; (v) the Company is not
a "consenting corporation" under Section 341(f) of the Code or any corresponding
provision of state, local or foreign law; and (vi) the Company has not made an
election or is required to treat any of its assets as owned by another Person
for federal income tax purposes or as tax-exempt bond financed property or
tax-exempt use property within the meaning of Section 168 of the Code (or any
corresponding provision of state, local or foreign law).
SECTION 2.13 RELATIONS WITH EMPLOYEES. (a) Except as set forth
in Section 2.13(a) of the Company Disclosure Schedule:
(i) The Company has satisfactory relationships
with their employees.
(ii) The Company is and has been in compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, including any law, rule or
regulation relating to discrimination, fair labor standards and occupational
health and safety, wrongful discharge or violation of the personal rights of
employees, former employees or prospective employees, and the Company is not
or has not engaged in any unfair labor practices, except to the extent a
failure to so comply could not, alone or together with any other failure,
have a Material Adverse Effect.
(iii) No collective bargaining
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agreement with respect to the business of the Company is currently in effect
or being negotiated. The Company does not have any obligation to negotiate
any such collective bargaining agreement. There are no labor unions
representing, purporting to represent or attempting to represent any employee
of the Company.
(iv) There are no strikes, slowdowns or work
stoppages pending or, to the best of the knowledge of the Company and each of
the Company Shareholders, threatened with respect to the employees of the
Company, nor has any such strike, slowdown or work stoppage occurred or, to the
best of the knowledge of the Company and each of the Company Shareholders, been
threatened. There is no representation claim or petition or complaint pending
before the National Labor Relations Board or any state or local labor agency
and, to the best of the knowledge of the Company and each of the Company
Shareholders, no question concerning representation has been raised or
threatened respecting the employees of the Company.
(v) To the best of the knowledge of the Company
and each of the Company Shareholders, no charges with respect to or relating to
the business of the Company are pending before the Equal Employment Opportunity
Commission, or any state or local agency responsible for the prevention of
unlawful employment practices, which could reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth in Section 2.13(b) of the Company
Disclosure Schedule, the Company is not a contractor or subcontractor with
obligations under any federal, state or local government contract.
(c) Except as set forth in Section 2.13(c) of the Company
Disclosure Schedule, the Company has nor or could not have any material
liability, whether absolute or contingent, including any obligations under any
of the Employee Benefit Plans described in Section 2.14, with respect to any
misclassification of a person as an independent contractor rather than as an
employee.
(d) Section 2.13(d) of the Company Disclosure Schedule
contains a complete and correct list of all employment, management or other
consulting agreements with any Persons employed or retained by the Company
(including independent consultants), complete and correct copies of which have
been delivered to Parent.
SECTION 2.14 BENEFIT PLANS. (a) Section 2.14(a) of the Company
Disclosure Schedule sets forth each employee benefit plan, policy, program,
practice, agreement, understanding, arrangement or commitment (whether written
or underwritten) providing compensation, benefits or perquisites of any kind,
including executive compensation, deferred compensation, stock ownership, stock
purchase, stock option, restricted stock, performance share, bonus and other
incentive plans, pension, profit sharing, sav ings, thrift or retirement plans,
employee stock ownership plans, life, health, dental and disability plans,
vacation, severance pay, sick leave or dependent care plans, any cafeteria or
tuition reimbursement plans and any "employee benefit plans" within the meaning
of Section g(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (whether or not subject to ERISA), all employment,
-13-
severance, golden parachute or similar agreements (individually, an "EMPLOYEE
BENEFIT PLAN" and collec tively, the "EMPLOYEE BENEFIT PLANS"), currently or
within the past six years maintained by, contributed by or with respect to which
an obligation to contribute exists on the part of the Company or any of its
trades or businesses, whether or not incorporated, which, together with the
Company, is treated as a single employer under Section 414 of the Code
(collectively, "ERISA AFFILIATES"), or with respect to which the Company or any
ERISA Affiliate may have any liability or obligation (direct, indirect,
contingent or otherwise) to any employee, former employee, director or former
director (or any of their dependents or beneficiaries) of the Company or any of
its Subsidiaries or to any governmental entity. There have been delivered to
Parent complete and correct copies of all written Employee Benefit Plans and any
related trust agreements, insurance and other contracts and other funding
arrangements, written descriptions of all unwritten Employee Benefit Plans, the
current summary plan descriptions and current summaries of material
modifications relating to each Employee Benefit Plan, the two most recent Forms
5500 required to have been filed with any appropriate government agency with
respect to each Employee Benefit Plan, the most recent favorable determination
letter issued for each Employee Benefit Plan and related trust that is intended
to satisfy the qualification requirements of sections 401(a) and 501(a) of the
Code (and the latest IRS form 5300 or 5307, whichever is applicable, filed with
the IRS for each such Employee Benefit Plan), and all collective bargaining
agreements pursuant to which an Employee Benefit Plan is maintained or
contributions to an Employee Benefit Plan are or have been made.
(b) No Employee Benefit Plan is, a "DEFINED BENEFIT PLAN"
within the meaning of section 3(35) of ERISA to which ERISA applies applicable
to or a plan to which the funding requirements of Section 412 of the Code or 302
of ERISA and neither the Company nor any ERISA Affiliate has or could have any
liability with respect to any such plan. Neither the Company nor any ERISA
Affiliate has ever contributed to, or withdrawn in a complete or partial
withdrawal from, any multi-employer plan (within the meaning of Subtitle E of
Title IV of ERISA) or incurred contingent liability under Section 4204 of ERISA.
No Employee Benefit Plan provides for medical or health benefits (through
insurance or otherwise) to individuals other than current employees of the
Company (or spouses and dependents of such employees), except to the extent
necessary to comply with "APPLICABLE BENEFITS LAW" (including, without
limitation, section 4980B of the Code), and there has been no communication to
any person that could reasonably be expected to promise or guarantee any
employee, former employee (or any spouse, dependent or domestic partner of any
employee or former employee) any retiree medical, life or other retiree
benefits. "Applicable Benefits Law" refers to the legal requirements (whether
imposed by common law, statue or regulation or otherwise) applicable to employee
benefit plans sponsors thereof or their affiliates, services providers thereto
or fiduciaries thereof or their affiliates or parties related thereto or their
affiliates by the United States or any political subdivision thereof (including
any requirements enforced by the IRS with respect to employee benefit plans
intended to confer tax benefits on the Company or any of its employees).
(c) Each Employee Benefit Plan (and each related trust,
insurance contract and fund) is in compliance in all material respects in form
and in operation with all applicable requirements of Applicable Benefits Law
(including ERISA and the Code), and is being administered in all material
respects in accordance with all relevant plan documents to the extent consistent
with Applicable Benefits Law. There has been no prohibited transaction with
respect to any Employee Benefit Plan which would result in the imposition of any
material unpaid excise tax. No Employee Benefit Plan is under investigation or
audit by the Department of Labor or Internal Revenue Service other than as part
of a routine tax audit of the Company. There are no legal actions or suits
pending or, to the best of the knowledge of the Company and each of the Company
Shareholders, threatened against or with respect to any Employee Benefit Plan or
the assets of any such Employee Benefit Plan or against any fiduciary of any
such Employee Benefit Plan and the Company has no knowledge of any facts that
could give rise to any such actions. There has been full compliance in all
material respects with the notice and continuation
-14-
requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA, and the requirement of Part 7 of Subtitle B of Title I of ERISA and
Section 9801, ET. seq. of the Code applicable to any Employee Benefit Plan. No
event has occurred or reasonably is expected to occur as a result of which the
Company or any ERISA Affiliate, directly or indirectly, could be subject to any
material Liability (including under any indemnity or hold harmless agreement)
under ERISA or the Code or any other Applicable Benefits Law, including, without
limitation, Section 4971, 4975 or 4976 of the Code or Sections 406, 409, 502(i)
and 502(l) of the Code.
(d) Except as provided in Section 2.14(d) of the Company
Disclosure Statement, no provision of any Employee Benefit Plan becomes
effective in the event of a change in control of the employer maintaining such
Employee Benefit Plan. The Company has not agreed to or has not announced any
plan or commitment (whether or not legally binding) to create any new employee
benefit plan or, with respect to any existing Employee Benefit Plan, to increase
the benefits or change in employee coverage in an amount that could increase the
expense of maintaining such Employee Benefit Plan or to terminate any Employee
Benefit Plan. No provision of any Employee Benefit Plan prohibits the employer
maintaining it from amending or terminating such Employee Benefit Plan at any
time and to the fullest extent that law permits. Except as provided in Section
2.14(d) of the Company Disclosure Schedule, the consummation of the Merger or
any other transaction contemplated by this Agreement, either alone or in
combination of any other event, will not (i) result in an increase in the amount
of compensation or benefits or accelerate the vesting or timing of payment of
any benefits or compensation payable under any Employ ee Benefit Plan in respect
of any employee or former employee of the Company, (ii) entitle any such current
or former employee to any benefits or payment, or (iii) result in any "Parachute
Payment" under Section 280G of the Code, whether or not such payment is
considered reasonable compensation for services rendered. No employee or former
employee of the Company will be entitled to any severance benefits under the
terms of any Employee Benefit Plan solely by reason of the consummation of the
Merger or any other transaction contemplated by this Agreement.
(e) No leased employee (within the meaning of section
414(n) or (o) of the Code) performs any services for the Company.
(f) An Employee Benefit Plan does not own or is not
entitled to receive any of the capital stock of the Company.
(g) Except as set forth in Section 2.14(g) of the
Company Disclosure Schedule, there are no material liabilities, whether absolute
or contingent, of the Company relating to workers compensation benefits that are
not fully insured against by a BONA FIDE third-party insurance carrier. Except
as set forth in Section 2.14(g) of the Company Disclosure Schedule, with
respect to each workers' compensation arrangement that is funded wholly or
partially through an insurance policy or public or private fund, all premiums
required to have been paid to date under the insurance policy or fund have been
paid, all premiums required to be paid under the insurance policy or fund
through the Closing Date will have been paid on or before the Closing Date and,
as of the Closing Date, there will be no material liability of the Company under
any such insurance policy, fund or ancillary agreement with respect to such
insurance policy or fund in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Closing Date.
SECTION 2.15 TITLE TO PROPERTIES. Except as set forth in
Section 2.15 of the Company Disclosure Schedule, the Company has good and
indefeasible title to all of its properties and assets, free and clear of all
Encumbrances, except liens for taxes not yet due and payable and such
Encumbrances or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the
-15-
present use of the property affected thereby or which could not reasonably be
expected to have a Material Adverse Effect, and except for Encumbrances which
secure indebtedness reflected in the Company Balance Sheet.
SECTION 2.16 COMPLIANCE WITH LAWS; LEGAL PROCEEDINGS. (a) The
Company is not in violation of, or in default with respect to, any applicable
law, statute, regulation, ordinance, writ, injunction, order, judgment, decree
or any Governmental License, including any federal state or local law regarding
or relating to trespass or violations of privacy rights, which violation or
default could reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in Section 2.16(b) of the Company
Disclosure Schedule, there is no order, writ, injunction, judgment or decree
outstanding and no legal, administrative, arbitration or other governmental
proceeding or investigation pending or, to the best of the knowledge of the
Company and each of the Company Shareholders, threatened, and there are no
claims (including unasserted claims of which the Company is aware) against or
relating to the Company or any of its properties, assets or busi nesses. There
is no legal, administrative or other governmental proceeding or investigation
pending or, to the best of the knowledge of the Company and each of the Company
Shareholders, threatened against the Company, or any of its directors or
officers, as such, that relates to this Agreement, the Merger or any of the
transactions contemplated hereby. None of the items listed in Section 2.16(b) of
the Company Disclosure Schedule could reasonably be expected to have a Material
Adverse Effect. The Company has not been a defendant (either originally, by
counter-claim or impleading) in any legal proceedings which have either been
filed in the past two (2) fiscal years or are currently pending (all as set
forth in Section 2.16(b) of the Company Disclosure Schedule). Except as set
forth in Section 2.16(b) of the Company Disclosure Schedule, none of the legal
proceedings set forth in Section 2.16(b) of the Company Disclosure Schedule has
had or, to the best of the knowledge of the Company and each of the Company
Shareholders, will have a Material Adverse Effect.
