SHARE EXCHANGE AGREEMENT
BY AND AMONG
ZC ACQUISITION CORP. AND
ZEFER CORP. AND
THE STOCKHOLDERS OF ZEFER CORP.
Dated as of April 30, 1999 ============================================================================= ==
TABLE OF CONTENTS
ARTICLE I
EXCHANGE OF SHARES.................................................... 1
SECTION 1.1 Basic Transaction....................................... 1
SECTION 1.2 Exchange Consideration.................................. 1
SECTION 1.3 The Closing............................................. 2
SECTION 1.4 Deliveries at the Closing............................... 2
SECTION 1.5 Stockholder Representatives............................. 2
SECTION 1.6 Material Adverse Effect................................. 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.................... 3
SECTION 2.1 Stockholders............................................ 3
SECTION 2.2 Authority............................................... 3
SECTION 2.3 Noncontravention........................................ 3
SECTION 2.4 Brokers' Fees........................................... 4
SECTION 2.5 The Shares.............................................. 4
SECTION 2.6 Qualification of the Stockholders....................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY................. 4
SECTION 3.1 Organization, Qualification and Other Equity Interests.. 4
SECTION 3.2 Articles of Incorporation and By-Laws................... 5
SECTION 3.3 Capitalization.......................................... 5
SECTION 3.4 Authority Relative to this Agreement.................... 5
SECTION 3.5 No Conflict; Required Filings and Consents.............. 5
SECTION 3.6 Compliance, Permits..................................... 7
SECTION 3.7 Financial Statements.................................... 7
SECTION 3.8 Absence of Certain Changes or Events.................... 7
SECTION 3.9 No Undisclosed Liabilities.............................. 7
SECTION 3.10 Absence of Litigation................................... 8
SECTION 3.11 Employee Benefit Plans, Employment Agreements........... 8
SECTION 3.12 Labor Matters........................................... 9
SECTION 3.13 Restrictions on Business Activities..................... 9
SECTION 3.14 Title to Property....................................... 9
SECTION 3.15 Taxes................................................... 10
SECTION 3.16 Environmental Matters................................... 11
SECTION 3.17 Intellectual Property................................... 12 -ii-
SECTION 3.18 Immigration Compliance............................................. 12
SECTION 3.19
Insurance.......................................................... 13
SECTION 3.20 Accounts
Receivable................................................ 13
SECTION 3.21
Brokers............................................................ 13
SECTION 3.22 Change in Control
Payments......................................... 13
SECTION 3.23
Expenses........................................................... 13
SECTION 3.24 Books and Records.................................................. 13
SECTION 3.25 Full
Disclosure.................................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ZC............................................. 14
SECTION 4.1 Organization and Qualification; Subsidiaries....................... 14
SECTION 4.2 Charter and By-Laws................................................ 14
SECTION 4.3
Capitalization..................................................... 14
SECTION 4.4 Authority Relative to this Agreement............................... 15
SECTION 4.5 No Conflict, Required Filings and Consents......................... 15
SECTION 4.6 No Prior
Activities................................................ 15
SECTION 4.7 Validity of ZC Common
Stock........................................ 16
SECTION 4.8
Brokers............................................................ 16
SECTION 4.9 Tax-Free
Exchange.................................................. 16
SECTION 4.10 Full
Disclosure.................................................... 16
ARTICLE V
CONDUCT OF BUSINESS PENDING THE
CLOSING.......................................... 16
SECTION 5.1 Conduct of Business by the Company Pending the Closing............. 16
SECTION 5.2 No
Solicitation.................................................... 18
ARTICLE VI ADDITIONAL AGREEMENTS............................................................ 19
SECTION 6.1 Access to Information.............................................. 19
SECTION 6.2 Consents; Approvals................................................ 19
SECTION 6.3 Notification of Certain Matters.................................... 19
SECTION 6.4 Further Action/Tax Treatment....................................... 20
SECTION 6.5 Public Announcements............................................... 20
SECTION 6.6 Conveyance Taxes................................................... 20
SECTION 6.7 Board Observation
Right............................................ 20
SECTION 6.8 Tjan Board Seat.................................................... 20
SECTION 6.9
Noncompetition/Nonsolicitation..................................... 20
SECTION 6.10 Issuance of Options................................................ 21
SECTION 6.11 Employee
Bonus..................................................... 21
SECTION 6.12 Third Party Securities............................................. 21 -iii-
ARTICLE VII
CONDITIONS TO THE
EXCHANGE....................................................... 22
