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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ELTRAX SYSTEMS, INC.,
WINDWARD ACQUIRING CORPORATION,
AND
WINDWARD TECHNOLOGY GROUP, INC.,
MARCH 31, 1999
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 31, 1999 (the
"Agreement"), is by and among ELTRAX SYSTEMS, INC., a Minnesota corporation
(the "Parent"), WINDWARD ACQUIRING CORPORATION., a Georgia corporation and a
wholly owned subsidiary of Parent ("Acquiring Sub"), WINDWARD TECHNOLOGY
GROUP, INC., a Georgia corporation ("Windward"), and the shareholders of
Windward, whose names are set forth in this signature blocks to this
Agreement (collectively, the "Shareholders").
RECITALS
A. The Boards of Directors of Parent, Acquiring Sub and Windward each
have approved the merger of Windward with and into Acquiring Sub upon the
terms and subject to the conditions set forth herein (the "Merger") and deem
it advisable and in the best interests of their respective shareholders that
the foregoing merger be consummated; and
B. For federal income tax purposes, it is intended that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
C. For accounting purposes, it is intended that the Merger will be
accounted for as a pooling of interests within the meaning of Accounting
Principles Board Opinion Xx. 00 ("XXX Xxxxxxx Xx. 00").
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, the parties hereto agree as
follows:
ARTICLE
1.
THE MERGER
1.1. THE MERGER.
Simultaneously with the Closing (defined below), the parties hereto
will effect the Merger by filing the required number of originals of the
articles of merger. The Merger will become effective at the time specified
in the articles of merger (the "Effective Time").
1.2. SURVIVING CORPORATION.
At the Effective Time, Windward will be merged with and into
Acquiring Sub, in accordance with the applicable provisions of the Georgia
Business Corporation Code (the "GBCC"), whereupon the separate existence of
Windward will cease and Acquiring Sub will continue as the surviving
corporation (the "Surviving Corporation"). The identity, existence, rights,
privileges, powers, franchises, properties and assets of Windward shall
continue unaffected and unimpaired by the Merger, and all of the rights,
privileges, powers, franchises, properties, and assets of Acquiring Sub shall
be vested in the Surviving Corporation.
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1.3. MERGER CONSIDERATION.
The aggregate consideration payable to the Shareholders will be One
Million Three Hundred Seventy Five Thousand (1,375,000) shares of Parent
common stock, par value $.01 per share (the "Parent Common Stock").
1.4. CONVERSION OF SHARES.
At the Effective Time:
(a) Each share of Windward common stock outstanding
immediately prior thereto the ("Windward Common Stock") will,
by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive,
38.09497423 shares of Parent Common Stock, adjusted to the
nearest whole number, as set forth below:
Shares of Windward Shares of Parent
Shareholder Common Stock Common Stock
----------- ------------------ ----------------
Xxxxx Able 6,000 228,570 shares of Parent
Common Stock
Xxx Xxxxxxxxx 10,000 380,950 shares of Parent
Common Stock
Xxxx Xxxxxxx 4,000 152,380 shares of Parent
Common Stock
Xxxxxx Xxxxxxx 10,000 380,950 shares of Parent
Common Stock
Xxxx Xxxxxx 521 19,847 shares of Parent
Common Stock
Xxxx Xxx 1,562 59,504 shares of Parent
Common Stock
Xxx Xxxxxxxx 2,048 78,019 shares of Parent
Common Stock
Xxxxxx Xxxx 711 27,086 shares of Parent
Common Stock
Xxxxxxx X. Xxxxxxxxx 711 27,086 shares of Parent
Common Stock
Xxxxxxx Xxxxxx 541 20,609 shares of Parent
Common Stock
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(b) Each share of common stock of Acquiring Sub, no par
value, issued and outstanding immediately prior thereto will, by
virtue of the Merger and without any action on the part of the
holder thereof, be converted into one share of the common stock
of the Surviving Corporation, no par value.
(c) The Shareholders will cease to have any rights as
Shareholders of Windward, except such rights, if any, as they may
have pursuant to the GBCC.
1.5. CLOSING.
The closing of the Merger (the "Closing") will be held on March 31,
1999 or such later date as mutually determined by Parent and Windward (the
"Closing Date"), but in no event later than April 15, 1999 (the "Termination
Date"). The Closing will be held at such location as mutually determined by
the parties.
1.6. ARTICLES OF INCORPORATION.
The articles of incorporation of Acquiring Sub as in effect
immediately prior to the Effective Time will be the articles of incorporation
of the Surviving Corporation until further amended in accordance with
applicable law.
1.7. BYLAWS.
The bylaws of Acquiring Sub as in effect immediately prior to the
Effective Time will be the bylaws of the Surviving Corporation until amended
or repealed in accordance with applicable law.
1.8. DIRECTORS AND OFFICERS.
Immediately after the Effective Time of the Merger, the directors and
officers of the Surviving Corporation will be as set forth below, and will
serve in such capacities until their respective successors are duly elected
and qualified:
DIRECTORS OFFICERS
--------- --------
Clunet X. Xxxxx Xxx Xxxxxxxxx - President
Clunet X. Xxxxx - Secretary
Xxxxxxxx X. Xxxxx - Treasurer
ARTICLE
2.
REPRESENTATIONS AND WARRANTIES
OF WINDWARD AND CERTAIN SHAREHOLDERS
Windward and each of Xxx Xxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxx X. Able and
Xxxx X. Xxxxxxx (the "Initial Shareholders") severally represent and warrant
to Parent and to Acquiring Sub that the following statements are true,
complete and correct as of the date hereof and shall be true, complete and
correct as of the Closing Date:
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2.1. CORPORATE ORGANIZATION.
Except as disclosed in Schedule 2.1, Windward is a corporation duly
incorporated, validly existing and in good standing under the laws of
Georgia, has full corporate power and authority to carry on its business as
it is now being conducted and to own, lease and operate its properties and
assets. Windward has heretofore delivered to Parent complete and correct
copies of its articles or certificate of incorporation and bylaws, as
presently in effect. In addition, Windward has delivered to Parent a good
standing certificate from the State of Georgia bearing a date within thirty
(30) days of the date of this Agreement. Except as set forth on Schedule
2.1, Windward is duly qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction in which the
character or location of the properties and assets owned, leased or operated
by it or the nature of the business conducted by it requires such
qualification or licensing, except where the failure to be so qualified,
licensed or in good standing in such other jurisdiction is not reasonably
likely, individually or in the aggregate, to have a material adverse effect
on the business of Windward taken as a whole. Windward does not own or
control any interest in any corporation, partnership, joint venture or other
business association or entity.
