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Agreement and Plan of Merger

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Sectors: Telecommunications
Governing Law: Colorado , View Colorado State Laws
Effective Date: December 21, 2001
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Exhibit 10.1
------------


AGREEMENT AND PLAN OF MERGER


AMONG


PROXIMITY, INC.,


ACT TELECONFERENCING, INC.,


ACT PROXIMITY, INC.,


ROBERT C. KAPHAN,


RICHARD PARLATO,


AND


NORTH ATLANTIC VENTURE FUND II, L.P.


Dated as of December 21, 2001


1


AGREEMENT AND PLAN OF MERGER


TABLE OF CONTENTS


Page ARTICLE I THE MERGER..................................................................................... 2
Section 1.1 The Merger.............................................................................. 2
Section 1.2 Effective Time.......................................................................... 3
Section 1.3 Effects of the Merger................................................................... 3
Section 1.4 Articles and Bylaws; Directors and Officers............................................. 3
Section 1.5 Conversion of Securities/Merger Consideration........................................... 3
Section 1.6 Adjustment of Merger Consideration...................................................... 5
Section 1.7 Closing of Company Transfer Books....................................................... 5
Section 1.8 Further Assurances...................................................................... 6


ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.............................................. 8
Section 2.1 Organization, Standing and Power........................................................ 8
Section 2.2 Authority............................................................................... 9
Section 2.3 Consents and Approvals; No Violation.................................................... 9
Section 2.4 SEC Documents and Other Reports......................................................... 10
Section 2.5 Required Vote of Parent Stockholders.................................................... 10
Section 2.6 Brokers................................................................................. 11
Section 2.7 Litigation.............................................................................. 11
Section 2.8 Operations of Sub....................................................................... 11


ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................ 11
Section 3.1 Organization, Standing and Power........................................................ 11
Section 3.2 Capital Structure....................................................................... 12
Section 3.3 Authority............................................................................... 13
Section 3.4 Consents and Approvals; No Violation.................................................... 14
Section 3.5 Financial Statements.................................................................... 14
Section 3.6 No Dividends; Absence of Certain Changes or Events...................................... 15
Section 3.7 Governmental Permits.................................................................... 17
Section 3.8 Tax Matters............................................................................. 18
Section 3.9 Actions and Proceedings................................................................. 19
Section 3.10 Certain Agreements..................................................................... 20
Section 3.11 Employee Benefits...................................................................... 20
Section 3.12 Worker Safety and Environmental Laws................................................... 22
Section 3.13 Labor Matters.......................................................................... 22


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Section 3.14 Intellectual Property; Software...................................................... 22
Section 3.15 Availability of Assets and Legality of Use........................................... 26
Section 3.16 Real Property........................................................................ 27
Section 3.17 Real Property Leases................................................................. 27
Section 3.18 Personal Property Leases............................................................. 27
Section 3.19 Title to Assets...................................................................... 27
Section 3.20 Contracts............................................................................ 27
Section 3.21 Status of Contracts.................................................................. 28
Section 3.22 Insurance............................................................................ 29
Section 3.23 Takeover Statutes and Charter Provisions............................................. 29
Section 3.24 Required Vote of Company Shareholders................................................ 29
Section 3.25 Brokers.............................................................................. 29
Section 3.26 Hart-Scott-Rodino.................................................................... 30
Section 3.27 Accredited Investors................................................................. 30


ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS................................................... 30
Section 4.1 Conduct of Business Pending the Merger................................................ 30
Section 4.2 Filing of Statements with the IRS..................................................... 32


ARTICLE V ADDITIONAL AGREEMENTS........................................................................ 33
Section 5.1 Shareholder Meeting................................................................... 33
Section 5.2 Access to Information................................................................. 33
Section 5.3 Fees and Expenses..................................................................... 33
Section 5.4 Commercially Reasonable Efforts....................................................... 33
Section 5.5 Public Announcements.................................................................. 34
Section 5.6 State Takeover Laws................................................................... 34
Section 5.7 Notification of Certain Matters....................................................... 35
Section 5.8 Termination of Agreements............................................................. 35


ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER.......................................................... 35
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger............................ 35
Section 6.2 Conditions to Obligation of the Company and the Company Shareholdersto Effect the
Merger......................................................................................... 36
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger...................... 36


ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.......................................................... 37
Section 7.1 Termination........................................................................... 37
Section 7.2 Effect of Termination................................................................. 39
Section 7.3 Amendment............................................................................. 39
Section 7.4 Waiver................................................................................ 39


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ARTICLE VIII INDEMNIFICATION..................................................................... 39
Section 8.1 Indemnification by Active Shareholders.......................................... 39
Section 8.2 Indemnification by Company...................................................... 40
Section 8.3 Indemnification Procedure....................................................... 40
Section 8.4 Limitations on Indemnification.................................................. 41
Section 8.5 Payment of Indemnification Claims............................................... 42


ARTICLE IX GENERAL PROVISIONS.................................................................... 42
Section 9.1 Survival of Representations and Warranties...................................... 42
Section 9.2 Notices......................................................................... 43
Section 9.3 Interpretation.................................................................. 44
Section 9.4 Counterparts.................................................................... 44
Section 9.5 Entire Agreement; No Third-Party Beneficiaries.................................. 44
Section 9.6 Governing Law................................................................... 44
Section 9.7 Assignment...................................................................... 45
Section 9.8 Severability.................................................................... 45
Section 9.9 Enforcement of this Agreement................................................... 45


4


EXHIBITS


Exhibit A Form of Parent Note


Exhibit B Form of Earnout Agreement (with respect to Earnout Shares)


Exhibit C Form of Escrow Agreement (with respect to Escrow Consideration)


Exhibit D Form of Opinion of Faegre & Benson


Exhibit E Form of Registration Rights Agreement


Exhibit F Form of Employment Agreements


Exhibit G Form of Opinion of Downs Rachlin Martin PLLC


5


AGREEMENT AND PLAN OF MERGER


This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is dated as of
--------- December 21, 2001, by and among ACT Teleconferencing, Inc., a Colorado corporation ("Parent"), ACT Proximity, Inc., a Colorado corporation and a direct
------ wholly owned subsidiary of Parent ("Sub"), Proximity, Inc., a Vermont
--- corporation (the "Company") (Sub and the Company being hereinafter collectively
------- referred to as the "Constituent Companies"), Robert C. Kaphan ("Kaphan"),
--------------------- ------ Richard Parlato ("Parlato" and together with Kaphan, the "Active Shareholders"),
------- ------------------- and North Atlantic Venture Fund II, L.P., a Delaware limited partnership ("NAVF," and together with the Active Shareholders, the "Company Shareholders"). ---- --------------------


W I T N E S S E T H:


WHEREAS, the respective Boards of Directors of Parent, Sub and Company have approved and declared advisable the merger of Sub and the Company (the "Merger"), upon the terms and subject to the conditions set forth herein, ------- whereby each issued and outstanding share of Capital Stock of the Company will be converted into the right to receive a portion of the Merger Consideration;


WHEREAS, the Company Shareholders own all of the issued and outstanding Company Capital Stock and desire to enter into this Agreement to effect the Merger and receive their proportionate share of the Merger Consideration;


NOW, THEREFORE, in consideration of the premises, representations, warranties and agreements herein contained, the parties agree as follows:


ARTICLE I
THE MERGER


Section 1.1 The Merger. Upon the terms and subject to the
---------- conditions set forth in this Agreement, and in consideration for the Shareholder Consideration and the Escrow Consideration (collectively, the "Merger
------ Consideration"), in accordance with the Colorado Business Corporations Act (the ------------- "CBCA") the Company shall be merged with and into Sub at the Effective Time. ---- Following the Merger, the separate existence of the Company shall cease and Sub shall continue as the surviving corporation (the "Surviving Corporation") and
--------------------- shall succeed to and assume all the rights and obligations of the Company in accordance with the CBCA. Notwithstanding anything to the contrary herein, at the election of Parent, any Subsidiary of Parent may be substituted for Sub as a Constituent Company in the Merger. In such event, the parties agree to execute an appropriate amendment to this Agreement, in form and substance reasonably satisfactory to Parent and the Company, in order to reflect such substitution. The parties intend that the Merger will qualify as a reorganization as described in Sections 368(a)(2)(D) and 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
----


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Section 1.2 Effective Time. The Merger shall become effective at the
-------------- time provided in the Statement of Merger (the "Statement of Merger") to be
------------------- executed in accordance with the relevant provisions of the CBCA and filed with the Secretary of State of the State of Colorado. The Statement of Merger shall provide that the effective time of the Merger (the "Effective Time") shall be
-------------- the date of the Closing. The filing of the Statement of Merger shall be made on the date of the Closing.