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Exchange of
Shares......................................................... 22
SECTION 7.2 Additional Conditions to Obligations of ZC......................... 22
SECTION 7.3 Additional Conditions to Obligation of the Company................. 23
ARTICLE VIII GENERAL
PROVISIONS............................................................... 24
SECTION 8.1
Indemnification.................................................... 24
SECTION 8.2
Survival........................................................... 26
SECTION 8.3
Notices............................................................ 27
SECTION 8.4 Certain
Definitions................................................ 28
SECTION 8.5
Amendment.......................................................... 29
SECTION 8.6
Waiver............................................................. 29
SECTION 8.7
Headings........................................................... 29
SECTION 8.8
Severability....................................................... 29
SECTION 8.9 Entire Agreement................................................... 29
SECTION 8.10
Assignment......................................................... 29
SECTION 8.11 Payment of Expenses................................................ 29
SECTION 8.12 Parties in Interest................................................ 30
SECTION 8.13 Failure or Indulgence Not Waiver; Remedies Cumulative.............. 30
SECTION 8.14 Governing Law...................................................... 30
SECTION 8.15
Counterparts....................................................... 30 -iv-
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT, dated as of April 30, 1999 (this "Agreement"),
among ZC Acquisition Corp., a Delaware corporation ("ZC"), ZEFER Corp., a --
Delaware corporation (the "Company"), and the stockholders of the Company set -------
forth on the signature pages hereto (the "Stockholders"). ------------ WITNESSETH:
WHEREAS, the Stockholders own all of the outstanding shares (the "Shares") ------
of the Company's capital stock (the "Company Stock"); -------------
WHEREAS, ZC wishes to acquire the Shares from the Stockholders in exchange
for shares (the "ZC Shares") of ZC's common stock, $.01 par value ("ZC Common
--------- ---------
Stock"), and cash as set forth in Section 1.2 below (the "Cash Consideration"
- ----- ------------------
and, together with the ZC Shares, the "Exchange Consideration"), to the ----------------------
Stockholders, and the Stockholders wish to surrender the Shares in exchange for
such Exchange Consideration, all upon and subject to the terms and conditions
set forth herein; and
WHEREAS, it is intended that the exchange of the Shares for the ZC Shares,
along with the purchase of shares of ZC Common Stock pursuant to the First
Amendment and Supplement No. 1 to Purchase Agreement dated as of the date hereof
among ZC, GTCR Fund VI, L.P., GTCR VI Executive Fund, L.P. and GTCR Associates
VI (the "GTCR Purchase Agreement"), shall qualify as tax-free transfers to ZC
-----------------------
pursuant to Section 351 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder.
- -----
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, ZC,
the Stockholders and the Company hereby agree as follows: ARTICLE I
EXCHANGE OF SHARES
SECTION 1.1 Basic Transaction. The Stockholders hereby agree to transfer
the Shares to ZC, and ZC hereby agrees to issue and pay the Exchange
Consideration to the Stockholders, at the Closing, subject to and upon the terms
and conditions contained herein.
SECTION 1.2 Exchange Consideration. The Exchange Consideration which ZC
shall issue and pay to the Stockholders at the Closing for the Shares and in
consideration of the agreements and covenants of the Stockholders contained
herein shall consist of 864,000 ZC Shares and seven million one hundred thousand
dollars ($7,100,000.00) in cash. Each Stockholder shall be entitled to the
number of ZC Shares and the amount of cash set forth across from his or her name
on Exhibit 1.2 hereto. -----------
SECTION 1.3 The Closing. The closing of the exchange of the Shares for the
Exchange Consideration and the other transactions contemplated hereby (the
"Closing") shall take place at the office of Ropes & Gray, One International
-------
Place, Boston, Massachusetts, or at such other place as may be agreed to by ZC
and the Stockholders, on April 30, 1999 or on such other date as may be agreed
to by ZC and the Stockholders (the "Closing Date"). ------------
SECTION 1.4 Deliveries at the Closing. At the Closing (i) the Company shall
deliver to ZC the various certificates, instruments, and documents referred to
in Section 7.2 below, (ii) ZC will deliver to the Company the various
certificates, instruments, and documents referred to in Section 7.3 below, (iii)
each of the Stockholders shall deliver to ZC stock certificates representing all
of his, her or its Shares of Company Stock endorsed in blank or accompanied by
duly executed assignment documents and the various certificates, instruments and
documents referred to in Section 7.2 below, and (iv) ZC will deliver to each of
the Stockholders, in exchange for such Shares of Company Stock so delivered, the
number of shares of ZC Common Stock to which such Stockholder is entitled
pursuant to Section 1.2 hereof (subject to the restrictions set forth in the
Employment Agreements and Stock Restriction Agreement delivered pursuant to
Sections 7.2(f) and 7.2(g) hereof, respectively) and the amount of cash to which
such Stockholder is entitled pursuant to Section 1.2 hereof.