SECTION 2.17 BROKERS. No broker, finder or investment advisor
acted, directly or indi rectly, as such for the Company or any shareholder of
the Company in connection with this Agreement or the Merger, and no broker,
finder, investment advisor or other Person is entitled to any fee or other
commission, or other remuneration, in respect thereof based in any way on any
action, agreement, arrange ment or understanding taken or made by or on behalf
of the Company or any shareholder of the Company.
SECTION 2.18 INTELLECTUAL PROPERTY. (a) The Company owns, or
is licensed or otherwise possesses legally enforceable rights to use, all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or material
that are used in the business of the Company as currently conducted, except as
would not reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.18(b) of the Company
Disclosure Schedule or as could not reasonably be expected to have a Material
Adverse Effect: (i) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other agreements as to
which the Company is a party and pursuant to which the Company is authorized to
use any patents, trademarks, service marks or copyrights owned by others
("COMPANY THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS"); (ii) No claims with
respect to the patents, registered and material unregistered trademarks and
service marks, registered copyrights, trade names and any applications therefor
owned by the Company (the "COMPANY INTELLECTUAL PROPERTY RIGHTS"), any trade
secret material to the Company, or Company Third Party Intellectual Property
Rights to the extent arising out of any use, reproduction or distribution of
Company Third Party
-16-
Intellectual Property Rights by or through the Company, are currently pending
or, to the best of the knowledge of the Company and each of the Company
Shareholders, have been threatened by any Person; or (iii) The Company does
not know of any valid grounds for any BONA FIDE claims (1) to the effect that
the sale, licensing or use of any product or service as now sold, licensed or
used, or proposed for sale, license or use by the Company infringes on any
copyright, patent, trademark, service xxxx or trade secret; (2) against the
use by the Company of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in the business of the Company as currently conducted or as proposed to
be conducted; (3) challenging the ownership, validity or effectiveness of any
of the Company Intellectual Property Rights or other trade secret material to
the Company; or (4) challenging the license or legally enforceable right to
use of Company Third Party Intellectual Rights by the Company.
(c) To the best of the knowledge of the Company and each
of the Company Shareholders, there is no material unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property
Rights by any third party, including any employee or former employee of the
Company.
SECTION 2.19 INSURANCE. Except as set forth in Section 2.19
of the Company Disclosure Schedule, all material fire and casualty, general
liability, business interruption, product liability and other insurance
policies maintained by the Company are with reputable insurers, provide
adequate coverage for all normal risks incident to the Company's assets,
properties and business operations and are in character and amount at least
equivalent to that carried by Persons engaged in a business subject to the
same or similar perils or hazards.
SECTION 2.20 CONTRACTS; ETC. (a) Set forth on Section 2.20
of the Company Disclosure Schedule is a complete and correct list of each of
the following agreements, leases and other instruments, both oral and
written, to which the Company is a party or by which Company or its
properties or assets are bound:
(i) each service or other similar type of agreement under
which services are provided by any other Person to the Company which is
material to the business of the Company taken as a whole;
(ii) each agreement that restricts the operation of the
business of the Company or the ability of the Company to solicit
customers or employees;
(iii) each operating lease (as lessor, lessee, sublessor or
sublessee) that is material to the Company taken as a whole of any real
or tangible personal property or assets;
(iv) each agreement under which services are provided by
the Company to any material customer;
(v) each agreement (including capital leases) under which
any money has been or may be borrowed or loaned or any note, bond,
indenture or other evidence of indebtedness has been issued or assumed
(other than those under which there remain no ongoing obligations of
the Company), and each guaranty of any evidence of indebtedness or
other obligation, or of the net worth, of any Person (other than
endorsements for the purpose of collection in the ordinary course of
business);
-17-
(vi) each partnership, joint venture or similar agreement;
(vii) each agreement containing restrictions with respect
to the payment of dividends or other distributions in respect of the
Company's capital stock;
(viii) each agreement to make unpaid capital expenditures in
excess of $25,000;
(ix) each agreement providing for accelerated or special
payments as a result of the Merger, including any shareholder rights
plan or other instrument commonly referred as a "poison pill."
A complete and correct copy of each written agreement, lease or other type of
document, and a true, complete and correct summary of each oral agreement,
lease or other type of document, required to be disclosed pursuant to this
Section 2.20(a) has been previously delivered to Parent.
(b) Each agreement, lease or other type of document
required to be disclosed pursuant to Sections 2.13, 2.14 or 2.20(a) to which
the Company is a party or by which the Company or its properties or assets
are bound (collectively, the "COMPANY CONTRACTS"), except those Company
Contracts the loss of which could reasonably be expected to not have a
Material Adverse Effect, is valid, binding and in full force and effect and
is enforceable by the Company in accordance with its terms. The Company is
not (with or without the lapse of time or the giving of notice, or both) in
breach of or in default under any of the Company Contracts, and, to the best
of the knowledge of the Company and each of the Company Shareholders, no
other party to any of the Company Contracts is (with or without the lapse of
time or the giving of notice, or both) in breach of or in default under any
of the Company Contracts, where such breach or default could reasonably be
expected to have a Material Adverse Effect. No existing or completed
agreement to which the Company is a party is subject to renegotiation with
any governmental body.
SECTION 2.21 PERMITS, AUTHORIZATIONS, ETC. Section 2.21 of
the Company Disclosure Schedule sets forth all Governmental Licenses and each
other material approval, authorization, consent, license, certificate, order
or other permit of any governmental agencies, whether federal, state, local
or foreign, necessary to enable the Company to own, operate and lease its
properties and assets as and where such properties and assets are owned,
leased or operated and to provide service and carry on its business as
presently provided and conducted (collectively, the "COMPANY PERMITS") or
required to permit the continued conduct of such business following the
Merger in the manner conducted on the date of this Agreement (indicating in
each case whether or not the consent of any Person is required for the
consummation of the transactions contemplated hereby). The Company has all
necessary Company Permits of all governmental agencies, whether federal,
state, local or foreign, all of which are valid and in good standing with the
issuing agencies and not subject to any proceedings for suspension,
modification or revocation, except for such Company Permits which could not
reasonably be expected to have a Material Adverse Effect.
SECTION 2.22 ENVIRONMENTAL MATTERS. (a) For purposes of
this Agreement, the capitalized terms defined below shall have the meanings
ascribed to them below.
(i) "ENVIRONMENTAL CLAIM" means any accusation,
allegation, notice of violation, action, claim, lien, demand, abatement
or other order or direction (conditional or otherwise) by any
governmental agency or entity or any other Person for personal injury
(including sickness, disease or death), tangible or intangible property
damage, damage to the environment, nuisance,
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pollution, contamination or other adverse effects an the environment,
or for fines, penalties or restrictions resulting from or based upon
(a) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden accidental or
non-accidental Releases) of, or exposure to, any Hazardous Substance,
odor or audible noise in, into or onto the environment (including,
without limitation, the air, soil, surface water or groundwater) at,
in, by, from or related to any property owned, operated or leased by
the Company or any activities or operations thereof; (b) the
transportation, storage, treatment or disposal of Hazardous Substances
in connection with any property owned, operated or leased by the
Company or its operations or facilities; or (c) the violation, or
alleged violation, of any Environmental Law or Environmental Permit of
or from any governmental agency or entity relating to environmental
matters connected with any property owned, leased or operated by the
Company.
(ii) "ENVIRONMENTAL LAW(S)" means all federal, state or
local law (including common law), statute, ordinance, rule, regulation,
code, or other requirement relating to the environment, natural
resources, or public or employee health and safety and includes, but is
not limited to the Comprehensive Environmental Response Compensation
and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 ET SEQ.,
The Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section
6901 ET SEQ., the Clean Water Act, 33 U.S.C. Section Section 1251 ET
SEQ., the Clean Air Act, 33 U.S.C. Section 2601 ET SEQ., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 ET SEQ., the Oil
Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ., and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 ET SEQ., as
such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes
and any applicable transfer statutes.
(iii) "ENVIRONMENTAL PERMITS" means all approvals,
authorizations, consents, permits, licenses, registrations and
certificates required by any applicable Environmental Law.
(iv) "HAZARDOUS SUBSTANCE(S)" means, without limitation,
any flammable explosives, radioactive materials, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products
(including but not limited to waste petroleum and petroleum products),
methane, hazardous materials, hazardous wastes, pollutants,
contaminants and hazardous or toxic substances, as defined in or
regulated under any applicable Environmental Laws.
(v) "RELEASE" means any past or present spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of a Hazardous Substance into
the Environment.
(b) The Company has obtained all Environmental Permits
required for its businesses and facilities except for such Environmental Permits
the failure of which to obtain could not reasonably be expected to have a
Material Adverse Effect. The Company (i) is in compliance with all terms and
conditions of their Environmental Permits and of any applicable Environmental
Law, except for such failure to be in compliance that could not reasonably be
expected to have Material Adverse Effect; (ii) has not received notice of any
violation by or claim against the Company under any Environmental Law; and (iii)
is not aware of any facts or circumstances related to their businesses and
facilities likely to give rise to an Environmental Claim that could reasonably
be expected to have a Material Adverse Effect.
(c) There have been no Releases, or threatened Releases
of any Hazardous Substances into, on or under any of the properties owned or
operated (or formerly owned or operated) by the Company in any case in such a
way as to create any liability (including the costs of investigation and
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remediation) under any applicable Environmental Law that could reasonably be
expected to have a Material Adverse Effect.
(d) The Company has not been identified as a potentially
responsible party at any federal or state National Priority List ("SUPERFUND")
site, and the Company has not transported, disposed of, or arranged for the
disposal of any Hazardous Substances.
SECTION 2.23 COMPANY ACQUISITIONS. Section 2.23 of the
Company Disclosure Schedule hereto contains a complete and correct list of
all agreements ("COMPANY ACQUISITION AGREEMENTS") executed by the Company
pursuant to which the Company has acquired or agreed to acquire all or any
part of the stock or assets (including any customer list) of any Person. A
complete and correct copy of each of the Company Acquisition Agreements has
been delivered to Parent. The Company does not have any further obligation or
liability under any of the Company Acquisition Agreements or as a result of
the transactions provided for therein, except as described in reasonable
detail in Section 2.23 of the Company Disclosure Schedule.
SECTION 2.24 BOOKS AND RECORDS. All accounts, books,
ledgers and official and other records prepared and kept by the Company have
been kept and completed in all material respects, and there are no material
inaccuracies or discrepancies contained or reflected therein. Such records of
the Company are located at the Company's offices in Norman, Oklahoma.
SECTION 2.25 INTERESTED PARTY TRANSACTIONS. Except as set
forth in Section 2.25 of the Company Disclosure Schedule, since January 1,
1998, no event has occurred that would be required to be reported as a
Certain Relationship or Related Transaction, pursuant to Item 404 of
Regulation S-B promulgated by the United States Securities and Exchange
Commission.