Section 1.3 Effects of the Merger. The Merger shall have the effects
--------------------- set forth in Section 7-111-106 of the CBCA and Chapter 11 of the Vermont Business Corporations Act.


Section 1.4 Articles and Bylaws; Directors and Officers.
-------------------------------------------


(a) At the Effective Time, the Articles of Incorporation of Sub, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. At the Effective Time, the Bylaws of Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or in the Articles of Incorporation of the Surviving Corporation.


(b) The directors and officers of Sub at the Effective Time shall be the directors and officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.


Section 1.5 Conversion of Securities/Merger Consideration. As of the
--------------------------------------------- Effective Time, by virtue of the Merger and without any action on the part of Sub, the Company, or the holders of any securities of the Constituent Companies:


(a) All capital stock of the Company ("Company Capital Stock"),
--------------------- including, without limitation, the common stock, $0.001 par value (the "Company
------- Common Stock"), the Series A Preferred Stock of the Company, $0.001 par value, ------------ and the Series B Preferred Stock of the Company, $0.001 par value (collectively the Series A Preferred Stock and the Series B Preferred Stock are referred to herein as the "Company Preferred Stock") shall be exchanged for the Merger
----------------------- Consideration and, other than the right of each holder thereof to receive a portion of the Merger Consideration, no other consideration or capital stock of the Parent or Sub shall be delivered in exchange therefor.


(b) The Parent shall pay the following consideration (collectively, the "Shareholder Consideration") to the Company Shareholders or the Earnout
------------------------- Escrow Agent in such proportions as set forth on Schedule 1.5:
------------


(i) $450,000 (the "Cash Consideration") in immediately
------------------
available funds, payable by wire transfer or in accordance with other
instructions from the Company Shareholders;


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(ii) 290,000 shares of Parent's common stock ("Parent Common
-------------
Stock"), $.01 par value (the "Stock Consideration");
----- -------------------


(iii) Notes in the aggregate original principal amount of
$675,000, payable by Parent to Active Shareholders in the form of Exhibit A
---------
(the "Parent Notes").
------------


(iv) 135,000 shares of Parent Common Stock (the "Earnout
-------
Stock") which shall be delivered to Downs Rachlin Martin PLLC, as escrow
-----
agent (the "Escrow Agent") and held pursuant to the Earnout Agreement in
------------
the form of Exhibit B (the "Earnout Agreement") and the Escrow Agreement in
--------- -----------------
the form of Exhibit C (the "Escrow Agreement").
--------- ----------------


(v) 25,000 shares of Parent Common Stock, which shall be
delivered to NAVF.


(c) In addition to the Shareholder Consideration, and pursuant to the Escrow Agreement, Parent shall deliver the following consideration (the "Escrow
------ Consideration,") to Escrow Agent, such Escrow Consideration to secure the ------------- representations, warranties and covenants of Active Shareholders and to be held in escrow for the Active Shareholders in such proportions as set forth on


Schedule 1.5: ------------


(i) $ 50,000 in immediately available funds, payable by wire
transfer or in accordance with other instructions from Escrow Agent;


(ii) 35,000 shares of Parent Common Stock;


(iii) Notes in the aggregate principal amount of $75,000 in
substantially the form of the Parent Notes, but with additional provisions
providing for the reduction of principal amounts pursuant to this Agreement
and the Escrow Agreement; and


(iv) 15,000 shares of Parent Common Stock, which upon release
from escrow under the terms of the Escrow Agreement, shall be deemed to be
additional shares of Earnout Stock subject to the terms of the Earnout
Escrow Agreement.


(d) In calculating the consideration payable under this Section 1.5,
----------- Parent and Sub shall be entitled to rely on Schedule 1.5 provided by the Company
------------ Shareholders, the representations and warranties contained in Section 3.2 and
----------- the certificate delivered pursuant to Section 6.3(e). If such schedule,
-------------- representations, warranties and certificate are not correct, Parent shall have the right, but not the obligation, to adjust the Merger Consideration accordingly.


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(e) Company Shareholders agree that, for a period of five (5) years after the Closing, they shall not, without the prior written consent of Parent, sell in any three month period shares of capital stock of Parent in excess of the maximum amount permitted under Rule 144(e) promulgated under the Securities Act of 1933.