SECTION 1.5 Stockholder Representatives. The Stockholders hereby constitute
and appoint, effective as of the Closing, 1261417 Ontario Limited "Mosaic") and ------
Anthony Tjan (together with their permitted successors, the "Stockholder -----------
Representatives") as their true and lawful agents and attorneys-in-fact to enter
- ---------------
into any agreement in connection with the transactions contemplated by this
Agreement, to exercise all or any of the powers, authority and discretion
conferred on them under any such agreement, to waive any terms and conditions of
any such agreement (other than the Exchange Consideration), to give and receive
notices on their behalf and to be their exclusive representatives with respect
to any matter, suit, claim, action or proceeding arising with respect to any
transaction contemplated by any such agreement, including, without limitation,
the defense, settlement or compromise of any claim, action or proceeding for
which ZC may be entitled to indemnification and the Stockholder Representatives
agree to act as, and to undertake the duties and responsibilities of, such
agents and attorneys-in-fact. This power of attorney is coupled with an
interest. The Stockholder Representatives shall not be liable for any action
taken or not taken by them in connection with their obligations under this
Agreement (i) with the consent of stockholders who, as of the date of this
Agreement, owned a majority in number of the outstanding shares of the Company
Stock or (ii) in the absence of their own gross negligence or wilful misconduct.
If the Stockholder Representatives shall be unable or unwilling to serve in such
capacity or if the Stockholders otherwise desire to replace the Stockholder
Representatives, their successor shall be named by those persons holding a
majority of the shares of the Company Stock outstanding at the Closing Date who
shall serve and exercise the powers of Stockholder Representatives hereunder.
SECTION 1.6 Material Adverse Effect. When used in connection with the
Company or ZC, as the case may be, the term "Material Adverse Effect" means any
-----------------------
change, effect or -2-
circumstance that, individually or when taken together with all other similar or
related 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, prospects, assets
(including intangible assets), financial condition or results of operations of
the Company or ZC, as the case may be, taken as a whole, as applicable based on
the party making the representation, warranty or disclosure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders hereby represents and warrants to ZC, as to
himself or itself but not jointly, that, except as set forth in the written
disclosure schedule delivered on or prior to the date hereof by the Stockholders
to ZC that is arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article II (the "Stockholder Disclosure Schedule"): -------------------------------
SECTION 2.1 Stockholders. Such Stockholder (other than Mosaic) is an
individual residing at the address indicated on Section 2.1 of the Stockholder
Disclosure Schedule. Mosaic is an Ontario corporation having its principal
executive office at the address indicated on Section 2.1 of the Stockholder
Disclosure Schedule.
SECTION 2.2 Authority. Such Stockholder has full legal capacity, power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement has been duly and validly authorized, executed and
delivered by such Stockholder and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes the valid and legally binding
obligation of such Stockholder, enforceable in accordance with its terms and
conditions. No Stockholder need give any notice to, make any filing with or
obtain any authorization, consent or approval of any government or governmental
agency or any other third party in order to consummate the transactions
contemplated by this Agreement.
SECTION 2.3 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any charter, by-law or other governing document of such
Stockholder or, to the knowledge of such Stockholder, any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which such
Stockholder is subject to or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel or require any notice under
any agreement, contract, lease, license, instrument or other legally binding
arrangement to which any Stockholder is a party or by which he or it is bound or
to which any of his or its assets is subject. -3-
SECTION 2.4 Brokers' Fees. No Stockholder has any liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which ZC or the Company
could become liable or obligated.
SECTION 2.5 The Shares. Each Stockholder holds of record and owns
beneficially that number of the issued and outstanding shares of Company Stock
indicated in Section 2.5 of the Stockholder Disclosure Schedule, free and clear
of any restrictions on transfer (other than restrictions under applicable
securities laws), mortgages, pledges, liens, encumbrances, charges, security
interests, options, warrants, purchase rights, contracts, commitments, equities,
claims and demands. No Stockholder is a party to any option, warrant, purchase
right or other contract or commitment that could require such Stockholder to
sell, transfer or otherwise dispose of any capital stock of the Company (other
than this Agreement). No Stockholder is a party to any voting trust, proxy or
other Agreement or understanding with respect to the voting of any capital stock
of the Company.
SECTION 2.6 Qualification of the Stockholders. (a) Each Stockholder is
acquiring the ZC Common Stock for his or its own account and not with a view to
or for resale in connection with any distribution thereof; (b) such Stockholder
understands that such shares of ZC Common Stock have not been registered under
the Securities Act or any state securities laws by reason of specified
exemptions from the registration provisions of the Securities Act which depend
upon, among other things, the bona fide nature of his or its investment intent
as expressed herein; (c) such Stockholder is able to bear the economic risk of
investment in the ZC Common Stock and is experienced and has such knowledge and
experience in financial and business matters that he or it is capable of
evaluating the risks and merits of the transactions contemplated by this
Agreement; and (d) such Stockholder acknowledges that such shares of ZC Common
Stock will bear a legend restricting transfer unless (i) the transfer is exempt
from the registration requirements of the Securities Act and an opinion of
counsel reasonably satisfactory to ZC that such transfer is exempt therefrom is
delivered to ZC, or (ii) the transfer is made pursuant to an effective
registration statement under the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company and the Stockholders (other than Mosaic) hereby represent and
warrant to ZC that, except as set forth in the written disclosure schedule
delivered on or prior to the date hereof by the Stockholders to ZC that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III (the "Company Disclosure Schedule"): ---------------------------
SECTION 3.1 Organization, Qualification and Other Equity Interests. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now being conducted.