2.2. CAPITALIZATION.
(a) The authorized capital stock of Windward consists of
100,000 shares of common voting stock, no par value. Except as set
forth on Schedule 2.2, a total of 36,094 shares of common voting
stock will be issued and outstanding on or prior to the Closing and
owned by the Shareholders as set forth on Schedule 2.2. Except as
set forth on Schedule 2.2, all issued and outstanding shares of
capital stock of Windward are (or will be) duly authorized, validly
issued, fully paid and nonassessable and have not been issued in
violation of, any preemptive rights. Except as set forth on Schedule
2.2, there are no outstanding options, warrants, conversion
privileges or other rights to purchase or acquire any shares of
capital stock or other equity securities of Windward or any
outstanding securities that are convertible into or exchangeable for
such shares, securities or rights. Except as set forth on Schedule
2.2, there are no contracts, commitments, understandings,
arrangements or restrictions by which Windward or any of its
Shareholders are bound to issue or acquire any additional shares of
its capital stock or other equity securities or any options,
warrants, conversion privileges or other rights to purchase or
acquire any capital stock or other equity securities of Windward or
any securities convertible into or exchangeable for such shares,
securities or rights.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, including the Schedules hereto, each Shareholder
represents and warrants that neither he nor any third person has any
claim, right or interest in or to shares of Windward Common Stock
other than as allocated on Schedule 2.2
2.3. AUTHORIZATION.
The Shareholders and the Board of Directors of Windward have taken
all action required by law, the articles or certificate of incorporation and
bylaws of Windward and otherwise to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
described herein (the "Transactions"). No other consent or approval from any
party is necessary to validly complete the Transactions, other than as may be
required under the GBCC. This Agreement has been duly and validly executed
and delivered by the Shareholders and Windward, and is the valid and binding
legal obligation of the Shareholders and Windward, enforceable against each
of them in
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accordance with its terms, subject to the effect of applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and other laws
affecting the rights of creditors generally (the "Enforceability
Exceptions"), or the availability of specific performance, injunctive relief
and other equitable remedies and to general principles of equity (regardless
of whether such principles are considered in a proceeding in equity or at
law).
2.4. NON-CONTRAVENTION.
Except as set forth on Schedule 2.4, neither the execution, delivery
and performance of this Agreement nor the consummation of the transactions
contemplated herein will: (i) violate or be in conflict with any provision
of the articles or certificate of incorporation or bylaws of Windward; (ii)
require that written consent first be obtained from any third party; or (iii)
be in conflict with, or constitute a default under, any material instrument,
agreement or obligation to which Windward is a party.
2.5. FINANCIAL STATEMENTS.
Windward has furnished to Parent the unaudited balance sheet and
statement of earnings for Windward as of and for the fiscal year ended
December 31, 1998 and for the two month period ended February 28, 1999 (the
"Latest Balance Sheet") (collectively, the "Financial Statements"). Except as
set forth on Schedule 2.5, the Financial Statements: (i) are in accordance
with generally accepted accounting principles in all material respects; (ii)
fairly present the financial position and the results of operations of
Windward as of the date thereof; and (iii) in all material respects
accurately state each of the various account balances.
2.6. ACCOUNTS RECEIVABLE.
Except as set forth on Schedule 2.6: (i) the accounts receivable
which are reflected in the Latest Balance Sheet or which arose subsequent
thereto were validly obtained in the ordinary course of business of Windward;
and (ii) except to the extent of applicable reserves shown in the Latest
Balance Sheet, all of the receivables owing to Windward constitute valid and
enforceable claims arising from bona fide arms-length transactions, and
Windward has not received any written or oral claims, defenses or refusals to
pay, or granted any rights of set-off with respect to any receivables.
2.7. LIABILITIES.
Except as set forth on Schedule 2.7, since the date of Latest Balance
Sheet Windward has not incurred any liability or obligation of any nature
except those that may have been incurred in the ordinary course of business
and consistent with past practices.
2.8. INVESTIGATIONS; LITIGATION.
Except as described on Schedule 2.8, there are no material claims or
actions by anyone against Windward that are pending or, to the knowledge of
Windward or any of the Shareholders, have been threatened. To the knowledge
of Windward or any of the Shareholders, there is no basis for any such claim
or action.
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2.9. ABSENCE OF CERTAIN CHANGES.
Except as set forth on Schedule 2.9 since February 28, 1999, Windward
has not suffered any adverse change in its condition (financial or
otherwise), working capital, assets, properties, liabilities, obligations,
reserves or businesses, or experienced any event or failed to take any
action, which is reasonably likely to have a material adverse effect on the
business of Windward taken as a whole.
2.10. TITLE TO PROPERTY; CONDITION.
Except as set forth on Schedule 2.10:
(a) Windward has good and marketable title in and to all
of the assets reflected in the Latest Balance Sheet and all of the
assets purchased or otherwise acquired since February 28, 1999
(except for such assets as may have been sold or otherwise disposed
of in the ordinary course of business), subject to no material lien
of any kind or nature;
(b) Windward owns no real property;
(c) All inventory of Windward consists of a quality and
quantity usable and salable in the ordinary course of business,
except as reserved against in the Latest Balance Sheet, or included
in reserves made prior to Closing, consistent with ordinary and
customary practices.