SECTION 2.26 OPINION OF FINANCIAL ADVISOR. The Company has
not been advised by a financial advisor regarding, as of the date hereof, the
fairness of the Exchange Ratio from a financial point of view of the Company
Shareholders.
SECTION 2.27 PROXY OR INFORMATION STATEMENT. The
information supplied by the Company with respect to the Company and its
officers, directors, stockholders and other Affiliates (collectively, the
"COMPANY INFORMATION") for inclusion in the Proxy or Information Statement
(as defined in Section 5.1) to be sent to the stockholders of Parent in
connection with the meeting of the stockholders of Parent to consider the
Merger (the "PARENT SHAREHOLDERS MEETING") will not, on the date the Proxy
Information Statement (or any amendment thereof or supplement thereto) is
first mailed to Parent's shareholders or at the time of the Parent
Shareholders Meeting, contain any statement which, at such time and in light
of the circumstances under which it shall be made, is false or misleading. If
at any time prior to the Effective Time any event relating to the Company or
any of its officers, directors, shareholders or other Affiliates should be
discovered by the Company which should be set forth in an amendment to the
Proxy or Information Statement, the Company shall promptly inform Parent. The
Proxy or Information Statement shall comply in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"). Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent
or Merger Sub which is contained or incorporated by reference in, or
furnished in connection with the preparation of, the Proxy or Information
Statement.
SECTION 2.28 BANK ACCOUNTS AND POWERS OF ATTORNEY. Section
2.28 of the Company Disclosure Schedule sets forth the name of each bank in
which the Company have an account, lock box
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or safe deposit box, the number of each such account, lock box or safe
deposit box and the names of the Persons authorized to draw thereon or have
access thereto. Except as set forth on Section 2.28 of the Company Disclosure
Schedule, no Person holds any power of attorney from the Company.
SECTION 2.29 CERTAIN PAYMENTS. Neither the Company nor any
director, officer, agent, or employee thereof, or to the knowledge of the
Company and each of the Company Shareholders, any other Person associated
with or acting for or on behalf of the Company, has directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback or other payment to any Person, private or public, regardless of
form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for
business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any
affiliate of the Company, or (iv) in violation of any legal requirement, or
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
SECTION 2.30 CUSTOMERS; CUSTOMER RELATIONSHIPS. Section
2.30 of the Company Disclosure Schedule sets forth a complete list of the 10
largest clients and customers of the Company in each of the years ended
December 31, 1999 and 1998, including the amounts they paid to the Company in
such years. To the knowledge of the Company and each of the Company
Shareholders, there are no facts or circumstances that are likely to result
in the loss of any such client or customer of the Company or a material
change in the relationship of the Company with any such client or customer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, hereby
represent and warrant to the Company that, except as set forth in the written
disclosure schedule delivered by Parent to the Company (the "PARENT
DISCLOSURE SCHEDULE"):
SECTION 3.1 CORPORATE ORGANIZATION. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Oklahoma and has all requisite
corporate power and authority to own, operate and lease its properties and
assets as and where the same are owned, operated or leased and to conduct its
business as it is now being conducted. Each of Parent and Merger Sub is in
good standing and duly qualified or licensed as a foreign corporation to do
business in those jurisdictions in which the location of the property and
assets owned, operated or leased by Parent or Merger Sub or the nature of the
business conducted by Parent or Merger Sub makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
could not reasonably be expected to have a Material Adverse Effect. Parent
has heretofore delivered to the Company complete and correct copies of the
Certificate of Incorporation and Bylaws of Parent and Merger Sub, as amended
to and as in effect on the date hereof.
SECTION 3.2 CAPITALIZATION. (a) The authorized capital
stock of Parent consists of 8,000,000 shares of Parent Common Stock, par
value $0.01 per share and 2,000,000 shares of Parent Preferred Stock, par
value $1.00 per share. As of the date hereof, 2,350,000 shares of Parent
Common Stock and no shares of Parent Preferred Stock are issued and
outstanding.
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(b) All outstanding shares of Parent Common Stock are
validly issued and outstanding, fully paid and non-assessable and there are
no preemptive or similar rights in respect of Parent Common Stock. All
outstanding shares of Parent Common Stock were issued in compliance with all
requirements of all applicable federal and state securities laws.
(c) Section 3.2 of the Parent Disclosure Schedule sets
forth a complete and correct list of (i) all stock options, including stock
options granted under any Parent stock option plan, (ii) all warrants to
purchase Parent Common Stock indicating as to each holder thereof, and (iii)
and other rights to receive Parent Common Stock indicating as to each holder
thereof, the number of shares of Parent Common Stock subject thereto and the
exercisability, exercise price and termination date therefor, if applicable.
SECTION 3.3 SUBSIDIARIES. (a) Merger Sub is the only
subsidiary of Parent.
(b) Except as set forth in Section 3.3(b) of the Parent
Disclosure Schedule, Parent or Merger Sub has good and valid title to all
such shares free and clear of all Encumbrances. All of the out standing
shares of capital stock of Merger Sub are validly issued, fully paid and
non-assessable, and there are no preemptive or similar rights in respect of
any shares of capital stock of Merger Sub.
SECTION 3.4 NO COMMITMENTS TO ISSUE CAPITAL STOCK. Except
for the Stock Options and the Warrants and as set forth in Section 3.4 of the
Parent Disclosure Schedule, there are no outstanding options, warrants,
calls, convertible securities or other rights, agreements, commitments or
other instruments pursuant to which the Company or any of its Subsidiaries is
or may become obligated to authorize, issue or transfer any shares of its
capital stock or any other equity interest. Except as set forth in Section
3.4 of the Parent Disclosure Schedule, there are no agreements or
understandings in effect among any of the stockholders of the Company or any
such Subsidiary or with any other Person and by which the Company or any such
Subsidiary is bound with respect to the voting, transfer, disposition or
registration under the Securities Act of any shares of capital stock of the
Company or any of its Subsidiaries.
SECTION 3.5 AUTHORIZATION; EXECUTION AND DELIVERY. Parent
and Merger Sub each has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement by Parent and Merger
Sub and the consummation by Parent or Merger Sub of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action on the part of Parent and Merger Sub. This Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with its terms. The shares of Parent
Common Stock and Parent Preferred Stock to be issued as part of the Merger
Consideration have been duly reserved and authorized for issuance upon
consummation of the Merger and when issued pursuant to and in accordance with
this Agreement will be duly authorized, validly issued, fully paid and
non-assessable shares of Parent Common Stock and Parent Preferred Stock.
SECTION 3.6 GOVERNMENTAL APPROVALS AND FILINGS. No
approval, authorization, consent, license, clearance or order of, declaration
or notification to, or filing or registration with, any governmental or
regulatory authority is required in order (a) to permit Parent or Merger Sub
to consummate the Merger or perform its obligations under this Agreement or
(b) to prevent the termination of, or materially and adversely affect, any
Governmental License of Parent or any of its Subsidiaries to enable Parent
and its Subsidiaries to own, operate and lease their properties and assets as
and where such properties and assets are owned, leased or operated and to
provide its services or carry on its business,
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or to prevent any material loss or disadvantage to Parent's business, by
reason of the Merger, except for (i) filing and recording of the Certificate
of Merger as required by the OGCA and (ii) as set forth in Section 3.6 of
the Parent Disclosure Schedule.
SECTION 3.7 NO CONFLICT. Subject to compliance with any
Governmental Licenses described in Section 3.7 of the Parent Disclosure
Schedule and obtaining the Private Consents, neither the execution, delivery
and performance of this Agreement by Parent or Merger Sub, nor the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
will (i) conflict with, or result in a breach or violation of, any provision
of the Certificate of Incorporation (or similar organizational document) or
Bylaws of Parent or Merger Sub; (ii) conflict with, result in a breach or
violation of, give rise to a default, or result in the acceleration of
performance, or permit the acceleration or performance, under (whether or not
after the giving of notice or lapse of time or both) any Encumbrance, note,
bond, indenture, guaranty, lease, license, agreement or other instrument,
writ, injunction, order, judgment or decree to which Parent or Merger Sub or
any of their respective properties or assets is subject; (iii) give rise to a
declaration or imposition of any Encumbrance upon any of the properties or
assets of Parent or Merger Sub; or (iv) impair Parent's business or adversely
affect any Governmental License necessary to enable Parent and Merger Sub to
carry on their business as presently conducted, except, in the cases of
clauses (ii), (iii) or (iv), for any conflict, breach, violation, default,
declaration, imposition or impairment that could not reasonably be expected
to have a Material Adverse Effect.
SECTION 3.8 SEC FILINGS. The Parent Common Stock is the
only class or securities of Parent registered under the Exchange Act. Parent
has filed all forms, reports or other documents required to be filed with the
SEC (the "PARENT SEC REPORTS") since its initial public offering of the
Parent Common Stock on February 8, 2000. The Parent SEC Reports (i) were
prepared in accordance, and complied as of their respective dates in all
material respects, with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Parent has filed
with the SEC as exhibits to the Parent SEC Reports all agreements, contracts
and other documents or instruments required to be so filed, and such exhibits
are correct and complete copies of such agreements, contracts and other
documents or instruments. Merger Sub is not required to file any forms,
reports or other documents with the SEC under the Exchange Act.
SECTION 3.9 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED
LIABILITIES. (a) Parent has heretofore delivered to the Company complete and
correct copies of the following financial statements (collectively, the
"PARENT FINANCIAL STATEMENTS"), all of which have been prepared from the
books and records of Parent in accordance with GAAP consistently applied and
maintained throughout the periods indicated (except as may be indicated in
the notes thereto) and fairly present in all material respects the financial
condition of Parent as at their respective dates and the results of the
Parent's operations and cash flows for the periods covered thereby:
(i) unaudited balance sheet (the
"PARENT BALANCE SHEET") of Parent as of December 31, 1999 (the
"PARENT BALANCE SHEET DATE") and statement of income for the
year then ended.
Such statements of income do not contain any items of special or nonrecurring
revenue or income or any revenue or income not earned in the ordinary course
of business, except as expressly specified therein.
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(b) Except as and to the extent reflected or reserved
against on the Parent Balance Sheet, and except for liabilities which will
not have a Material Adverse Effect, Parent did not have, as of the Parent
Balance Sheet Date, any liabilities, debts or obligations (whether absolute,
accrued, contingent or otherwise) of any nature that would be required as of
such date to have been included on a balance sheet prepared in accordance
with GAAP. Since the Parent Balance Sheet Date, Parent has not incurred or
suffered to exist any liability, debt or obligation (whether absolute,
accrued, contingent or otherwise), except liabilities, debt and obligations
incurred in the ordinary course of business, consistent with past practice,
none of which will have a Material Adverse Effect or incurred in connection
with this Agreement and the transactions contemplated herein. Other than the
transactions contemplated by this Agreement, since the Parent Balance Sheet
Date, there has been no material adverse change in the business, operations,
assets (including intangible assets), condition (financial or otherwise),
liabilities or results of operations of Parent, taken as a whole, and no
event has occurred which is reasonably likely to cause any such material
adverse change.
SECTION 3.10 CERTAIN OTHER FINANCIAL REPRESENTATIONS. Since
the Parent Balance Sheet Date, the Parent's accounts payable have been
accrued and paid in a manner consistent with the Parent's prior practice.