The Company is duly qualified or licensed as a foreign corporation to do -4-
business, and is in good standing, in each jurisdiction where the character of
its properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not have a Material
Adverse Effect. Except as set forth in Section 3.1 of the Company Disclosure
Schedule, the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
SECTION 3.2 Articles of Incorporation and By-Laws. The Company has
heretofore furnished to ZC a complete and correct copy of its Certificate of
Incorporation and By-Laws as amended to date. Such Certificate of Incorporation
and By-Laws are in full force and effect. The Company is not in violation of any
of the provisions of its Certificate of Incorporation or By-Laws.
SECTION 3.3 Capitalization. The authorized capital stock of the Company
consists of 168,000 shares of Class A Common Stock, $.01 par value (the
"Class A -------
Common"), 12,000 shares of Class B Common Stock, $.01 par value (the "Class B
- ------ -------
Common"), 12,000 shares of Series A Convertible Preferred Stock, $100 par value
- ------
(the "Series A Preferred"), and 8,000 shares of Series B Non-Voting Preferred ------------------
Stock, $100 par value (the "Series B Preferred"). 50,976.5886287627 shares of ------------------
Class A Common, zero shares of Class B Common, 12,000 shares of Series A
Preferred and zero shares of Series B Preferred are issued and outstanding, all
of which are validly issued, fully paid and nonassessable, and zero shares are
held in treasury. There are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or other equity interests in, the Company. There are
no obligations, contingent or otherwise, of the Company to repurchase, redeem or
otherwise acquire any shares of Company Stock.
SECTION 3.4 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting generally the enforcement of creditors' rights and
except as the remedy of specific performance and other injunctive relief may be
unavailable in certain cases.
SECTION 3.5 No Conflict; Required Filings and Consents. -5-
(a) Section 3.5(a) of the Company Disclosure Schedule includes a list of
(i) all loan agreements, indentures, mortgages, pledges, conditional sale or
title retention agreements, security agreements, equipment obligations,
guaranties, standby letters of credit, equipment leases or lease purchase
agreements to which the Company is a party or by which it is bound and (ii) all
contracts, agreements, commitments or other understandings or arrangements to
which the Company is a party or by which it or any of its properties or assets
are bound or affected, but excluding contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of business
and involving, in each case, payments or receipts by the Company of amounts
reasonably expected to be less than $25,000 in any single instance but not more
than $100,000 in the aggregate (collectively, the "Contracts"). ---------
(b) (i) The Company has not materially breached, is not in material default
under, and has not received written notice of any material breach of or material
default under, any of the Contracts, (ii) to the knowledge of the Company, no
other party to any of the Contracts has materially breached or is in material
default of any of its obligations thereunder, and (iii) to the knowledge of the
Company, each of the Contracts is in full force and effect.
(c) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not, (i) conflict with or violate the
Certificate of Incorporation or By-Laws of the Company, (ii) conflict with or
violate any federal, foreign, state or provincial law, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to the Company or by which ----
any of its properties is bound or affected, or (iii) result in any material
breach of or constitute a material default (or, to the knowledge of the Company
and the Stockholders, an event that with notice or lapse of time or both would
become a default) under, or impair the Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a security interest, lien, claim, encumbrance or any other
restriction on any of the properties or assets of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or any of its properties is bound or affected.
(d) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit on the part of the Company of, or
filing with or notification on the part of the Company to, any federal, foreign,
state or provincial governmental or regulatory authority except for (i)
applicable requirements, if any, of the Securities Act of 1933, as amended, and
the rules and regulations thereunder (the "Securities Act"), the Securities --------------
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), and state securities laws ("Blue Sky Laws") and (ii) where the
------------ -------------
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the transactions contemplated by this Agreement, or otherwise
prevent the Company from performing its obligations under this Agreement, and
would not have a Material Adverse Effect. -6-
SECTION 3.6 Compliance, Permits.
(a) The Company is in compliance, in all material respects, with all Laws
applicable to the Company or by which any of its assets or properties are bound
or affected.
(b) The Company holds all material permits, licenses, easements, variances,
exemptions, consents, certificates, orders and approvals from governmental
authorities which are necessary for the operation of the business of the Company
as it is now being conducted (collectively, the "Company Permits"), except where ---------------
the failure to hold such Company Permits would not have a Material Adverse
Effect. The Company is in compliance in all material respects with the terms of
the Company Permits.
SECTION 3.7 Financial Statements.
(a) Attached to the Company Disclosure Schedule are (i) the unaudited
balance sheet of the Company as of December 31, 1998, together with the related
statement of income, cash flow and stockholders' equity for the fiscal year then
ended (the "December Financial Statements"), and (ii) the unaudited balance -----------------------------
sheet of the Company as of March 31, 1999 and the related statement of income,
cash flow and stockholders' equity for the three months then ended (the "Interim -------
Financial Statements") and, together with the December Financial Statements, the
- --------------------
"Financial Statements").