2.11. TAX RETURNS.
Except as disclosed on Schedule 2.11, proper and accurate amounts
have been withheld by Windward from its employees for federal and state tax
purposes for taxable year 1998 and periods ending on or before March 31, 1999
and, to the extent due under applicable law, have been deposited with
appropriate depositories or taxing authorities in compliance in all material
respects with the tax withholding, deposit and payment provisions of
applicable federal, state, and local laws. Except as disclosed on Schedule
2.11, Windward has timely filed all federal, state, local, and other such Tax
returns and reports that are due on or prior to the Closing Date (giving
effect to any extensions of time to file such returns), and except as
disclosed on Schedule 2.11, Windward has timely paid all governmental taxes,
levies, duties, license and registration fees and charges of any nature
whatsoever including penalties and interest imposed thereon ("Taxes") due and
payable in respect of such returns and reports. Except as disclosed on
Schedule 2.11, to the knowledge of Windward and the Shareholders, all such
returns are true, correct and complete in all material respects. Except as
disclosed on Schedule 2.11, no Tax returns are presently under audit or
examination by any federal, state or local tax authority, and no written
adjustments have been proposed or asserted by the Internal Revenue Service or
any other agency in respect of any liability for Taxes arising out of or
relating to such returns.
2.12. INSURANCE.
Schedule 2.12 contains an accurate and complete list of all policies
of fire and other casualty, general liability, theft, life, workers'
compensation, health, directors and officers liability, business interruption
and other forms of insurance owned or held by Windward, specifying the
insurer, the policy number, the term of the coverage and the same information
as to predecessor policies for the previous five years. All present policies
are in full force and effect and all premiums that are due as of the date
hereof and as of the Closing Date with respect thereto have been paid.
Windward has not been denied any form of insurance and no policy of insurance
has been revoked or rescinded during the past three years, except as
described under Schedule 2.12.
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2.13. BENEFIT PLANS.
Except as disclosed on Schedule 2.13, Windward does not maintain, is
not a party to, bound by or a contributor to, or required to contribute to,
(a) any employee pension benefit plans whether or not qualified under Section
401(a) of the Code, (b) any employee welfare benefit plans, or (c) any other
compensation, fringe or welfare plan or program, policy, understanding or
arrangement providing plan benefits to its employees or employees of others
(collectively, the "Employee Plans"). As used in this Section, the terms
"employee pension benefit plan" and "employee welfare benefit plan" will have
the respective meanings assigned to such terms in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Each Employee
Plan described on Schedule 2.13 is in compliance with the material
requirements of ERISA, and has been operated and administered in accordance
with the material requirements of the Code, ERISA and the plan document. To
the knowledge of Windward and the Shareholders, all required government
filings and disclosures have been timely and fully made, are true, correct
and complete in all material respects, and no prohibited transaction or other
act or omission which could result in the imposition of an excise tax has
occurred. Notwithstanding the foregoing, no representation is made with
respect to the effects of terminating the Windward 401(k) Plan, which will
occur on or about March 31, 1999.
2.14. CONTRACTS AND COMMITMENTS; NO DEFAULT.
Schedule 2.14 sets forth a complete and accurate list of all
agreements or other binding commitments or proposals involving a possible
liability or obligation of Windward or the other party of at least $25,000 or
which are not terminable without penalty at the option of Windward upon no
more than 30 days' notice (the "Contracts"). Windward has made available to
Parent true and accurate copies of the Contracts. The Contracts are valid,
binding and in full force and effect, and are enforceable against Windward in
accordance with their respective terms (subject to the Enforceability
Exceptions) and to the knowledge of Windward and the Shareholders are
enforceable against the parties thereto in accordance with their terms
(subject to the Enforceability Exceptions). Windward is not in default under
any of the Contracts, nor has any notice of default been received by
Windward. To the knowledge of Windward and the Shareholders, all other
parties to the Contracts have performed or are performing all obligations
required to be performed by them and are not in default thereunder.
2.15. LABOR MATTERS.
Schedule 2.15 sets forth a list of all employees of Windward and
includes their position, current salary, and 1998 wage information for each
person. Except as set forth on Schedule 2.15 and except as are not material
to the business of Windward: (i) to the knowledge of Windward and the
Shareholders, Windward is and has at all times been in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination and occupational safety
and health requirements, and has not and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint against either
Windward or any of the Shareholders pending or, to the knowledge of Windward
and each of the Shareholders, threatened before the National Labor Relations
Board or any other comparable government authority; (iii) there is no labor
strike, dispute, slowdown or stoppage actually pending or, to the knowledge
of Windward and each of the Shareholders, threatened against or directly
affecting Windward; (iv) no collective bargaining agreement is binding and in
force against either Windward or any of the Shareholders or currently being
negotiated by either Windward or any of the Shareholders; or (v) Windward is
not delinquent in payments to any person for any wages, salaries,
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commissions, bonuses or other direct or indirect compensation for any
services performed by them or amounts required to be reimbursed to such
persons, including without limitation any amounts due under any pension plan,
welfare plan or compensation plan.
2.16. INTELLECTUAL PROPERTY RIGHTS.
(a) Windward owns or is licensed or otherwise possesses legally
enforceable rights, directly or through its subsidiaries, under all patents
and patent applications and has the right to use all trademarks, trade names,
service marks, copyrights and any applications for such trademarks, trade
names, service marks and copyrights, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material (collectively, the "Intellectual
Property) that are necessary to conduct its material business as currently
conducted and, except as qualified by or disclosed in Schedule 2.16, is aware
of no intellectual property right of any third party that may prevent
Windward or its subsidiaries from conducting its business as currently
conducted.
(b) To the knowledge of Windward and the Shareholders, neither
Windward nor any of its subsidiaries will be as a result of the execution and
delivery of this Agreement or the performance of Windward's obligations under
this Agreement, knowingly infringing upon any Intellectual Property rights of
others or in breach of any license, sublicense or other agreement relating to
the Intellectual Property or third party Intellectual Property rights, except
as qualified by or disclosed in Schedule 2.16.
(c) To the knowledge of Windward and the Shareholders, the
manufacturing, marketing, licensing or sale of the products or performance of
the service offerings of Windward and its subsidiaries relating to the
conduct of its business consistent with past practice does not infringe upon
any Intellectual Property right of any third party; and to the knowledge of
Windward and its subsidiaries, the Intellectual Property rights of Windward
and its subsidiaries are not knowingly being infringed by activities,
products or services of any third party.