SECTION 3.11 ABSENCE OF CHANGES. Except as disclosed in the
Parent Financial Statements or as set forth in Section 3.11 of the Parent
Disclosure Schedule, since December 31, 1999, Parent has conducted its
business only in the ordinary course and Parent has not:
(a) amended or otherwise modified its Certificate of
Incorporation or Bylaws (or similar organizational document);
(b) issued or sold or authorized for issuance or sale,
or granted any options or warrants or amended or modified in any respect of
any previously granted option or warrant or made other agreements (other than
this Agreement) of the type referred to in Section 3.4 with respect to, any
shares of its capital stock or any other of its securities, or altered any
term of any of its outstanding securities or made any change in its
outstanding shares of capital stock or other ownership interests or its
capitalization, whether by reason of a reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares, stock
dividend or otherwise or redeemed, purchased or otherwise acquired any of its
or its parent's capital stock or agreed to do any of the foregoing (whether
or not legally enforceable);
(c) recorded or accrued any item of revenue, except as a
result of the provision of services in the ordinary course of business and
consistent with prior practice;
(d) incurred any indebtedness for borrowed money,
entered into any lease that should be capitalized in accordance with GAAP or
subjected to any Encumbrance or other restriction any of its properties,
business or assets except Encumbrances or other restrictions that could not
reasonably be expected to have a Material Adverse Effect;
(e) discharged or satisfied any Encumbrance, or paid any
obligation or liability, absolute, accrued, contingent or otherwise, whether
due or to become due, other than current liabilities shown on Parent's
consolidated balance sheet as of December 31, 1999 and current liabilities
incurred since that date in the ordinary course of business and consistent
with prior practice;
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(f) sold, transferred, leased to others or otherwise
disposed of any material properties or assets or purchased, leased from
others or otherwise acquired any material properties or assets except in the
ordinary course of business;
(g) canceled or compromised any debt or claim or waived
or released any right of substantial value;
(h) terminated or received any notice of termination of
any contract, lease, license or other agreement or any Governmental License,
or suffered any damage, destruction or loss (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse
Effect;
(i) made any change in the rate of compensation,
commission, bonus or other remuneration payable, or paid, agreed, or promised
(in writing or otherwise) to pay, provide or modify, conditionally or
otherwise, any bonus, extra compensation, pension, severance or vacation pay
or any other benefit or perquisite of any other kind, to any director,
officer, employee, salesman or agent of the Company or any of its
Subsidiaries except in the ordinary course of business consistent with prior
practice and pursuant to or in accordance with plans disclosed in Section
3.11(a) of the Parent Disclosure Schedule that were in effect as of December
31, 1999;
(j) made any increase in or commitment (whether or not
legally enforceable) to increase or communicated any intention to increase
any employee benefits, adopted or made any commitment to adopt any additional
employee benefit plan or made any contribution, other than regularly
scheduled contributions, to any Employee Benefit Plan (as defined in Section
2.14(a));
(k) lost the employment services of a senior manager or
other employee of equal or higher ranking;
(l) made any loan or advance to any Person other than
travel and other similar routine advances in the ordinary course of business
consistent with past practice, or acquired any capital stock or other
securities of any other corporation or any ownership interest in any other
business enterprise;
(m) instituted, settled or agreed to settle any material
litigation, action or proceeding before any court or governmental body
relating to Parent or its properties or assets;
(n) entered into any transaction, contract or commitment
other than in the ordinary course of business;
(o) changed any accounting practices, policies or
procedures utilized in the preparation of Parent Financial Statements
(including procedures with respect to revenue recognition, payment of
accounts payable or collection of accounts receivable); or
(p) entered into any agreement or made any commitment to
take any of the types of action described in subparagraphs (a) through (o) of
this Section 3.11.
SECTION 3.12 TAX MATTERS. (a) Parent represents that, other
than as disclosed in Section 3.12(a) of the Parent Disclosure Schedule,
Parent has timely filed all United States federal income Tax Returns and all
other material Tax Returns required to be filed by it. All such Tax Returns
are complete and correct in all material respects (except to the extent a
reserve has been established as reflected in the Parent Balance Sheet).
Parent has timely paid and discharged all Taxes due in connection with or
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with respect to the periods or transactions covered by such Tax Returns and
have paid all other Taxes as are due, except such as are being contested in
good faith by appropriate proceedings (to the extent that any such proceedings
are required), and there are no other Taxes that would be due if asserted by a
taxing authority, except with respect to which Parent is maintaining reserves
unless the failure to do so could not have a Material Adverse Effect. Except
as does not involve or would not result in liability to Parent that could have
a Material Adverse Effect, (i) there are no tax liens on any assets of Parent;
(ii) Parent has not granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax; (iii)
no unpaid (or unreserved) deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental authority with respect to
Parent; (iv) there are no pending or threatened audits, investigations or
claims for or relating to any liability in respect of Taxes of Parent; and (v)
Parent has not requested any extension of time within which to file any
currently unfiled Tax Returns. The accruals and reserves for Taxes (including
deferred taxes) reflected in the Parent Balance Sheet are in all material
respects adequate to cover all Taxes accruable through the date thereof
(including Taxes being contested) in accordance with GAAP.
(b) Parent represents that, other than as disclosed in
Section 3.12(b) of Parent Disclosure Schedule and other than with respect to
items the inaccuracy of which could not have a Material Adverse Effect: (i)
Parent has not filed or been included in a combined, consolidated or unitary
return (or substantial equivalent thereof) of any Person other than Parent;
(ii) Parent is not liable for Taxes of any Person other than Parent, or
currently under any contractual obligation to indemnify any Person with
respect to Taxes, or a party to any tax sharing agreement or any other
agreement providing for payments by Parent with respect to Taxes; (iii) Parent
is not a party to any joint venture, partnership or other arrangement or
contract which could be treated as a partnership for United States federal
income tax purposes; (iv) Parent is not a party to any agreement, contract,
arrangement or plan that would result (taking into account the transactions
contemplated by this Agreement), separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G
of the Code; (v) Parent is not a "consenting corporation" under Section 341(f)
of the Code or any corresponding provision of state, local or foreign law; and
(vi) Parent has not made an election or is required to treat any of its assets
as owned by another Person for federal income tax purposes or as tax-exempt
bond financed property or tax-exempt use property within the meaning of
Section 168 of the Code (or any corresponding provision of state, local or
foreign law).
SECTION 3.13 RELATIONS WITH EMPLOYEES. (a) Except as set
forth in Section 3.13 of the Parent Disclosure Schedule:
(i) Parent has satisfactory relationships with
their employees in all material respects.
(ii) Parent is and has been in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, including any law, rule or
regulation relating to discrimination, fair labor standards and occupational
health and safety, wrongful discharge or violation of the personal rights of
employees, former employees or prospective employees, and Parent is not or has
not engaged in any unfair labor practices, except to the extent a failure to
so comply could not, alone or together with any other failure, have a Material
Adverse Effect.
(iii) No collective bargaining agreement with respect
to the business of Parent is currently in effect or being negotiated. Parent
does not have any obligation to negotiate any such collec-
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tive bargaining agreement. There are no labor unions representing, purporting
to represent or attempting to represent any employee of Parent.
(iv) There are no strikes, slowdowns or work
stoppages pending or, to the best of Parent's knowledge, threatened with
respect to the employees of Parent, nor has any such strike, slowdown or work
stoppage occurred or, to the best of Parent's knowledge, been threatened.
There is no representation claim or petition or complaint pending before the
National Labor Relations Board or any state or local labor agency and, to the
best of Parent's knowledge, no question concerning representation has been
raised or threatened respecting the employees of Parent.
(v) To the best of Parent's knowledge, no charges
with respect to or relating to the business of Parent are pending before the
Equal Employment Opportunity Commission, or any state or local agency
responsible for the prevention of unlawful employment practices, which could
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in Section 3.13(b) of Parent
Disclosure Schedule, Parent is not a contractor or subcontractor with
obligations under any federal, state or local government contract.
(c) Except as set forth in Section 3.13(c) of Parent
Disclosure Schedule, Parent has nor or could not have any material liability,
whether absolute or contingent, including any obligations under any of the
Employee Benefit Plans described in Section 3.13 of the Parent Disclosure
Schedule, with respect to any misclassification of a person as an independent
contractor rather than as an employee.
(d) Section 3.13(d) of Parent Disclosure Schedule
contains a complete and correct list of all employment, management or other
consulting agreements with any Persons employed or retained by Parent
(including independent consultants), complete and correct copies of which have
been delivered to the Company.
SECTION 3.14 BENEFIT PLANS. (a) Section 3.14(a) of Parent
Disclosure Schedule sets forth each Employee Benefit Plan, currently or within
the past three years maintained by, contributed by or with respect to which an
obligation to contribute exists on the part of Parent or any of its ERISA
Affiliates, or with respect to which Parent or any ERISA Affiliate may have
any liability or obligation (direct, indirect, contingent or otherwise) to any
employee, former employee, director or former director (or any of their
dependents or beneficiaries) of Parent or to any governmental entity. There
have been delivered to the Company complete and correct copies of all written
Employee Benefit Plans and any related trust agreements, insurance and other
contracts and other funding arrangements, written descriptions of all
unwritten Employee Benefit Plans, the current summary plan descriptions and
current summaries of material modifications relating to each Employee Benefit
Plan, the two most recent Forms 5500 required to have been filed with any
appropriate government agency with respect to each Employee Benefit Plan, the
most recent favorable determination letter issued for each Employee Benefit
Plan and related trust that is intended to satisfy the qualification
requirements of sections 401(a) and 501(a) of the Code (and the latest IRS
form 5300 or 5307, whichever is applicable, filed with the IRS for each such
Employee Benefit Plan), and all collective bargaining agreements pursuant to
which an Employee Benefit Plan is maintained or contributions to an Employee
Benefit Plan are or have been made.
(b) No Employee Benefit Plan is, a "defined benefit plan"
within the meaning of section 3(35) of ERISA to which ERISA applies applicable
to or a plan to which the funding requirements of Section 412 of the Code or
302 of ERISA and neither Parent nor any ERISA Affiliate has or could have any
liability with respect to any such plan. Neither Parent nor any ERISA
Affiliate has ever contributed
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to, or withdrawn in a complete or partial withdrawal from, any multi-employer
plan (within the meaning of Subtitle E of Title IV of ERISA) or incurred
contingent liability under Section 4204 of ERISA. No Employee Benefit Plan
provides for medical or health benefits (through insurance or otherwise) to
individuals other than current employees of Parent (or spouses and dependents
of such employees), except to the extent necessary to comply with Applicable
Benefits Law (including, without limitation, section 4980B of the Code), and
there has been no communication to any person that could reasonably be
expected to promise or guarantee any employee, former employee (or any spouse,
dependent or domestic partner of any employee or former employee) any retiree
medical, life or other retiree benefits.
(c) Each Employee Benefit Plan (and each related trust,
insurance contract and fund) is in compliance in all material respects in form
and in operation with all applicable requirements of Applicable Benefits Law
(including ERISA and the Code), and is being administered in all material
respects in accordance with all relevant plan documents to the extent
consistent with Applicable Benefits Law. There has been no prohibited
transaction with respect to any Employee Benefit Plan which would result in
the imposition of any material unpaid excise tax. No Employee Benefit Plan is
under investigation or audit by the Department of Labor or Internal Revenue
Service other than as part of a routine tax audit of Parent. There are no
legal actions or suits pending or, to the best of Parent's knowledge,
threatened against or with respect to any Employee Benefit Plan or the assets
of any such Employee Benefit Plan or against any fiduciary of any such
Employee Benefit Plan and Parent has no knowledge of any facts that could give
rise to any such actions. There has been full compliance in all material
respects with the notice and continuation requirements of Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA, and the requirement of Part
7 of Subtitle B of Title I of ERISA and Section 9801, ET. SEQ. of the Code
applicable to any Employee Benefit Plan. No event has occurred or reasonably
is expected to occur as a result of which Parent or any ERISA Affiliate,
directly or indirectly, could be subject to any material Liability (including
under any indemnity or hold harmless agreement) under ERISA or the Code or any
other Applicable Benefits Law, including, without limitation, Section 4971,
4975 or 4976 of the Code or Sections 406, 409, 502(i) and 502(l) of the Code.