--------------------
(b) Each of the Financial Statements was prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and each fairly presents in all material
respects the consolidated financial position of the Company as at the respective
dates thereof and the consolidated results of its operations, cash flows and
stockholder equity for the periods indicated, except that the Financial
Statements are subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount and do not contain complete
footnotes required by GAAP.
SECTION 3.8 Absence of Certain Changes or Events. Since December 31, 1998,
the Company has conducted its business in the ordinary course and there has not
occurred: (a) any Material Adverse Effect; (b) any amendments to the Certificate
of Incorporation or By-laws of the Company; (c) any damage to, destruction, sale
or loss of any asset of the Company (whether or not covered by insurance) that
has had or could reasonably be expected to have a Material Adverse Effect; (d)
except as required by law, any material change by the Company in its accounting
methods, principles or practices; (e) any material revaluation by the Company of
any of its assets, including, without limitation, writing off notes or accounts
receivable other than in the ordinary course of business; or (g) any sale of the
property or assets of the Company, except in the ordinary course of business.
Since December 31, 1998, the Company has not taken any action that would require
ZC's consent under Section 5.1 had that provision been in effect at the time.
SECTION 3.9 No Undisclosed Liabilities. The Company has no liabilities
(absolute, accrued, contingent or otherwise), except liabilities (a) adequately
provided for in the Financial -7-
Statements, (b) which are current liabilities incurred since March 31, 1999 in
the ordinary course of business consistent with past practice, or (c) incurred
in connection with this Agreement.
SECTION 3.10 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any properties or rights of the Company before
any federal, foreign, state or provincial court, arbitrator or administrative,
governmental or regulatory authority or body.
SECTION 3.11 Employee Benefit Plans, Employment Agreements.
(a) Section 3.11 (a) of the Company Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), all employee welfare plans (as -----
defined in Section 3(1) of ERISA), and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
for the benefit of, or relating to, any present or former employee (including
any beneficiary of any such employee) of, or any present or former consultant
(including any beneficiary of any such consultant) to the Company, or any trade
or business (whether or not incorporated) which is a member of a controlled
group including the Company or which is under common control with the Company
(an "ERISA Affiliate") within the meaning of Section 414 of the Code (all such ---------------
plans, practices and programs are referred to as the "Company Employee Plans"). ----------------------
The Company has made available to ZC copies of (i) the most recent annual report
on Form 5500 series, with accompanying schedules and attachments, filed with
respect to each Company Employee Plan required to make such a filing, and (ii)
the most recent Internal Revenue Service determination or opinion letter with
respect to each Company Employee Plan intended to be qualified under Section
401(a) of the Code.
(b) (i) None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person (other than post-
employment coverage mandated by law), and neither the Company nor any ERISA
Affiliate has ever maintained, contributed to, or been required to contribute
to, any plan that is or was a "multiemployer plan" as such term is defined in
Section 3(37) of ERISA, a pension plan subject to Title IV of ERISA or a plan
subject to Part 3 of subtitle B of Title I of ERISA; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Company Employee Plan, which could
result in any material liability of the Company; (iii) all Company Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all Laws (including ERISA and the Code), currently in
effect with respect thereto (including all applicable requirements for
notification to participants or the Department of Labor, Internal Revenue
Service (the "IRS") or Secretary of the Treasury), and the Company has performed ---
all material obligations required to be performed by it under, is not in any
material respect in default under or violation of, and has no knowledge of any
such default or violation by any other party to, any of the Company Employee
Plans; (iv) each Company Employee Plan intended to qualify under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a) of the Code
is the subject of a favorable determination or opinion letter from the IRS, and
nothing has occurred which would reasonably be expected to impair such
determination (other than required -8-
changes where the time for making such changes has not yet expired); and (v)
there are no lawsuits or other claims (other than claims for benefits in the
ordinary course) pending or, to the best knowledge of the Company, threatened
with respect to any Company Employee Plan.
(c) Section 3.11(c) of the Company Disclosure Schedule sets forth a true
and complete list of: (i) all employment agreements with officers of the Company
or; (ii) all agreements with consultants who are individuals obligating the
Company to make minimum annual cash payments in an amount exceeding $50,000
(iii) all employees of, or consultants to, the Company who have executed a non-
competition agreement with the Company; (iv) all severance agreements, programs
and policies of the Company with or relating to its employees, in each case with
outstanding commitments exceeding $50,000, excluding programs and policies
required to be maintained by law; and (v) all plans, programs, agreements and
other arrangements of the Company with or relating to its employees which
contain change in control provisions.
SECTION 3.12 Labor Matters. (i) There are no controversies pending or, to
the knowledge of the Company, threatened between the Company and any of its
employees; (ii) the Company is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, and to the knowledge of the Company there are no activities or
proceedings of any labor union to organize any such employees; and (iii) to the
knowledge of the Company there are not currently and there have not been any
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company.
SECTION 3.13 Restrictions on Business Activities. Except for this
Agreement, to the Company's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon the Company or any other person which
has or would reasonably be expected to have the adverse effect of prohibiting or
impairing any material business practice of the Company or the acquisition of
property by the Company.