2.17. HAZARDOUS SUBSTANCES AND HAZARDOUS WASTES.
Except as set forth on Schedule 2.17:
(a) To the knowledge of Windward and the Shareholders,
there is not now, nor has there ever been, any disposal, release or
threatened release of Hazardous Material (as defined below) on, from
or under properties now or ever owned or leased by or to Windward
(the "Properties") and there has not been generated by or on behalf
of Windward any Hazardous Material that would result in a material
adverse effect to the business of Windward, taken as a whole. No
Hazardous Material has been disposed of or allowed to be disposed of
by Windward, or to the knowledge of Windward and the Shareholders by
any other party, on or off any of the Properties during the period
that Windward owned or leased the property which may give rise under
applicable Environmental Law to a clean-up responsibility, personal
injury liability or property damage claim against Windward or
Windward being named a potentially responsible party for any such
clean-up costs, personal injuries or property damage or create any
cause of action by any third party against Windward. For purposes of
this subsection, the terms "disposal," "release," and "threatened
release" shall have the definitions assigned thereto by the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended. The term "Hazardous Material" means any material
or substance which is (i) defined as a "hazardous waste" or a
"hazardous substance" under applicable Law, (ii) designated as a
8
"hazardous substance" pursuant to Section 311 of the Federal Water
Pollution Control Act, (iii) defined as a "hazardous waste" pursuant
to Section 1004 of the Federal Resource Conservation and Recovery
Act, or (iv) defined as a "hazardous substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended. The term "Environmental Laws"
means any law, statute, ordinance, rule or regulation of any
governmental authority for which the primary purpose is to control
pollution and protect the environment, including the statutes
referenced above in this paragraph.
(b) To the knowledge of Windward and the Shareholders,
none of Windward's operations at the Properties is (or, with respect
to past Properties and Properties of former subsidiaries, was at the
time of disposition) in violation of any Environmental Law (with
respect to past Properties and Properties of former subsidiaries,
Environmental Laws in effect at the time of disposition) relating to
industrial hygiene or to the environmental conditions on, under or
about such Properties, including without limitation soil and ground
water condition and there are (or at the time of disposition were) no
underground tanks or related piping, conduits or related structures
used by Windward in the conduct of its business at such properties.
During the period that Windward owned or leased the Properties, to
the knowledge of Windward and the Shareholders, neither Windward nor
any third party used, generated, manufactured or stored on, under or
about such Properties or transported to or from such Properties any
Hazardous Material.
2.18. BROKERS.
Except as disclosed on Schedule 2.18, neither the Shareholders nor
Windward or any of its directors, officers or employees has employed any
broker, finder, or financial advisor or incurred any liability for any
brokerage fee or commission, finder's fee or financial advisory fee, in
connection with the transactions contemplated hereby, nor is there any basis
known to either Windward or any of the Shareholders for any such fee or
commission to be claimed by any person or entity.
2.19. INTENTIONALLY OMITTED.
2.20. SHAREHOLDERS' REPRESENTATIONS.
In addition to the foregoing representations, each of the
Shareholders individually represents and warrants to Parent as follows:
(a) The Shareholders are acquiring the shares of Parent's
Common Stock pursuant to the Merger for such Shareholders' sole
account (and such Shareholders will be the sole beneficial owners
thereof) for the purpose of investment and not with a view to
distribution thereof within the meaning of the Securities Act of
1933, as amended and the rules and regulations thereunder (the
"Securities Act"), nor with any present intention of distribution or
selling such shares of Parent Common Stock in connection with any
such distribution, and such Shareholders understand that such shares
have not been registered under the Securities Act or any applicable
state securities law and therefore cannot be resold unless they are
registered under the Securities Act and any applicable state
securities laws or unless an exemption from registration is available.
(b) There are available over the Internet various public
filings made by the Parent with the Securities and Exchange
Commission pursuant to its XXXXX filing requirements (the "Eltrax
Reports"). The Shareholders have had access to, and have had
sufficient time to review
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and consider, such Eltrax Reports. The Shareholders have been
afforded an opportunity to ask questions of and receive answers from
representatives of Parent concerning the terms and conditions of the
Transactions and to obtain any additional information as such
Shareholders have requested in writing to verify the accuracy of the
Eltrax Reports and copies of any exhibits identified in such
documents that such Shareholders have requested.
(c) The Shareholders have accurately, truthfully and
completely executed the Investor Questionnaire, in the form of
Exhibit 2.20.
(d) The Shareholders have consented to the following
legends on the certificate or certificates for shares of Parent
Common Stock to be issued to each such Shareholder in connection with
the Merger:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS AND MAY BE SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A
REGISTRATION STATEMENT WITH RESPECT TO SUCH
TRANSACTION IS IN EFFECT PURSUANT TO THE
PROVISIONS OF SUCH LAWS OR IF, IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER,
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH LAWS IS AVAILABLE.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN
RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9
OF THE "GEORGIA SECURITIES ACT OF 1973," AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH
ACT.
2.21. ACCURACY OF INFORMATION.
Neither this Agreement or the Exhibits and Schedules hereto, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein or herein not
misleading. Windward and the Shareholders promptly shall notify Parent of any
change or event which is reasonably likely have a material effect on the
assets, operations, business, or condition of Windward.
ARTICLE
3.
REPRESENTATIONS AND WARRANTIES
OF PARENT
The Parent represents and warrants to the Shareholders that the
following statements are true, complete and correct as of the date hereof and
shall be true, complete and correct as of the Closing Date:
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3.1. ORGANIZATION.
Each of Parent and Acquiring Sub is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and each has all requisite corporate power and authority to
own, lease and operate its respective properties and to carry on its business
as it is now being conducted. Acquiring Sub is a recently-formed Georgia
corporation that has not conducted, and will not conduct prior to the
Closing, any activities other than those incident to its formation and in
connection with the consummation of the Merger. Each of Parent and Acquiring
Sub is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to qualify could have a material adverse effect on the
business, results of operations or financial condition of the Parent and its
subsidiaries taken as a whole.
3.2. AUTHORITY AND VALIDITY OF AGREEMENT.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized
and approved by the Boards of Directors of Parent and Acquiring Sub and by
Parent as the sole shareholder of Acquiring Sub, and no other corporate
proceedings on the part of Parent or Acquiring Sub are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed by each of Parent and Acquiring
Sub and constitutes valid and binding obligations of Parent and Acquiring
Sub, enforceable against each of them in accordance with their terms, subject
to the Enforceability Exceptions.