(d) Except as provided in Section 3.14(d) of Parent
Disclosure Statement, no provision of any Employee Benefit Plan becomes
effective in the event of a change in control of the employer maintaining such
Employee Benefit Plan. Parent has not agreed to or has not announced any plan
or commitment (whether or not legally binding) to create any new employee
benefit plan or, with respect to any existing Employee Benefit Plan, to
increase the benefits or change in employee coverage in an amount that could
increase the expense of maintaining such Employee Benefit Plan or to terminate
any Employee Benefit Plan. No provision of any Employee Benefit Plan prohibits
the employer maintaining it from amending or terminating such Employee Benefit
Plan at any time and to the fullest extent that law permits. Except as
provided in Section 3.14(d) of Parent Disclosure Schedule, the consummation
of the Merger or any other transaction contemplated by this Agreement, either
alone or in combination of any other event, will not (i) result in an increase
in the amount of compensation or benefits or accelerate the vesting or timing
of payment of any benefits or compensation payable under any Employee Benefit
Plan in respect of any employee or former employee of the Company, (ii)
entitle any such current or former employee to any benefits or payment, or
(iii) result in any "PARACHUTE PAYMENT" under Section 280G of the Code,
whether or not such payment is considered reasonable compensation for services
rendered. No employee or former employee of the Company will be entitled to
any severance benefits under the terms of any Employee Benefit Plan solely by
reason of the consummation of the Merger or any other transaction contemplated
by this Agreement.
(e) No leased employee (within the meaning of section
414(n) or (o) of the Code) performs any services for Parent.
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(f) An Employee Benefit Plan does not own or is not
entitled to receive any of the capital stock of Parent.
(g) Except as set forth in Section 3.14(g) of Parent
Disclosure Schedule, there are no material liabilities, whether absolute or
contingent, of Parent relating to workers compensation benefits that are not
fully insured against by a BONA FIDE third-party insurance carrier. Except as
set forth in Section 3.14(g) of Parent Disclosure Schedule, with respect to
each workers' compensation arrangement that is funded wholly or partially
through an insurance policy or public or private fund, all premiums required
to have been paid to date under the insurance policy or fund have been paid,
all premiums required to be paid under the insurance policy or fund through
the Closing Date will have been paid on or before the Closing Date and, as of
the Closing Date, there will be no material liability of Parent or any of its
Subsidiaries under any such insurance policy, fund or ancillary agreement with
respect to such insurance policy or fund in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Closing Date.
Furthermore, at no time since the organization of Parent has any entity (other
than Parent) been an "ERISA affiliate" of Parent.
SECTION 3.15 TITLE TO PROPERTIES. Except as set forth in
Section 3.15 of Parent Disclosure Schedule, Parent has good and indefeasible
title to all of its properties and assets, free and clear of all Encumbrances,
except liens for taxes not yet due and payable and such Encumbrances or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which
could not reasonably be expected to have a Material Adverse Effect, and except
for Encumbrances which secure indebtedness reflected in Parent Balance Sheet.
SECTION 3.16 COMPLIANCE WITH LAWS; LEGAL PROCEEDINGS. (a)
Parent is not in violation of, or in default with respect to, any applicable
statute, regulation, ordinance, writ, injunction, order, judgment, decree or
any Governmental License, including any federal state or local law regarding
or relating to trespass or violations of privacy rights, which violation or
default could reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in Section 3.13(b) of the Parent
Disclosure Schedule, there is no order, writ, injunction, judgment or decree
outstanding and no legal, administrative, arbitration or other governmental
proceeding or investigation pending or, to the best of Parent's knowledge,
threatened, and there are no claims (including unasserted claims of which
Parent is aware) against Parent or Merger Sub or any of their respective
properties, assets or businesses that could reasonably be expected to have a
Material Adverse Effect or against Parent or any of its directors or officers,
as such, that relate to this Agreement, the Merger or the other transactions
contemplated hereby. None of the items listed in Section 3.16(b) of Parent
Disclosure Schedule could reasonably be expected to have a Material Adverse
Effect. Parent has not been a defendant (either originally, by counter-claim
or impleading) in any legal proceedings which have either been filed in the
past two (2) fiscal years or are currently pending (all as set forth in
Section 3.16(b) of Parent Disclosure Schedule). Except as set forth in Section
3.16(b) of Parent Disclosure Schedule, none of the legal proceedings set forth
in Section 3.16(b) of Parent Disclosure Schedule has had or, to the best of
Parent's knowledge, will have a Material Adverse Effect.
SECTION 3.17 BROKERS. No broker, finder or investment
advisor acted directly or indi rectly as such for Parent, Merger Sub or any
shareholder of Parent in connection with this Agreement or the Merger, and no
broker, finder, investment advisor or other Person is entitled to any fee or
other commission, or other remuneration, in respect thereof based in any way
on any action, agreement, arrange ment or understanding taken or made by or on
behalf of Parent, Merger Sub or any shareholder of Parent.
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SECTION 3.18 INTELLECTUAL PROPERTY. (a) Parent owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
patents, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications,
and tangible or intangible proprietary information or material that are used
in the business of Parent as currently conducted, except as could not
reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 3.18(b) of Parent
Disclosure Schedule or as could not reasonably be expected to have a Material
Adverse Effect: (i) Parent is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other agreements as
to which Parents is a party and pursuant to which Parent is authorized to use
any patents, trademarks, service marks or copyrights owned by others ("PARENT
THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS"); (ii) No claims with respect to the
patents, registered and material unregistered trademarks and service marks,
registered copyrights, trade names and any applications therefor owned by
Parent or Merger Sub (the "PARENT INTELLECTUAL PROPERTY RIGHTS"), any trade
secret material to Parent, or Parent Third Party Intellectual Property Rights
to the extent arising out of any use, reproduction or distribution of Parent
Third Party Intellectual Property Rights by or through Parent, are currently
pending or, to the best of Parent's knowledge, have been threatened by any
Person; or (iii) Parent does not know of any valid grounds for any BONA FIDE
claims (1) to the effect that the sale, licensing or use of any product or
service as now sold, licensed or used, or proposed for sale, license or use by
Parent infringes on any copyright, patent, trademark, service xxxx or trade
secret; (2) against the use by Parent of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the business of Parent as currently
conducted or as proposed to be conducted; (3) challenging the ownership,
validity or effectiveness of any of Parent Intellectual Property Rights or
other trade secret material to Parent; or (4) challenging the license or
legally enforceable right to use of Parent Third Party Intellectual Rights by
Parent.
(c) To the best of Parent's knowledge, there is no
material unauthorized use, infringement or misappropriation of any of Parent
Intellectual Property Rights by any third party, including any employee or
former employee of Parent.
SECTION 3.19 INSURANCE. Except as set forth in Section 3.19
of the Parent Disclosure Schedule, all material fire and casualty, general
liability, business interruption, product liability and other insurance
policies maintained by Parent are with reputable insurers, provide adequate
coverage for all normal risks incident to Parent's assets, properties and
business operations and are in character and amount at least equivalent to
that carried by Persons engaged in a business subject to the same or similar
perils or hazards.
SECTION 3.20 CONTRACTS; ETC. (a) Set forth on Section 3.20
of Parent Disclosure Schedule is a complete and correct list of each of the
following agreements, leases and other instruments, both oral and written, to
which Parent is a party or by which Parent or its properties or assets are
bound:
(i) each service or other similar type of agreement under
which services are provided by any other Person to Parent which is
material to the business of Parent taken as a whole;
(ii) each agreement that restricts the operation of the
business of Parent or the ability of Parent to solicit customers or
employees;
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(iii) each operating lease (as lessor, lessee, sublessor or
sublessee) that is material to Parent taken as a whole of any real or
tangible personal property or assets;
(iv) each agreement under which services are provided by
Parent to any material customer;
(v) each agreement (including capital leases) under which
any money has been or may be borrowed or loaned or any note, bond,
indenture or other evidence of indebtedness has been issued or assumed
(other than those under which there remain no ongoing obligations of
Parent), and each guaranty of any evidence of indebtedness or other
obligation, or of the net worth, of any Person (other than
endorsements for the purpose of collection in the ordinary course of
business);
(vi) each partnership, joint venture or similar agreement;
(vii) each agreement containing restrictions with respect
to the payment of dividends or other distributions in respect of
Parent's capital stock;
(viii) each agreement to make unpaid capital expenditures in
excess of $25,000;
(ix) each agreement providing for accelerated or special
payments as a result of the Merger, including any shareholder rights
plan or other instrument commonly referred as a "poison pill."
A complete and correct copy of each written agreement, lease or other type of
document, and a true, complete and correct summary of each oral agreement,
lease or other type of document, required to be disclosed pursuant to this
Section 3.20(a) has been previously delivered to the Company.
(b) Each agreement, lease or other type of document
required to be disclosed pursuant to Sections 3.13, 3.14 or 3.20(a) to which
Parent is a party or by which Parent or its properties or assets are bound
(collectively, the "Parent Contracts"), except those Parent Contracts the loss
of which could reasonably be expected to not have a Material Adverse Effect,
is valid, binding and in full force and effect and is enforceable by Parent in
accordance with its terms. Parent is not (with or without the lapse of time or
the giving of notice, or both) in breach of or in default under any of the
Parent Contracts, and, to the best of Parent's knowledge, no other party to
any of the Parent Contracts is (with or without the lapse of time or the
giving of notice, or both) in breach of or in default under any of the Parent
Contracts, where such breach or default could reasonably be expected to have a
Material Adverse Effect. No existing or completed agreement to which Parent is
a party is subject to renegotiation with any governmental body.
SECTION 3.21 PERMITS, AUTHORIZATIONS, ETC. Section 3.21 of
Parent Disclosure Schedule sets forth all Governmental Licenses and each other
material approval, authorization, consent, license, certificate, order or
other permit of any governmental agencies, whether federal, state, local or
foreign, necessary to enable Parent to own, operate and lease its properties
and assets as and where such properties and assets are owned, leased or
operated and to provide service and carry on its business as presently
provided and conducted (collectively, the "PARENT PERMITS") or required to
permit the continued conduct of such business following the Merger in the
manner conducted on the date of this Agreement (indicating in each case
whether or not the consent of any Person is required for the consummation of
the transactions contemplated hereby). Parent has all necessary Parent Permits
of all governmental agencies, whether federal, state, local or foreign, all of
which are valid and in good standing with the issuing agencies and
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not subject to any proceedings for suspension, modification or revocation,
except for such Parent Permits which could not reasonably be expected to have
a Material Adverse Effect.
SECTION 3.22 ENVIRONMENTAL MATTERS. (a) Parent has obtained
all Environmental Permits that are required for the lawful operation of its
business except for such Environmental Permits the failure of which to obtain
could not reasonably be expected to have a Material Adverse Effect. Parent (i)
is in compliance with all terms and conditions of their Environmental Permits
and are in compliance with and not in default under any applicable
Environmental Law, except for such failure to be in compliance that could not
reasonably be expected to have Material Adverse Effect, and (ii) has not
received written notice of any material violation by or material claim against
Parent under any Environmental Law.