SECTION 3.14 Title to Property. The Company has good and marketable title
to all of its properties and assets, free and clear of all liens, charges and
encumbrances, except liens for taxes not yet due and payable and such liens 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
would not have a Material Adverse Effect; and, to the knowledge of the Company,
all leases pursuant to which the Company leases from others real or personal
property, are in good standing, valid and effective in accordance with their
respective terms, and there is not, to the knowledge of the Company, under any
of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material
default). The Company does not own any real property. -9-
SECTION 3.15 Taxes.
(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 (or similar),
workers' compensation, unemployment compensation, environmental (including Taxes
under Code section 59A) 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, declarations, forms and
information statements with respect to Taxes required to be filed with the IRS
or any other federal, foreign, state or provincial taxing authority, domestic or
foreign, including, without limitation, consolidated, combined and unitary tax
returns, including any amendments thereto.
(b) (i) All Tax Returns of, relating to or which include the Company which
are required to have been filed have been filed on a timely basis with the
appropriate authorities and all such Tax Returns are true, correct and complete
in all material respects, (ii) all material Taxes required to have been paid by
the Company (whether or not shown on any Tax Return) have been paid in full
on a
timely basis to the appropriate authorities, and (iii) all material Taxes or
other material amounts required to have been collected or withheld by the
Company have been timely and properly collected or withheld and paid to the
appropriate authorities.
(c) (1) No claim has ever been made by an authority in a jurisdiction where
the Company does not file Tax Returns that the Company is or may be subject to
Tax by that jurisdiction, (2) no Taxing authority has asserted in writing any
adjustment, deficiency, or assessment that could result in additional Tax for
which the Company is or may be liable, (3) there is no pending audit,
examination, investigation, dispute, proceeding or claim for which the Company
has received notice relating to any Tax for which the Company is or may be
liable, (4) no statute of limitations with respect to any Tax for which the
Company is or may be liable has been waived or extended, (5) the Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return, (6) the Company is not a party to any Tax sharing or Tax allocation
agreement, arrangement or understanding and (7) there are no powers of attorney
with respect to Taxes of the Company currently in force.
(d) There are no liens on any of the assets of the Company which arose in
connection with any failure or asserted failure to pay any Tax, other than liens
for current Taxes not yet due and payable.
(e) The Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
in the nature of compensation that -10-
would not be deductible by reason of Sections 162, 280G or 404 of the Code. No
consent has been filed under Section 341(f) of the Code with respect to theCompany.
(f) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local, or foreign law) as transferee or successor, by contract or
otherwise. The Company is not a party to any joint venture, partnership or other
arrangement that could be treated as a partnership for Tax purposes.
(g) Copies of (i) any Tax examinations, (ii) extensions of statutes of
limitations, (iii) the federal, state, local and foreign income Tax Returns of
the Company, and (iv) substantive correspondence between the Company and all
Taxing authorities for its last three (3) taxable years have previously been
furnished or made available to ZC.
(h) Section 3.15(h) of the Company Disclosure Schedule lists (A) the
Company's Tax basis in its assets as of December 31, 1998 and as utilized in the
Tax Returns, (B) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign Tax, excess charitable contribution,
adjustments under Section 481 of the Code and other Tax attributes allocable to
the Company as shown on the Tax Returns, and (C) the amount of any deferred gain
or loss allocable to the Company arising out of any deferred intercompany
transaction and any excess loss account attributable to the Company.
(i) The unpaid Taxes of the Company (A) did not as of December 31, 1998
materially exceed the reserve for Taxes (other than deferred Taxes established
to reflect book-tax timing differences) set forth on the Company's December
Financial Statements and (B) do not materially exceed that reserve as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Company in filing its Tax Returns.
(j) No Tax is required to be withheld by ZC as a result of the payment of
the Exchange Consideration pursuant to this Agreement, except as set forth in
Section 3.15(j) of the Company Disclosure Schedule.
SECTION 3.16 Environmental Matters. The Company: (i) to its knowledge, has
obtained all material approvals which are required to be obtained under all
applicable federal, state or local laws or any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water, or land or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company ("Environmental Laws"); (ii) to its ------------------
knowledge, is in material compliance with all terms and conditions of such
required approvals, and also is in material compliance with all other
limitations, restrictions, conditions, standards, prohibitions, -11-
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; and (iii) as of the date hereof, is not aware of nor has
received notice of any past or present violations by the Company of
Environmental Laws or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued material compliance with or which would give rise to any material
common law or statutory liability, or otherwise form the basis of any material
claim, action, suit or proceeding, against the Company based on or resulting
from the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material orwaste.
SECTION 3.17 Intellectual Property. The Company owns or licenses all
patents, patent applications, trademarks, service marks, trade names, corporate
names, copyrights, trade secrets or other proprietary rights necessary to the
conduct of the business of the Company. Except as listed in Section 3.17 of the
Company Disclosure Schedule, the Company has not licensed from any third party
any proprietary rights or, to the knowledge of the Company, infringed,
misappropriated or otherwise conflicted with any proprietary rights of any third
parties. To the Company's knowledge, no activity of any third party infringes
upon any proprietary rights of the Company. All of the Company's trademarks and
trade names are listed in Section 3.17 of the Company Disclosure Schedule and
the Company has good title to all of such trademarks and trade names free and
clear of any lien, charge, license or other encumbrance.