(f) Upon the request of Company Shareholders, certain shares that make up the Stock Consideration will be issued to Downs Rachlin Martin PLLC, as nominee. Parent agrees that it will issue new certificates representing such shares in accordance with written instructions from Downs Rachlin Martin PLLC within three (3) business days of receipt of such instructions and the return of the appropriate certificates representing such shares.


Section 1.6 Adjustment of Merger Consideration. As soon as
---------------------------------- reasonably practicable following the Closing, Parent shall cause an audit (the "Audit") of the Surviving Corporation to be performed for the year ending ------ December 31, 2001. The Audit shall be conducted according to GAAP, consistent with the past practice of the Company, and shall be conducted without taking into account transaction costs of the Company associated with the Merger or any effect of the Merger (it being expressly understood that Company Shareholders shall be responsible for all of their expenses as provided in Section 5.3). If the variance between (i) $96,105, and (ii) the current assets of the Company as of December 31, 2001 less the liabilities of the Company as of December 31, 2001 (the "December Difference"), each as determined by the Audit, is equal to or
------------------- greater than $50,000, then the Active Shareholders and Parent, as applicable, shall pay the amount of such variance in excess of $50,000 to the other party in accordance with the procedures below, with Parent making payment if the December Difference exceeds $96,105, and Active Shareholders making payment if $96,105 exceeds the December Difference. Any amounts credited or payable pursuant to this section shall be outside of and not included in any limitations or caps on indemnification pursuant to this Agreement or the Escrow Agreement. Any amounts credited or payable pursuant to this section shall be on a dollar-for-dollar basis, with the first such adjustment to be made against the Parent Notes until, in the case of any credit or adjustment in favor of Parent, the amount due thereunder is reduced to zero, the second such adjustment to be made against the Stock Consideration (with the price of each share of Parent Common Stock to be considered equal to $10) until, in the case of any credit or adjustment in favor of Parent, all of the Stock Consideration has been exhausted, and any excess amount to be made against the Cash Consideration.


Section 1.7 Closing of Company Transfer Books. At the date of the
--------------------------------- execution of this Agreement, the transfer books of the Company shall be closed, and no transfer of Company Capital Stock Interests shall thereafter be made on the records of the Company.


Section 1.8 Further Assurances. If at any time after the Effective
------------------ Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect


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or confirm, of record or otherwise, in the Surviving Corporation its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either of the Constituent Companies, or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either of the Constituent Companies, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Constituent Company, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm the Surviving Corporation's right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of such Constituent Company and otherwise to carry out the purposes of this Agreement.


Section 1.9 Closing; Closing Deliveries.
---------------------------


(a) The closing of the transactions contemplated by this Agreement (the "Closing") and all actions specified in this Agreement to occur at the
------- Closing shall take place at 10:00 a.m., Eastern Standard Time, on January 2, 2002, or at such other time as Parent and the Company shall agree (the date and time on which the Closing actually occurs is referred to herein as the "Closing
------- Date"). The Closing shall be conducted by videoconference. This Agreement and ---- all documents and instruments to be delivered at Closing may be delivered electronically or by facsimile copy and each party undertakes to transmit original executed documents promptly following the Closing.


(b) Subject to fulfillment or waiver of the conditions set forth in Article VI, at the Closing, Parent and Sub, as applicable, shall deliver to the ---------- Company Shareholders and Escrow Agent, as applicable, all of the following:


(i) copies of the Articles of Incorporation for Parent and
Sub, certified as of a recent date by the Secretary of State of the State
of Colorado;


(ii) certificates of good standing of Parent and Sub, issued as
of a recent date by the Secretary of State of the State of Colorado;


(iii) a certificate of the Secretary or an Assistant Secretary
of Parent, dated the Closing Date, in form and substance reasonably
satisfactory to the Company and the Company Shareholders, as to (a) no
amendments to the Articles of Incorporation of the Parent and Sub since
November 30, 2001, (b) the current Bylaws of Parent and Sub, (c) the
resolutions of the Boards of Directors of Parent and Sub authorizing the
execution and performance of this Agreement and the transactions
contemplated herein and (d) the incumbency and signatures of the officers
of Parent and Sub executing this Agreement;


(iv) the Merger Consideration;


(v) the opinion of Faegre & Benson in the form of Exhibit D;
---------


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(vi) a Regis
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