(b) There have been no Releases or threatened Releases of
any Hazardous Substances (i) into, on or under any of the properties owned or
operated (or formerly owned or operated) by Parent or any such Subsidiary in
such a way as to create any liability (including the costs of investigation or
remediation) under any applicable Environmental Law that could reasonably be
expected to have a Material Adverse Effect.
(c) Parent has not been identified as a potentially
responsible party at any federal or stated National Priority List
("superfund") site.
SECTION 3.23 PARENT ACQUISITIONS. Section 3.23 of Parent
Disclosure Schedule hereto contains a complete and correct list of all
agreements ("PARENT ACQUISITION AGREEMENTS") executed by Parent pursuant to
which Parent has acquired or agreed to acquire all or any part of the stock or
assets (including any customer list) of any Person. A complete and correct
copy of each of the Parent Acquisition Agreements has been delivered to the
Company. Parent does not have any further obligation or liability under any of
the Parent Acquisition Agreements or as a result of the transactions provided
for therein, except as described in reasonable detail in Section 3.23 of
Parent Disclosure Schedule.
SECTION 3.24 BOOKS AND RECORDS. All accounts, books, ledgers
and official and other records prepared and kept by Parent and Merger Sub have
been kept and completed in all material respects, and there are no material
inaccuracies or discrepancies contained or reflected therein. Such records of
Parent and Merger Sub are located at Parent's offices in Oklahoma City and
Norman, Oklahoma.
SECTION 3.25 INTERESTED PARTY TRANSACTIONS. Except as set
forth in Section 3.25 of Parent Disclosure Schedule, since January 1, 1998, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-B
promulgated by the SEC.
SECTION 3.26 OPINION OF FINANCIAL ADVISOR. Parent has not
been advised by a financial advisor regarding, as of the date hereof, the
fairness of the Exchange Ratio from a financial point of view to Parent
shareholders.
SECTION 3.27 PROXY OR INFORMATION STATEMENT. The information
supplied by Parent with respect to Parent and its officers, directors,
shareholders and other Affiliates (collectively, the "PARENT INFORMATION") for
inclusion in the Proxy Statement (as defined in Section 5.1) to be sent to the
stockholders of Parent in connection with the Parent Shareholders Meeting will
not, on the date the Proxy Information Statement (or any amendment thereof or
supplement thereto) is first mailed to Parent's
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shareholders or at the time of the Parent Shareholders Meeting, contain any
statement which, at such time and in light of the circumstances under which it
shall be made, is false or misleading. If at any time prior to the Effective
Time any event relating to Parent or any of its officers, directors,
shareholders or other Affiliates should be discovered by Parent which should
be set forth in an amendment to the Proxy or Information Statement, Parent
shall promptly inform the Company. The Proxy or Information Statement shall
comply in all material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, Parent makes no representation or warranty with
respect to any information supplied by the Company which is contained or
incorporated by reference in, or furnished in connection with the preparation
of, the Proxy or Information Statement.
SECTION 3.28 BANK ACCOUNTS AND POWERS OF ATTORNEY. Section
3.28 of Parent Disclosure Schedule sets forth the name of each bank in which
Parent have an account, lock box or safe deposit box, the number of each such
account, lock box or safe deposit box and the names of the Persons authorized
to draw thereon or have access thereto. Except as set forth on Section 3.28 of
Parent Disclosure Schedule, no Person holds any power of attorney from Parent.
SECTION 3.29 CERTAIN PAYMENTS. Parent, Merger Sub nor any
director, officer, agent, or employee thereof, or to the knowledge of Parent,
any other Person associated with or acting for or on behalf of Parent, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of Parent or any affiliate of
Parent, or (iv) in violation of any legal requirement, or (b) established or
maintained any fund or asset that has not been recorded in the books and
records of Parent.
SECTION 3.30 CUSTOMERS; CUSTOMER RELATIONSHIPS. Section 3.30
of Parent Disclosure Schedule sets forth a complete list of the 10 largest
clients and customers of Parent in each of the years ended December 31, 1999
and 1998, including the amounts they paid to Parent in such year. To the
knowledge of Parent, there are no facts or circumstances that are likely to
result in the loss of any such client or customer of Parent or a material
change in the relationship of Parent with any such client or customer.
SECTION 3.31 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES.
(a) Merger Sub is a direct, wholly-owned subsidiary of Parent and was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement.
(b) As of the date hereof and the Effective Time, expect
for obligations or liabilities incurred in connection with its incorporation
or organization and the transactions contemplated by this Agreement and expect
for this Agreement and any other agreements or arrangements contemplated by
this Agreement, Merger Sub has not and will not have incurred, directly or
indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, the
Company covenants and agrees that, unless Parent shall otherwise agree in
writing, the Company shall conduct its business only in, and shall not take
any action except in, the ordinary course of business and in a manner
consistent with past practice; and the Company shall use reasonable commercial
efforts to preserve substantially intact the business organization of the
Company , to keep available the services of the present officers, employees,
agents and consultants of the Company and to preserve the present
relationships of the Company with customers, suppliers and other Persons with
which the Company has significant business relations. By way of amplification
and not limitation, except as contemplated by this Agreement, each of the
Company shall not, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent:
(a) amend or otherwise change the Company's Certificate
of Incorporation or Bylaws;
(b) issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge, disposition or encumbrance of,
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any
shares of capital stock, or any other ownership interest (including,
without limitation, any phantom interest) in the Company or any of its
Affiliates, except for the issuance of shares of Company Common Stock
issuable upon the exercise of the Stock Options and Warrants and other
commitments listed in Section 2.4 of the Company Disclosure Schedule;
(c) sell, transfer, lease to others or otherwise dispose
of or subject to any Encumbrance any material assets or properties of
the Company or purchase, lease from others or otherwise acquire any
material assets or properties (except for (i) purchases or sales of
assets in the ordinary course of business and in a manner consistent
with past practice, (ii) dispositions of obsolete or worthless assets,
and (iii) purchases or sales of immaterial assets not in excess of
$20,000);
(d) (i) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of any of its capital stock, (ii)
split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or
(iii) amend the terms or change the period of exercisability of,
purchase, repurchase, redeem or otherwise acquire, or permit any
Person to purchase, repurchase, redeem or otherwise acquire, any of
its securities, including shares of Company Common Stock or any
option, warrant or right, directly or indirectly, to acquire shares of
Company Common Stock;
(e) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business
organization or division thereof; (ii) incur any indebtedness for
borrowed money, except for borrowings and reborrowing under the
Company's existing credit facilities or issue any debt securities or
assume, guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans
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or advances, except in the ordinary course of business consistent with
past practice; (iii) authorize any capital expenditures or purchases
of fixed assets which are, in the aggregate, in excess of the amount
set forth in Section 4.1 of the Company Disclosure Schedule for the
Company taken as a whole; or (iv) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 4.1(e);
(f) make any change in the rate of compensation,
commission, bonus or other remuneration payable, or pay or agree or
promise to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any director,
officer, employee, salesman or agent of the Company except in the
ordinary course of business consistent with prior practice and
pursuant to or in accordance with plans disclosed in Section 2.14(a)
of the Company Disclosure Schedule that were in effect as of December
31, 1999 or make any increase in or commitment to increase any
employee benefits, adopt or make any commitment to adopt any
additional employee benefit plan or make any contribution, other than
regularly scheduled contributions, to any Employee Benefit Plan;
(g) take any action to change accounting practices,
policies or procedures (including procedures with respect to revenue
recognition, payments of accounts payable or collection of accounts
receivable);
(h) make any material tax election inconsistent with past
practice or settle or compromise any material federal, state, local or
foreign Tax liability or agree to an extension of a statute of
limitations, except to the extent the amount of any such settlement
has been reserved for in the Company Financial Statements;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than
the payment, discharge or satisfaction when due, in the ordinary
course of business and consistent with past practice of liabilities
reflected or reserved against in the Company Financial Statements or
incurred after December 31, 1999 in the ordinary course of business
and consistent with past practice;
(j) enter into any transaction, contract or commitment
other than in the ordinary course of business; or
(k) take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (j) above, or any
action which would make any of the representations or warranties of
the Company contained in this Agreement untrue or incorrect or
prevent the Company from performing or cause the Company not to
perform its covenants herein.
SECTION 4.2 CONDUCT OF BUSINESS BY PARENT PENDING THE
MERGER. During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Parent
covenants and agrees that, except as set forth in Section 4.2 of the Parent
Disclosure Schedule or unless the Company shall otherwise agree in writing,
Parent shall conduct its business, and cause the businesses of Merger Sub to
be conducted, in the ordinary course of business and consistent with past
practice, other than actions taken by Parent or Merger Sub in contemplation of
the Merger, and shall not directly or indirectly do, or propose to do, any of
the following without the prior written consent of the Company:
(a) amend or otherwise change Parent's Certificate of
Incorporation or Bylaws;
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(b) issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge, disposition or encumbrance of,
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any
shares of capital stock, or any other ownership interest (including,
without limitation, any phantom interest) in Parent, Merger Sub or any
of their Affiliates, except for the issuance of shares of Parent
Common Stock issuable upon the exercise of the Stock Options and
Warrants and other commitments listed in Section 3.2 of the Parent
Disclosure Schedule;
(c) sell, transfer, lease to others or otherwise dispose
of or subject to any Encumbrance any material assets or properties of
Parent or purchase, lease from others or otherwise acquire any
material assets or properties (except for (i) purchases or sales of
assets in the ordinary course of business and in a manner consistent
with past practice, (ii) dispositions of obsolete or worthless
assets, and (iii) purchases or sales of immaterial assets not in
excess of $20,000);
(d) (i) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of any of its capital stock, (ii)
split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or
(iii) amend the terms or change the period of exercisability of,
purchase, repurchase, redeem or otherwise acquire, or permit any
Person to purchase, repurchase, redeem or otherwise acquire, any of
its securities or any securities of Merger Sub, including shares of
Parent Common Stock or any option, warrant or right, directly or
indirectly, to acquire shares of Parent Common Stock;
(e) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business
organization or division thereof; (ii) incur any indebtedness for
borrowed money, except for borrowings and reborrowing under Parent's
existing credit facilities or issue any debt securities or assume,
guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans or
advances, except in the ordinary course of business consistent with
past practice; (iii) authorize any capital expenditures or purchases
of fixed assets which are, in the aggregate, in excess of the amount
set forth in Section 4.2 of the Parent Disclosure Schedule for Parent
taken as a whole; or (iv) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 4.2(e);
(f) make any change in the rate of compensation,
commission, bonus or other remuneration payable, or pay or agree or
promise to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any director,
officer, employee, salesman or agent of Parent except in the ordinary
course of business consistent with prior practice and pursuant to or
in accordance with plans disclosed in Section 3.12(a) of Parent
Disclosure Schedule that were in effect as of December 31, 1999 or
make any increase in or commitment to increase any employee benefits,
adopt or make any commitment to adopt any additional employee benefit
plan or make any contribution, other than regularly scheduled
contributions, to any Employee Benefit Plan;
(g) take any action to change accounting practices,
policies or procedures (including procedures with respect to revenue
recognition, payments of accounts payable or collection of accounts
receivable);
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(h) make any material tax election inconsistent with past
practice or settle or compromise any material federal, state, local or
foreign Tax liability or agree to an extension of a statute of
limitations, except to the extent the amount of any such settlement
has been reserved for in Parent Financial Statements;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than
the payment, discharge or satisfaction when due, in the ordinary
course of business and consistent with past practice of liabilities
reflected or reserved against in Parent Financial Statements or
incurred after December 31, 1999, in the ordinary course of business
and consistent with past practice;
(j) enter into any transaction, contract or commitment
other than in the ordinary course of business; or
(k) take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (j) above, or any
action which would make any of the representations or warranties of
Parent contained in this Agreement untrue or incorrect or prevent
Parent and Merger Sub from performing or cause Parent and Merger Sub
not to perform its covenants herein.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PROXY OR INFORMATION STATEMENT. As promptly as
reasonably practicable after the execution of this Agreement, and after the
furnishing by the Company and Parent of all information required to be
contained therein (which each agrees to do as promptly as practicable after
the date hereof), Parent, after obtaining the approval of Company, shall
prepare and file with the SEC a proxy statement pursuant to Section 14(a) of
the Exchange Act or information statement pursuant to Section 14(c) of the
Exchange Act (the "PROXY OR INFORMATION STATEMENT") for the purpose of
obtaining approval of the Merger by the shareholders of Parent. Parent, with
all reasonable cooperation of the Company, shall use all reasonable efforts to
cause file the definitive Proxy or Information Statement with the SEC as soon
as reasonably practicable.