3.3. CONSENTS AND APPROVALS.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not, except for any applicable
requirements of the Securities Act and state securities laws, and the filing
and recordation of appropriate merger documents as required by the GBCC,
require any filing with or permit, consent or approval of any authority.
3.4. CAPITALIZATION.
The authorized capital stock of the Parent consists of 50,000,000
shares of Parent Common Stock and 970,000 shares of undesignated preferred
stock, of which there were approximately 22,481,118 shares of Parent Common
Stock issued and outstanding on March 26, 1999. All shares of Parent Common
Stock to be issued and delivered in the Merger will be, at the time of
issuance and delivery, validly issued, fully paid, nonassessable and free of
preemptive rights.
3.5. NON-CONTRAVENTION.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated herein will: (i) violate
or be in conflict with any provision of the articles or certificate of
incorporation or bylaws of the Parent or Acquiring Sub; or (ii) be in
conflict with, or constitute a default under, any instrument or other
agreement or obligation to which the Parent or Acquiring Sub is a party.
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3.6. SEC REPORTS AND FINANCIAL STATEMENTS.
Since January 1, 1995, Parent has filed with the SEC all forms,
statements, reports and documents (including all exhibits, post-effective
amendments and supplements thereto) required to be filed by it under each of
the Securities Act, the Exchange Act and the respective rules and regulations
thereunder, all of which, as amended if applicable, complied when filed in
all material respects with all applicable requirements of the appropriate act
and the rules and regulations thereunder. No subsidiary of Parent is
required to file any form, report or other document with the SEC. The
audited financial statements for the fiscal year ended December 1998 and the
two prior fiscal years have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may
be indicated therein or in the notes thereto) and fairly present the
financial position of Parent and its subsidiaries as of the dates thereof and
the results of their operations and changes in financial position for the
periods then ended.
3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS
Except for the acquisition of Sulcus Hospitality Technologies Corp.
which occurred on March 25, 1999, since December 31, 1998, Parent has not
suffered any change in its condition (financial or otherwise), working
capital, assets, properties, liabilities, obligations, reserves or
businesses, or experienced any event or failed to take any action, which is
reasonably likely to have a material adverse effect on the business of Parent
taken as a whole.
3.8. ACCURACY OF INFORMATION.
Neither this Agreement, the Exhibits and Schedules hereto, nor the
Eltrax Reports, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein or herein not misleading. Parent promptly shall notify the
Shareholders of any change or event which is reasonably likely to have a
material effect on the assets, operations, business, condition or prospects
of Parent.
ARTICLE
4.
[INTENTIONALLY OMITTED]
12
ARTICLE
5.
COVENANTS
5.1. ACCESS TO INFORMATION.
Subject to applicable law, Windward shall afford to Parent and its
respective accountants, counsel, financial advisors and other representatives
(the "Parent Representatives") and Parent shall afford to Windward and its
accountants, counsel, financial advisors and other representatives (the
"Windward Representatives") full access during normal business hours with
reasonable notice throughout the period prior to the Effective Time to all of
their respective properties, books, contracts, commitments and records.
5.2. CONFIDENTIALITY.
The parties hereto will not use, or permit the use of, any of the
information relating to any other party hereto furnished to it in connection
with the transactions contemplated herein ("Information") in a manner or for
a purpose detrimental to such other party or otherwise than in connection
with the transaction, and that they will not disclose, divulge, provide or
make accessible (collectively, "Disclose"), or permit the Disclosure of, any
of the Information to any person or entity, other than their responsible
directors, officers, employees, investment advisors, accountants, counsel and
other authorized representatives and agents, except as may be required by
judicial or administrative process or, in the opinion of such party's regular
counsel, by other requirements of Law, unless the disclosing party first
obtains the prior written consent of the other parties hereto. The parties
hereto also will promptly return to the party from whom originally received
all original and duplicate copies of written materials containing Information
should the transactions contemplated herein not occur. This Section 5.2
survives Closing and any termination of this Agreement.
5.3. FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions as
the other party or parties, as the case may be, may reasonably
require in order to carry out the intent of this Agreement,
including, but not limited to, any securities filings.
(b) At all times from the date hereof until the Closing,
each party will promptly notify the other in writing of the
occurrence of any event which it reasonably believes will or may
result in a failure by such party to satisfy the conditions specified
in Article 6 and Article 7 hereof.
5.4. REGISTRATION RIGHTS.
Parent agrees to provide the Shareholders with the registration
rights with respect to Parent Common Stock as set forth on Exhibit 5.4 hereto.
5.5. POOLING.
On and after the Closing Date, each Shareholder covenants that he
will not sell, transfer, assign or otherwise directly or indirectly dispose
of his shares of Parent Common Stock, or reduce his market
13
risk with respect to such shares before Parent publicly discloses, based on
the financial statements of the Parent and the Surviving Corporation on a
combined basis, the combined earnings of Parent and Surviving Corporation
which includes at least a thirty (30) day period of combined operations.
Shareholders and Parent acknowledge and agree that it is anticipated that
such first public disclosure by Parent will be through Parent's filing of its
quarterly report on Form 10-Q for the quarter ended June 30, 1999, which
filing is due on August 16, 1999.
5.6. EMPLOYMENT AND NON-COMPETITION.
Upon Closing, each Initial Shareholder will receive a letter of
employment from Parent, in the form of Exhibit 5.6. Each Initial Shareholder
covenants that through and including March 31, 2002, or such earlier date as
Parent either terminates Shareholder's employment relationship with the
Parent without Cause (as defined below), or alters in a materially adverse
fashion the terms of Exhibit 5.6:
(a) He will not, directly or indirectly, alone or as a
partner, member, officer, director, shareholder or employee of any
other firm or entity, engage in Georgia or South Carolina (the
"Restricted Area") in any commercial activity in competition with (i)
any part of Windward's business as conducted on the date hereof, or
(ii) any commercial activities undertaken on behalf of Parent or
Windward by the Shareholder during the term of his employment with
Parent and Windward. For purposes of this subparagraph, "shareholder"
shall not include beneficial ownership of less than five percent (5%)
of the combined voting power of all issued and outstanding voting
securities of a publicly held corporation whose voting stock is
traded in a public market.