SECTION 3.18 Immigration Compliance. (a) The Company is in compliance in
all material respects with all applicable foreign, federal, state and local
laws, rules, directives and regulations relating to the employment authorization
of its employees (including, without limitation, the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Section 212(n) and 274A of
the Immigration and Nationality Act, as amended and supplemented, and all
implementing regulations relating thereto), and the Company has not employed nor
is it currently employing any unauthorized aliens (as such term is defined under
8 CFR 274a.1(a)).
(b) The Company has not received any notice from the Immigration and
Naturalization Service (the "INS") or the U.S. Department of Labor (the "DOL")
--- ---
of the disapproval or denial of any visa petition pending before the INS or
labor certification pending before the DOL on behalf of any employee or
prospective employee of the Company.
(c) Section 3.18 (c) of the Company Disclosure Schedule contains a true,
complete and accurate list of all non-immigrant or immigrant visa petitions
pending before the INS and labor certifications pending before the DOL on behalf
of any of the employees or prospective employees of the Company.
(d) Since the approval of each of their respective visa petitions, there
has been no material change in the terms and conditions of employment of any
employees of the Company, provided that it is acknowledged that certain
employees from time to time unilaterally breach the terms of their employment
with the Company. -12-
SECTION 3.19 Insurance. Section 3.19 of the Company Disclosure Schedule
describes each insurance policy maintained by the Company with respect to the
Company's properties, assets and operations and sets forth the date of
expiration of each such insurance policy. All of such insurance policies are in
full force and effect. The Company is not in default with respect to its
obligations under any of such insurance policies.
SECTION 3.20 Accounts Receivable. The accounts receivable of the Company
as reflected in the most recent Financial Statements, to the extent uncollected
on the date hereof, and the accounts receivable reflected on the books of the
Company are valid and existing and represent monies due, and the Company has
made reserves reasonably considered adequate for receivables not collectible in
the ordinary course of business, and (subject to the aforesaid reserves) are
subject to no refunds or other adjustments and to no defenses, rights of setoff,
assignments, restrictions, encumbrances or conditions enforceable by third
parties on or affecting any thereof.
SECTION 3.21 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or its affiliates.
SECTION 3.22 Change in Control Payments. Except as set forth in Section
3.22 of the Company Disclosure, the Company has no plans, programs or agreements
to which it is a party, or to which it is subject, pursuant to which payments
may be required or acceleration of benefits may be required upon a change of
control of the Company.
SECTION 3.23 Expenses. Section 3.23 of the Company Disclosure Schedule
attached hereto sets forth a description of all of the estimated third party
expenses of the Company, including those payable to auditors, consultants and
other professionals, as of the date hereof which the Company expects to incur,
or has incurred, in connection with the transactions contemplated by this
Agreement. Notwithstanding anything else to the contrary herein, the
information set forth in Section 3.23 of the Company Disclosure Schedule shall
not act as a limitation on such third party expenses or otherwise limit the
rights of such third parties against the Company.
SECTION 3.24 Books and Records. The books of account, stock records,
minute books and other records of the Company are true and complete in all
material respects. The minute books of the Company made available to ZC contain
a complete and accurate record of all corporate actions of directors and
stockholders since the time of incorporation of the Company through the date of
this Agreement.
SECTION 3.25 Full Disclosure. No representation or warranty made by the
Company contained in this Agreement and no statement contained in any
certificate or schedule furnished by the Company to ZC in, or pursuant to the
provisions of, this Agreement, including without limitation the Company
Disclosure Schedule, contains any untrue statement of a material fact or -13-
omits or will at the Closing omit to state any material fact necessary, in the
light of the circumstances under which it was made, in order to make statements
herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ZC
ZC hereby represents and warrants to the Company and the Stockholders that,
except as set forth in the written disclosure schedule delivered on or prior to
the date hereof by ZC to the Company that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV (the "ZC Disclosure Schedule"): ----------------------
SECTION 4.1 Organization and Qualification; Subsidiaries. ZC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted. ZC is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not have a Material
Adverse Effect. ZC does not have any subsidiaries.
SECTION 4.2 Charter and By-Laws. ZC has heretofore furnished to the
Company a complete and correct copy of its Certificate of Incorporation and By-
Laws, as amended to date. Such Certificate of Incorporation and By-Laws are in
full force and effect.