SECTION 5.2 COMPANY SHAREHOLDERS APPROVAL. The Company
Shareholders by execution of this Agreement hereby approves the Merger in all
respects as contemplated in this Agreement.
SECTION 5.3 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon
reasonable notice and subject to restrictions contained in confidentiality
agreements to which such party is subject (from which such party shall use
reasonable efforts to be released), the Company and Parent shall each (and
shall cause each of their Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of the other reasonable access,
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, the Company and
Parent each shall (and shall cause each of their Subsidiaries to) furnish
promptly to the other all information concerning its business, properties and
personnel as such other party may reasonably request, and each shall make
available to the other the appropriate individuals (including attorneys,
accountants and other professionals) for discussion of the other's business,
properties and personnel as either Parent or the Company may reasonably
request. Each party shall keep such information confidential.
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SECTION 5.4 CONSENTS; APPROVALS. The Company and Parent
shall each use their reasonable best efforts to obtain all consents, waivers,
approvals, authorizations or orders (including, without limitation, all United
States and foreign governmental and regulatory rulings and approvals), and the
Company and Parent shall make all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby. The Company and Parent shall furnish all
information required to be included in the Prospectus and the Registration
Statement or for any application or other filing to be made pursuant to the
rules and regulations of any United States or foreign governmental body in
connection with the transactions contemplated by this Agreement.
SECTION 5.5 AGREEMENTS WITH RESPECT TO AFFILIATES.
[Omitted.]
SECTION 5.6 INDEMNIFICATION AND INSURANCE. (a) The Bylaws
and Certificate of Incorporation of the Surviving Corporation shall contain
the provisions with respect to indemnification set forth in the Bylaws and
Certificate of Incorporation of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of three years from the
Effective Time in any manner that would adversely affect the rights thereunder
as of the Effective Time of individuals who at the Effective Time were
directors or officers of the Company, unless such modification is required
after the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest
extent permitted under applicable law or under the Surviving Corporation's
Certificate of Incorporation or Bylaws, indemnify and hold harmless each
present and former director or officer of the Company (collectively, the
"INDEMNIFIED PARTIES") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative (collectively, "ACTIONS"), (x) arising out of or pertaining to
the transactions contemplated by this Agreement, or (y) otherwise with respect
to any acts or omissions occurring at or prior to the Effective Time, to the
same extent as provided in the Company's Certificate of Incorporation or
Bylaws or any applicable contract or agreement as in effect on the date
hereof, in each case for a period of three years after the Effective Time;
PROVIDED, HOWEVER, that, in the event that any claim or claims for
indemnification are asserted or made within such three-year period, all rights
to indemnification in respect of any such claim or claims shall continue until
the disposition of any and all such claims. In the event of any such Action
(whether arising before or after the Effective Time), the Indemnified Parties
shall promptly notify the Surviving Corporation in writing, and the Surviving
Corporation shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Parties. The
Indemnified Parties shall have the right to employ separate counsel in any
such Action and to participate in (but not control) the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Parties unless (a) the Surviving Corporation has agreed to pay
such fees and expenses, (b) the Surviving Corporation shall have failed to
assume the defense of such Action or (c) the named parties to any such Action
(including any impleaded parties) include both the Surviving Corporation and
the Indemnified Parties and such Indemnified Parties shall have been
reasonably advised in writing by counsel that there may be one or more legal
defenses available to the Indemnified Parties which are in conflict with those
available to the Surviving Corporation. In the event such Indemnified Parties
employ separate counsel at the expense of the Surviving Corporation pursuant
to clauses (b) or (c) of the previous sentence, (i) any counsel retained by
the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to the Surviving Corporation; (ii) the Indemnified
Parties as a group may retain only one law firm to represent them in each
applicable jurisdiction with respect to any single Action unless
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there is, under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more Indemnified
Parties, in which case each Indemnified Person with respect to whom such a
conflict exists (or group of such Indemnified Persons who among them have no
such conflict) may retain one separate law firm in each applicable
jurisdiction; (iii) after the Effective Time, the Surviving Corporation shall
pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received; and (iv) the Surviving Corporation will
cooperate in the defense of any such Action. The Surviving Corporation shall
not be liable for any settlement of any such Action effected without its
written consent.
(c) The provisions of this Section 5.6 shall survive the
consummation of the Merger at the Effective Time, is intended to benefit the
Company, the Surviving Corporation and the Indemnified Parties, shall be
binding on all successors and assigns of the Surviving Corporation and shall
be enforceable by the Indemnified Parties.
SECTION 5.7 NOTIFICATION OF CERTAIN MATTERS. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be materially untrue or inaccurate, or (ii) any
failure of the Company, Parent or Merger Sub, as the case may be, materially
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any
notice pursuant to this Section 5.7 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice; and PROVIDED
FURTHER that failure to give such notice shall not be treated as a breach of
covenant for the purposes of Sections 6.2(b) or 6.3(b) unless the failure to
give such notice results in material prejudice to the other party.
SECTION 5.8 FURTHER ACTION/TAX TREATMENT. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all other things reasonably necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied
all conditions precedent to its obligations under this Agreement. The
foregoing covenant shall not include any obligation by Parent to agree to
divest, abandon, license or take similar action with respect to any assets
(tangible or intangible) of Parent or the Company. Each of Parent, Merger Sub
and the Company shall use its commercially reasonable efforts to cause the
Merger to qualify, and will not (both before and after con summation of the
Merger) take any actions which to its knowledge could reasonably be expected
to prevent the Merger from qualifying, as a reorganization under the
provisions of Section 368 of the Code.
SECTION 5.9 PUBLIC ANNOUNCEMENTS. Parent and the Company
shall consult with each other before issuing any press release with respect to
the Merger or this Agreement and shall not issue any such press release or
make any such public statement without the prior consent of the other party,
which shall not be unreasonably withheld; PROVIDED, HOWEVER, that a party may,
without the prior consent of the other party, issue such press release or make
such public statement as may upon the advice of counsel be required by law if
it has used all reasonable efforts to consult with the other party.
SECTION 5.10 CONVEYANCE TAXES. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection
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with the transactions contemplated hereby that are required or permitted to be
filed on or before the Effective Time and the Surviving Corporation shall be
responsible for the payment of all such taxes and fees.
SECTION 5.11 NO SOLICITATION. Upon execution of this
Agreement, Parent, the Company and the Company Shareholders do not have, or
shall immediately terminate, any discussions with any third party concerning
an Alternative Acquisition (as defined below). From and after the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Parent, the Company and the Company
Shareholders shall not, and shall not permit any officer, director, employee,
affiliate, investment banker or other agent or other representative of Parent
or the Company to, directly or indirectly, other than in connection with the
performance and consummation of the transactions contemplated in this
Agreement, (1) solicit, engage in discussions or negotiate with any Person
(whether such discussions or negotiations are initiated by Parent or the
Company, such other Person or otherwise) or take any other action intended or
designed to facilitate the efforts of any Person relating to the possible
acquisition of the Company or Parent (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
or their capital stock or assets (with any such efforts by any such Person,
including a firm proposal to make such an acquisition, being referred to as an
"ALTERNATIVE ACQUISITION"), (2) provide information with respect to Parent or
the Company to any Person relating to a possible Alternative Acquisition by
any Person, (3) enter into an agreement with any Person providing for a
possible Alternative Acquisition, or (4) make or authorize any statement,
recommendation or solicitation in support of any possible Alternative
Acquisition by any Person.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) DELIVERY OF AUDITED FINANCIAL STATEMENTS. Parent
shall have received from Company and Company shall have received from
Parent its audited balance sheets as of December 31, 1999 and 1998 and
statements of income, stockholders' equity and cash flows and any
applicable supplemental information prepared in accordance with
generally accepted accounting principles in accordance with the rules
and regulations of the SEC (the "AUDITED FINANCIAL STATEMENTS").
Furthermore, there shall be no material adverse change in the
financial condition and results of operations as presented in the
Audited Financial Statements compared to the financial condition and
results of operations as presented in the Parent Financial Statements
or the Company Financial Statements, as the case may be.
(b) APPROVAL OF SHAREHOLDERS OF PARENT. The shareholders
of Parent shall have approved the Merger.
(c) GOVERNMENTAL ACTIONS. There shall not have been
instituted, pending or threatened any action or proceeding (or any
investigation or other inquiry that might result in such an action or
proceeding) by any governmental authority or administrative agency
before any governmental authority, administrative agency or court of
competent jurisdiction, domestic or foreign, nor shall there be in
effect any judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction, or any other
legal restraint (i) preventing or seeking to
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prevent consummation of the Merger, (ii) prohibiting or seeking to
prohibit or limiting or seeking to limit Parent from exercising all
material rights and privileges pertaining to its ownership of the
Surviving Corporation or the ownership or operation by Parent or any
of its Subsidiaries of all or a material portion of the business or
assets of Parent or Merger Sub, or (iii) compelling or seeking to
compel Parent or Merger Sub to dispose of or hold separate all or any
material portion of the business or assets of Parent or the Surviving
Corporation, as a result of the Merger or the transactions
contemplated by this Agreement.
(d) ILLEGALITY. No statute, rule, regulation or order
shall be enacted, entered, enforced or deemed applicable to the Merger
which makes the consummation of the Merger illegal.
SECTION 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT
AND MERGER SUB. The obligations of Parent and Merger Sub to effect the Merger
are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and the Company Shareholders contained
in this Agreement and in the Company Disclosure Schedule shall be
true and correct in all respects on and as of the Effective Time with
the same force and effect as if made on and as of the Effective Time,
except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such
date, subject to clause (iii)), or (iii) where the failure to be true
and correct would not reasonably be expected to have a Material
Adverse Effect, and Parent and Merger Sub shall have received a
certificate dated as of the Closing to such effect signed by the
Chief Executive Officer of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by it on or prior to the Closing, and Parent and Merger Sub shall have
received a certificate dated as of the Closing to such effect signed
by the Chief Executive Officer of the Company;
(c) CONSENTS OBTAINED. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all
filings required to be made, by the Company for the authorization,
execution and delivery of this Agreement, the consummation by it of
the transactions contemplated hereby and the continuation in full
force and effect of any and all material rights, documents,
agreements or instruments of the Company shall have been obtained and
made by the Company, except where the failure to receive such
consents, waivers, approvals, authorizations or orders would not
reasonably be expected to have a Material Adverse Effect on the
Parent.