(b) He will not disclose to a third party unrelated to
Windward or Parent, or use to the detriment of Parent or Windward any
Confidential Information of which Shareholder has actual knowledge.
"Confidential Information" means information or material which is not
generally available to others including: (i) information or material
relating to the Parent or Windward, and its businesses as conducted
or anticipated to be conducted, business plans, operations, past,
current or anticipated software, products or services, customers or
prospective customers, or research, engineering, development,
manufacturing, purchasing, accounting, or marketing activities; (ii)
information or material relating to the Parent's or Windward's
inventions, improvements, discoveries, "know-how," technological
developments, or unpublished works, or to the materials, apparatus,
processes, formulae, plans or methods used in the development,
manufacture or marketing of the Parent's or Windward's software,
products or services; (iii) any information marked "proprietary,"
"private," or "confidential"; (iv) trade secrets; (v) software in any
stage of development, including source code and binary code, software
designs, specifications, programming aids (including subroutines and
productivity tools), programming languages, interfaces, visual
displays, technical documentation, user manuals, data files and
databases; and (vi) any similar information of the type described
above which the Parent or Windward obtained from another party and
which the Parent or Windward treats as or designates as being
proprietary, private or confidential, whether or not owned or
developed by the Parent or Windward; provided, however, that
"Confidential Information" shall not include any such information
that is generally available to others not employed by Parent or that
is required to be disclosed by law, court order or legal process.
(c) He will not divert or attempt to divert, either
directly or indirectly, from the Parent, any trade or business with
any customer, supplier or vendor with whom such Shareholder
14
has had any contact or association during the term of his employment
with Parent and Windward; or
(d) He will not take any affirmative action, outside the
scope of his employment, to induce or attempt to induce any person
employed by the Parent to leave the employment of the Parent to
engage in any commercial activity in competition with Parent.
(e) For purposes of this Section 5.6, Cause means (a)
fraud of a material nature, or material theft or embezzlement of the
Parent's or Surviving Corporation's assets or material misuse of
their respective funds, or violation of law constituting a felony,
(b) the intentional and continued failure of Shareholder to
substantially perform Shareholder's duties with Parent as reasonably
assigned by Parent from time-to-time (other than any such failure
resulting from incapacity due to physical or mental illness; provided
that Shareholder shall in no event be required to relocate his
location of residence more than 30 miles, and specifically excluding
any failure by Shareholder, after reasonable efforts, to meet
performance expectations), for a period of 30 days after written
notice describing such failure is delivered to Shareholder's home
address.
5.7. DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) The indemnification provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation as in effect
at the Effective Time shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of
individuals who at the Effective Time were directors, officers,
employees or agents of Windward. Parent hereby guaranties
unconditionally the satisfaction of all such rights to
indemnification (and shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified
Party to the fullest extent permitted under the GBCC).
(b) In the event the Surviving Corporation or Parent or
any of their successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to
any person, then and in each such case, proper provisions shall be
made so that the successors and assigns of the Surviving Corporation
or Parent shall assume the obligations of the Surviving Corporation
or the Parent, as the case may be, set forth in this Section 5.7.
5.8. TAX RETURNS.
All Tax returns of Windward that have not been filed for all periods
(or portions thereof) ending on or prior to the Closing Date shall be
delivered to the Representative (as defined in Section 9.7) for his review
and approval (at his own cost and expense), which shall not be unreasonably
withheld or delayed, at least fifteen (15) business days prior to their
filing. Parent agrees that it will not amend or cause Windward to amend any
such Tax returns or any other Tax returns of Windward filed on or prior to
the Closing Date, without advance written consent of the Representative. The
parties agree that any compensation deduction attributable to the vesting of
Windward Common Stock on the Closing Date will be reported on Windward's
final Tax returns. If any tax authority determines that Windward qualifies
as an "S" corporation for any taxable period (or portion thereof) ending on
or prior to the Closing Date, Parent shall cause Surviving Corporation to
distribute to the Representative an amount equal to the product of the
cumulative taxable income of Windward for such periods and 40%; provided,
15
however, no such distribution shall be made to the extent that any income tax
paid with respect to Windward for such periods is not refundable or has not
been refunded to the Surviving Corporation.
5.9. TRANSFER TAXES.
All sales and use taxes, as well as any other transfer taxes
(exclusive of such taxes, if any, imposed directly on the exchange of
Windward stock certificates), shall be a liability of Windward and not the
Shareholders.
5.10. SECTION 368 MERGER.
Parent undertakes and agrees to use its best efforts to cause the
Merger, and to take no action which would cause the Merger not, to qualify
for treatment as a "reorganization" within the meaning of Section 368(a) of
the Code. Parent does not have any knowledge of any fact or circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
5.11. TAX DISPUTES.
Notwithstanding any provision of this Agreement to the contrary,
Parent shall provide Representative within five (5) days after receipt
thereof of notice of any communication received from any taxing authority in
connection with any income Tax matter of Windward for any taxable period (or
portion thereof) ending on or before the Closing Date, including notice of
the commencement of any Tax audit or administrative or judicial proceeding
related to the Taxes or income Tax returns of Windward ("Tax Matters"). Such
notice shall include copies of any document received from any taxing
authority. The Representative may participate, through counsel of his own
choosing and at his own expense, in any audit, or administrative or judicial
proceeding involving any Tax Matter. Parent shall (and shall cause Acquiring
Sub to) cooperate in good faith in each phase of resolving such Tax Matter
and no such Tax Matter shall be settled or resolved without the prior written
consent of the Representative (which shall not be unreasonably withheld).
The procedures contained in Section 9.6 shall not apply to income tax matters
of Windward that constitute Tax Matters.
5.12. TAX RECORDS.
Parent shall (or shall cause Acquiring Sub to) maintain and preserve
all Tax records and supporting documents of Windward necessary for
Shareholders or Windward to establish any positions taken by Windward on any
Tax return for any taxable period (or portion thereof) ending on or prior to
the Closing Date. Parent shall (or shall cause Acquiring Sub to) provide
Representative reasonable access to such records as is necessary or
appropriate for Shareholders to establish any such position.
5.13. SURVIVAL.
The covenants contained in Section 5.8 through and including this
Section 5.13 shall survive until the applicable statutes of limitations
expire.