SECTION 4.3 Capitalization. The authorized capital stock of ZC consists
of (i) 9,624,060 shares of ZC Common Stock and (ii) 96,200 shares of Class A
Preferred Stock, par value $.01 per share ("Preferred Stock"). Immediately ---------------
following the Closing (giving effect to the transactions contemplated by the
GTCR Purchase Agreement), the issued and outstanding capital stock of ZC will be
as set forth in Section 4.3 of the ZC Disclosure Schedule. The shares of ZC
Common Stock to be issued pursuant to the GTCR Purchase Agreement will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and
subject to no preemptive rights, and shall be issued in compliance with
applicable securities laws. Except as set forth in Section 4.3 of the ZC
Disclosure Schedule, there are no options, warrants or other rights, agreements,
trusts, proxies, arrangements or commitments of any character relating to the
issued or unissued shares of capital stock of ZC or obligating ZC to issue or
sell any shares of capital stock of, or other equity interests in, ZC. There
are no obligations, contingent or otherwise, of ZC to repurchase, redeem or
otherwise acquire shares of ZC Common Stock. Assuming the accuracy of the
Stockholders' representations, the issuance of the Shares is not required to be
registered under the Securities Act of 1933 or any state securities laws. -14-
SECTION 4.4 Authority Relative to this Agreement. ZC has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by ZC and the
consummation by ZC of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of ZC, and no
other corporate proceedings on the part of ZC are necessary to authorize this
Agreement or to consummate the transactions contemplated thereby. This
Agreement has been duly and validly executed and delivered by ZC and, assuming
the due authorization, execution and delivery by the Company and the
Stockholders, constitutes a legal, valid and binding obligation of ZC
enforceable against it in accordance with its terms.
SECTION 4.5 No Conflict, Required Filings and Consents.
(a) Except as set forth in Section 4.5(a) of the ZC Disclosure Schedule,
the execution and delivery of this Agreement by ZC does not, and the performance
of this Agreement by ZC will not, (i) conflict with or violate the Certificate
of Incorporation or By-Laws of ZC, (ii) conflict with or violate any Laws
applicable to ZC or by which its properties are bound or affected, or (iii)
result in any material breach of or constitute a material default (or an event
which with notice or lapse of time or both would become a default) under, or
impair ZC's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of ZC pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which ZC is a party or by which ZC or any of its properties are
bound or affected.
(b) The execution and delivery of this Agreement by ZC does not, and the
performance of this Agreement by ZC will not, require any consent, approval,
authorization or permit on the part of ZC of, or filing with or notification on
the part of ZC to, any federal foreign, state or provincial governmental or
regulatory authority except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, and the Blue Sky Laws, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the transactions contemplated by this Agreement, or otherwise prevent ZC from
performing its obligations under this Agreement, and would not have a Material
Adverse Effect.
SECTION 4.6 No Prior Activities. ZC is a newly formed corporation which
has conducted no material business activity other than entering into the
financing agreements and any ancillary agreements related thereto listed in
Section 4.6 of the ZC Disclosure Schedule (the "Initial Financing Agreements"), ----------------------------
true and correct copies of which ZC has furnished to the Company and the
Stockholders prior to the date hereof. As of the date hereof and the Closing
Date, except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and the Initial Financing Agreements and
any other agreements or arrangements contemplated -15-
hereby or thereby, ZC 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. ZC is not a party to any
material contracts or agreements other than those set forth in Section 4.6 of
the ZC Disclosure Schedule.
SECTION 4.7 Validity of ZC Common Stock. The shares of ZC Common Stock to
be issued pursuant to this Agreement will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and subject to no preemptiverights.
SECTION 4.8 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of ZC or its affiliates.
SECTION 4.9 Tax-Free Exchange. ZC has not taken any action which would
disqualify the share exchange contemplated hereby from being a tax-free exchange
under Section 351 of the Code.
SECTION 4.10 Full Disclosure. No representation or warranty made by ZC
contained in this Agreement and no statement contained in any certificate or
schedule furnished by ZC to the Company in, or pursuant to the provisions of,
this Agreement, including without limitation the ZC Disclosure Schedule,
contains any untrue statement of a material fact or omits to state any material
fact necessary, in the light of the circumstances under which it was made, in
order to make the statements herein not misleading. ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
SECTION 5.1 Conduct of Business by the Company Pending the Closing. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the Closing, unless ZC shall otherwise agree in
writing, which agreement shall not be unreasonably withheld, the Company shall
conduct its business only in, and the Company shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice other than actions expressly provided for in this Agreement; and the
Company shall use all reasonable commercial efforts to preserve intact the
business organization of the Company, to keep available the services of the
present officers, employees 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 business relations. By way of amplification and not
limitation, except as expressly provided for in this Agreement, the Company
shall not, during the period from the date of this Agreement and continuing
until the Closing, directly or indirectly do, or propose to do, any of the
following without the prior written consent of ZC, which consent shall not be
unreasonably withheld: -16-
(a) amend the Certificate of Incorporation or By-Laws of the Company;
(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 theCompany;
(c) except in the ordinary course of business, sell, pledge, dispose of
or encumber any assets (tangible or intangible) of the Company except for (i)
dispositions of obsolete or worthless assets and (ii) sales of assets not in
excess of $10,000 in the aggregate;
(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, any of its securities
including without limitation, shares of Company Stock or any option, warrant or
right, directl