SECTION 6.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE
COMPANY. The obligation of the Company to effect the Merger is also subject to
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent and Merger Sub contained in this Agreement
and the Parent Disclosure Schedule shall be true and correct in all
respects on and as of the Effective Time with the same force and
effect as if made on and as of the Effective Time, except for (i)
changes contemplated by this Agreement, (ii) those representations
and warranties which address matters only as of a particular date
(which shall have been true and correct as of such date, subject to
clause (iii)), or (iii) where the failure to be true and correct
could not reasonably be expected to have a Material Adverse Effect,
and the
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Company shall have received a certificate dated as of the Closing to
such effect signed by the Chief Executive Officer of Parent;
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall
have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed
or complied with by them on or prior to the Effective Time, and the
Company shall have received a certificate dated as of the Closing to
such effect signed by the Chief Executive Officer of Parent; and
(c) CONSENTS OBTAINED. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all
filings required to be made, by Parent or Merger Sub for the
authorization, execution and delivery of this Agreement, the
consummation by them of the transactions contemplated hereby and the
continuation in full force and effect of any and all material rights,
documents, agreements or instruments of Parent shall have been
obtained and made by Parent and Merger Sub, except where the failure
to receive such consents, waivers, approvals, authorizations or
orders could not be reasonably be expected to have a Material Adverse
Effect on Parent.
(d) STOCK OPTION AMENDMENTS. Parent shall obtain and
deliver to the Company amendments or statements of clarification to
each agreement governing the Stock Options in accordance with Section
1.17 of this Agreement.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company or Parent:
(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall
not have been consummated by July 31, 2000 (provided that the right to
terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date); or
(c) by either Parent or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative
agency or commission shall have issued a non-appealable final order,
decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger
(provided that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party who has not
complied with its obligations under Section 5.7 and such
noncompliance materially contributed to the issuance of any such
order, decree or ruling or the taking of such action); or
(d) by Parent or the Company if any representation or
warranty of the Company, or Parent and Merger Sub, respectively, set
forth in this Agreement shall be untrue when made, such that the
conditions set forth in Sections 6.2(a) or 6.3(a), as the case may be,
would not be satisfied (a "TERMINATING MISREPRESENTATION"); PROVIDED,
HOWEVER, that, if such Terminating
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Misrepresentation is curable by the Company or Parent, as the case may
be, through the exercise of its commercially reasonable efforts and
for so long as the Company or Parent, as the case may be, continues to
exercise such reasonable efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section 7.1(d);
or
(e) by Parent if any representation or warranty of the
Company shall have become untrue such that the condition set forth in
Section 6.2(a) would not be satisfied (a "COMPANY TERMINATING
CHANGE"), or by the Company if any representation or warranty of
Parent and Merger Sub shall have become untrue such that the
condition set forth in Section 6.3(a) would not be satisfied (a
"PARENT TERMINATING CHANGE" and together with a Company Terminating
Change, a "TERMINATING CHANGE"), in either case other than by reason
of a Terminating Breach (as hereinafter defined); PROVIDED, HOWEVER,
that if any such Terminating Change is curable by the Company or
Parent, as the case may be, through the exercise of its commercially
reasonable efforts, and for so long as the Company or Parent, as the
case may be, continues to exercise such commercially reasonable
efforts, neither Parent nor the Company, respectively, may terminate
this Agreement under this Section 7.1(e); or
(f) by Parent or the Company upon a breach of any
covenant or agreement on the part of the Company or Parent,
respectively, set forth in this Agreement, such that the conditions
set forth in Sections 6.2(b) or 6.3(b), as the case may be, would not
be satisfied (a "TERMINATING BREACH"); PROVIDED, HOWEVER, that, if
such Terminating Breach is curable by the Company or Parent, as the
case may be, through the exercise of its commercially reasonable
efforts and for so long as the Company or Parent, as the case may be,
continues to exercise such commercially reasonable efforts, neither
Parent nor the Company, respectively, may terminate this Agreement
under this Section 7.1(f).
SECTION 7.2 EFFECT OF TERMINATION. In the event of the
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto or of any of its Affiliates, directors, officers or stockholders except
(i) as set forth in Section 7.3 and Section 8.1, and (ii) except as provided in
Section 7.3, nothing herein shall relieve any party from liability for any
breach hereof.
SECTION 7.3 FEES AND EXPENSES. (a) Except as otherwise
provided in this Section 7.3, all fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated,
including without limitation the costs and expenses attributable to the
preparation of audited and unaudited financial statements of Parent on the one
hand and the Company and those entities acquired by the Company pursuant to the
Company Acquisition Agreements on the other hand. Parent shall bear all fees,
costs and expenses of preparation and filing of the Proxy or Information
Statement and any amendments thereto.
(b) Upon termination of this Agreement by either Parent
or the Company, the respective parties hereto may seek any and all remedies
available to it under applicable law.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS. (a) Except as otherwise provided in this Section 8.1, the
representations, warranties, covenants and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any Person
controlling any such party or any of their officers, directors or
representatives, whether prior to or after the execution of this Agreement.
The representations, warranties and agreements in this Agreement and in the
Disclosure Schedules shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 7.1, as the case may be,
except that the covenants and agreements set forth in Article I and Section
5.6 shall survive the Effective Time and those set forth in Section 7.3 shall
survive such termination.
(b) Any disclosure made with reference to one or more
sections of the Company Disclosure Schedule or the Parent Disclosure Schedule
shall be deemed disclosed with respect to each other section therein as to
which such disclosure is relevant provided that such relevance is reasonably
apparent. Disclosure of any matter in the Company Disclosure Schedule or the
Parent Disclosure Schedule shall not be deemed an admission that such matter
is material.
SECTION 8.2 NOTICES. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made if and when delivered personally or by overnight
courier to the parties at the following addresses or sent by electronic
transmission, with confirmation received, to the facsimile numbers specified
below (or at such other address, facsimile or telephone number or other
Person's attention for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
Precis Smart Card Systems, Inc.
0000 XxXxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Chief Executive Officer
With a copy to:
Xxxxxxx X. Xxxx
Xxxx, Swan & Xxxxxxxxxx
2800 Oklahoma Tower
000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
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(b) If to the Company:
Foresight, Inc.
0000 XxXxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxx X. Xxxxxx, President
With a copy to:
Xxxx X. Xxxxxxxxx
Xxxxx & Xxxxxxx
The HiPoint Office Building
0000 Xxxxx XxXxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
SECTION 8.3 CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "Affiliates" means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned Person;
(b) "Business Day" means any day other than a day on
which banks in New York or Oklahoma City are required or authorized to
be closed;
(c) "Control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause
the direction of the management or policies of a Person, whether
through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise;
(d) "Person" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(e) "Subsidiary" or "Subsidiaries" of the Company, the
Surviving Corporation, Parent or any other Person means any
corporation, partnership, limited liability company, or other legal
entity of which the Company, the Surviving Corporation, Parent or such
other Person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, more than 10%
of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
SECTION 8.4 AMENDMENT. This Agreement may be amended by
the Company Shareholders and the Company's Board of Directors and the Board
of Directors of Parent and Merger Sub at any time prior to the Effective
Time. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
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SECTION 8.5 WAIVER. At any time prior to the Effective
Time, any party hereto may with respect to any other party hereto (a) extend
the time for the performance of any of the obligations or other acts, (b)
waive any inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto, or (c) waive compliance with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby. For purposes of this Agreement, time
shall be of the essence.
SECTION 8.6 HEADINGS; CONSTRUCTION. 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. In this
Agreement (a) words denoting the singular include the plural and vice versa,
(b) "it" or "its" or words denoting any gender include all genders, (c) the
word "including" shall mean "including without limitation," whether or not
expressed, (d) any reference to a statute shall mean the statute and any
regulations thereunder in force as of the date of this Agreement or the
Closing, as applicable, unless otherwise expressly provided, (e) any
reference herein to a Section, Article or Schedule refers to a Section or
Article of or a Schedule to this Agreement, unless otherwise stated, (f) when
calculating the period of time within or following which any act is to be
done or steps taken, the date which is the reference day in calculating such
period shall be excluded and if the last day of such period is not a Business
Day, then the period shall end on the next day which is a Business Day and
(g) any reference to a party's "best efforts" or "reasonable efforts" shall
not include any obligation of such party to pay, or guarantee the payment of,
money or other consideration to any third party or to agree to the imposition
on such party or its Affiliates of any condition reasonably considered by
such party to be materially burdensome to such party or its Affiliates.
SECTION 8.7 SEVERABILITY. (a) If any term or other
provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent reasonably possible.
(b) The Company and Parent agree that the fee provided
in Section 7.3(a) is fair and reasonable in the circumstances. If a court of
competent jurisdiction shall nonetheless, by a final, non-appealable
judgment, determine that the amount of such fee exceeds the maximum amount
permitted by law, then the amount of such fee shall be reduced to the maximum
amount permitted by law in the circumstances, as determined by such court of
competent jurisdiction.
SECTION 8.8 ENTIRE AGREEMENT. This Agreement constitutes
the entire agreement and supersedes all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof, except as otherwise expressly provided herein.
SECTION 8.9 ASSIGNMENT; MERGER SUB. This Agreement shall
not be assigned by operation of law or otherwise, except that all or any of
the rights of Merger Sub hereunder may be assigned to any direct,
wholly-owned Subsidiary of Parent provided that no such assignment shall
relieve the assigning party of its obligations hereunder. Parent guarantees
the full and punctual performance by Merger Sub of all the obligations
hereunder of Merger Sub or any such assignees.
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SECTION 8.10 PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and the
Company Designees, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement,
including, without limitation, by way of subrogation, other than Section 5.6
(which is intended to be for the benefit of the Indemnified Parties and may
be enforced by such Indemnified Parties).
SECTION 8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE. No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be construed to be
a waiver of, or acquiescence in, any breach of any representation, warranty,
covenant or agreement herein, nor shall any single or partial exercise of any
such right preclude other or further exercise thereof or of any other right.
All rights and remedies existing under this Agreement are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
SECTION 8.12 GOVERNING LAW. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State
of Oklahoma applicable to contracts executed and fully performed within the
State of Oklahoma.
SECTION 8.13 COUNTERPARTS. This Agreement may be executed
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
SECTION 8.14 WAIVER OF JURY TRIAL. EACH OF THE COMPANY
SHAREHOLDERS, PARENT, MERGER SUB, AND THE COMPANY HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.15 JURISDICTION; SERVICE OF PROCESS. Any action
or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the parties in
the courts of the State of Oklahoma, County of Cleveland or the United States
District Court for the Western District of Oklahoma, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue
laid therein.
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Company Shareholders have caused this Agreement to be executed as of the date
first written above by their respective officers thereunto duly authorized.
"Parent" PRECIS SMART CARD SYSTEMS, INC.
By /s/ XXXXX X. XXXXXX
--------------------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
"Merger-Sub" PRECIS-FORESIGHT ACQUISITION, INC.
By /s/ XXXXX X. XXXXXX
--------------------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
"Company" FORESIGHT, INC.
By /s/ XXXX X. XXXXXX
--------------------------------------------------
Xxxx X. Xxxxxx, Chief Executive Officer
"Company Shareholders" /s/ XXXX X. XXXXXX
----------------------------------------------------
Xxxx X. Xxxxxx
/s/XXXX X. XXXX
----------------------------------------------------
Xxxx X. Xxxx
(Schedules Will Be Furnished Upon Request)
Company Disclosure Schedule
Parent Disclosure Schedule
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