5.14. EMPLOYEE BENEFITS. For purposes of participation, vesting
and (except in the case of Parent's pension plan, if any) benefit accrual
under Windward's employee benefit plans, the service of the employees of
Windward prior to the Effective Time shall be treated as service with Parent,
to the extent permissible under Parent's plans and applicable law.
16
ARTICLE
6.
CONDITIONS TO OBLIGATION OF PARENT AND ACQUIRING SUB
The following are conditions to the obligations of the Parent and
Acquiring Sub to close the Transactions:
(a) The continued material accuracy of the
representations and warranties of Windward and the Shareholders
contained in this Agreement;
(b) The performance in all material respects of
obligations of each of Windward and the Shareholders contained in
this Agreement;
(c) Parent's receipt of the opinion of Xxxxxx and Bird,
LLP, counsel for Windward, dated on the Closing Date, in the form
reasonably agreed to by counsel for Parent; and
(d) Parent's receipt of advice from Price Waterhouse,
Coopers LLP that the Merger qualifies as a pooling of interests
transaction under APB Opinion No. 16.
ARTICLE
7.
CONDITIONS TO THE OBLIGATION OF WINDWARD AND SHAREHOLDERS
The following are conditions to the obligations of Windward and the
Shareholders to close the Transactions:
(a) The continued material accuracy of the
representations and warranties of Parent contained in this Agreement;
(b) The performance in all material respects of
obligations of the Parent contained in this Agreement;
(c) Shareholders' receipt of the opinion of Jaffe, Raitt,
Heuer & Xxxxx, P.C., counsel for Parent, dated on the Closing Date,
in the form reasonably agreed to by counsel for Windward; and
(d) The receipt by Shareholders of the employment
letters, substantially in the form of Exhibit 5.8.
(e) Windward shall have received a written opinion of
Jaffe, Raitt, Heuer & Xxxxx, P.C., which shall state that the
Shareholders may rely thereon, in form reasonably satisfactory to
Windward and the Shareholders (the "Tax Opinion"), to the effect that
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and (ii) the exchange in the Merger of
the Windward Common Stock for Parent Common Stock will not give rise
to gain or loss to the Initial Shareholders. In rendering such Tax
Opinion, counsel shall be entitled to rely upon factual
representations of the officers of Windward and Parent reasonably
satisfactory in form and substance to such counsel.
17
ARTICLE
8.
TERMINATION AND ABANDONMENT
8.1. METHODS OF TERMINATION.
This Agreement may be terminated and the transactions contemplated
herein may be abandoned in accordance with the following:
(a) By mutual written consent of Parent, Acquiring Sub,
Windward and the Shareholders;
(b) By the Parent and Acquiring Sub, if any of the
conditions provided for in Article 6 have not been satisfied or
waived in writing by Parent prior to Closing; or
(c) By Windward and the Shareholders, if any of the
conditions provided for in Article 7 have not been satisfied or
waived in writing by Windward and the Shareholders prior to Closing;
and
(d) By any party, if on the Termination Date the
Transactions have not already closed.
8.2. PROCEDURE UPON TERMINATION.
In the event of termination and abandonment pursuant to Section
8.1(a), written notice thereof will forthwith be given to the other party or
parties, and the provisions of this Agreement will terminate, and the
Transactions contemplated herein will be abandoned, without further action by
any party hereto. If this Agreement is terminated as provided herein: (i)
each party will, upon request, redeliver all documents, work papers and other
material of any other party (and all copies thereof) relating to the
transactions contemplated herein, whether so obtained before or after the
execution hereof, to the party furnishing the same; (ii) the confidentiality
obligations of Section 5.2 will continue to be applicable; and (iii) no party
will have any liability for a breach of any representation, warranty,
agreement, covenant or other provision of this Agreement.
ARTICLE
9.
SURVIVAL AND INDEMNIFICATION
9.1. SURVIVAL.
Subject to Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.13 and 9.5(b),
the representations, warranties and covenants of each of the parties hereto
will survive the Closing until one (1) year after the Closing Date.
9.2. INDEMNIFICATION BY PARENT.
Parent agrees to indemnify each of the Shareholders from and against
any and all loss, liability or damage suffered or incurred by them including
any and all costs and expenses, including without
18
limitation reasonable legal fees and expenses incurred, in connection with
enforcing the indemnification rights of Shareholders pursuant to this Section
9.2 by reason of (i) any untrue representation of or breach of warranty set
forth in Article 3, or (ii) any loss, liability or damage suffered or
incurred by the Shareholders by reason of any nonfulfillment of any covenant,
agreement or undertaking of Parent in this Agreement
9.3. INDEMNIFICATION BY SHAREHOLDERS.
(a) The Initial Shareholders severally and not jointly,
on a pro rata basis, agree to indemnify Parent, Acquiring Sub, their
directors, officers, employees and agents, from and against any and
all loss, liability or damage suffered or incurred by it including
any and all costs and expenses, including without limitation
reasonable legal fees and expenses incurred, but excluding indirect,
special or consequential damages or lost profits, in connection with
enforcing the indemnification rights of Parent or Acquiring Sub
pursuant to this Section 9.3+(a) by reason of (i) any untrue
representation of or breach of warranty set forth in Article 2, or
(ii) any and all loss, liability or damage suffered or incurred by
Parent or Acquiring Sub by reason of any nonfulfillment of any
covenant, agreement or undertaking of Windward or any Shareholder in
this Agreement;
(b) Each Shareholder other than an Initial Shareholder,
severally and not jointly, on a pro rata basis, agrees to indemnify
Parent, Acquiring Sub, their directors, officers, employees and
agents, from and against any and all loss, liability or damage
suffered or incurred by it including any and all costs and expenses,
including without limitation reasonable legal fees and expenses
incurred, in connection with enforcing the indemnification rights of
Parent or Acquiring Sub pursuant to this Section 9.3(b) by reason of
(i) any untrue representation of or breach of warranty set forth in
Section 2.2(b) or Section 2.20, or (ii) any and all loss, liability
or damage suffered or incurred by Parent or Acquiring Sub by reason
of any nonfulfillment of any covenant, agreement or undertaking set
forth in Section 5.5;
(c) Notwithstanding the foregoing, any such
indemnification obligation shall be reduced by the net insurance
proceeds, if any, collected by Parent, under or pursuant to Windward
insurance policies existing on or prior to the Closing Date, as well
as any tax benefit inuring to Parent. The amount of any such tax
benefit shall be determined by taking into account the effect, if any
and to the extent reasonably determinable, of timing differences
resulting from the acceleration or deferral of items of gain or loss
resulting from such losses (and any corresponding future adjustments)
and shall otherwise be determined so that payment by the Indemnifying
Party of the indemnification obligation, as adjusted to give effect
to any such tax benefit, will make the Claimant as economically whole
as is reasonably practical with respect to the losses upon which the
indemnification obligation is based. In determining such tax
benefit, the Claimant (as defined below) shall make available to the
Indemnifying Party, calculations (in reasonable detail) setting forth
the tax benefit and applicable supporting documents. Any dispute as
to the amount of the tax benefit shall be resolved by arbitration as
provided in this Agreement;
(d) Notwithstanding the foregoing, no Shareholder other
than the Shareholder who actually breaches the covenant set forth in
Section 5.5 shall have an indemnification obligation with respect to
a breach of Section 5.5; and provided further, that any breach of
Section 2.2(b) shall not be subject to either Section 9.1 or the
Threshold Amount (defined below), but any losses of Parent arising
from such breach shall be limited to additional Merger consideration
that Parent or Windward pays to a person, consistent with Section
9.6, who claims to be entitled to a
19
portion of the Parent Common Stock paid to the Shareholders, plus
Parent's and Windward's reasonable fees and expenses incurred in
defending any such claim;
(e) Notwithstanding the foregoing, Parent shall be
entitled to no indemnification based upon the claim that a
Shareholder violation of this Section 9.3 has caused a decrease in
the trading value of Parent's common stock.
9.4. LIMITATION ON INDEMNIFICATION.
Each Shareholders' aggregate indemnification obligations under this
Article 9 will be limited to an amount equal to the Parent Common Stock
multiplied by each of the following: (i) the closing price of such stock on
the Closing Date and (ii) the percentage of Parent Common Stock received by
such Shareholder. In the discretion of each of the Shareholders, any payment
on a claim made pursuant to this Article 9 may be made in cash or shares of
Parent Common Stock, with the value of such shares, for purposes of
satisfying any such claim, equal to the closing price of Parent's stock in
effect on the Closing Date.
9.5. INDEMNIFICATION DE MINIMIS THRESHOLD.
(a) Except as expressively provided otherwise herein, and
subject to the provisions of Section 9.5(b), neither of the
Shareholders nor the Parent, as the case may be, will be entitled to
indemnification under this Agreement unless the aggregate of all
claims with respect to matters arising hereunder is more than Two
Hundred Thousand Dollars ($200,000) (the "Threshold Amount").
Subject to the limitations of Section 9.4, when the aggregate amount
of all such indemnification claims hereunder equals or exceeds the
Threshold Amount, the Parent or the Shareholders, as the case may be,
will be entitled to full indemnification of all claims, including the
Two Hundred Thousand Dollars ($200,000) that amounted to the
Threshold Amount. Once the aggregate amount of all indemnification
claims hereunder equal or exceed the Threshold Amount, the
Shareholders or the Parent, as the case may be, will be entitled to
full indemnification for all claims. The parties hereto agree that
the Threshold Amount is not a deductible amount, nor will the
Threshold Amount will be deemed to be a definition of "material" for
any purpose in this Agreement.
(b) Notwithstanding the foregoing, in the case of any
untrue representation with respect to which any Shareholder had
actual present knowledge (without a requirement of due inquiry) at
the time of Closing that such representation was untrue, without
disclosing such to Parent on or prior to the Closing Date, the
Shareholders, severally, will promptly pay Parent the full
indemnification claim without regard to the Threshold Amount set
forth in this Section, or the time limitation set forth in Section
9.1.
9.6. CLAIMS FOR INDEMNIFICATION.
The parties intend that all indemnification claims hereunder be made
as promptly as practicable by the party seeking indemnification (the
"Claimant"). Whenever any claim arises for indemnification hereunder the
Claimant will promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts
constituting the basis for such claim. In the case of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings of a third party (a "Third Party Claim"), the notice to the
Indemnifying Party will
20
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The Indemnifying Party shall have the right to dispute
and defend all Third Party Claims and thereafter so defend and pay any
adverse final judgment or award or settlement amount in regard thereto. Such
defense shall be controlled by the Indemnifying Party, and the cost of such
defense shall be borne by the Indemnifying Party, except that the Claimant
shall have the right to participate in such defense at its own expense; and
PROVIDED, HOWEVER that the Indemnifying Party must first acknowledge that the
claim is a bona fide indemnification claim under this Agreement. The
Claimant shall cooperate in all reasonable respects in the defense of any
such claim, including making personnel, books, and records relevant to the
claim available to the Indemnifying Party, without charge, except for
reasonable out-of-pocket expenses. If the Indemnifying Party fails to take
action within thirty (30) days as set forth above, then the Claimant shall
have the right to pay, compromise or defend any Third Party Claim and to
assert the amount of any payment on the Third Party Claim plus the reasonable
expenses of defense or settlement as the claim. The Claimant shall also have
the right, exercisable in good faith, to take such action as may be necessary
to avoid a default prior to the assumption of the defense of the Third Party
Claim by the Indemnifying Party, and any reasonable expenses incurred by
Claimant in so acting shall be paid by the Indemnifying Party. Except as
otherwise provided herein, the Claimant will not settle or compromise any
Third Party Claim for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party, which will not
be unreasonably withheld. If the Indemnifying Party is of the opinion that
the Claimant is not entitled to indemnification, or is not entitled to
indemnification in the amount claimed in such notice, it will deliver, within
twenty (20) business days after the receipt of such notice, a written
objection to such claim and written specifications in reasonable detail of
the aspects or details objected to, and the grounds for such objection. If
the Indemnifying Party filed timely written notice of objection to any claim
for indemnification, the validity and amount of such claim will be determined
by arbitration pursuant to Section 10.12 hereof. If timely notice of
objection is not delivered or if a claim by an Claimant is admitted in
writing by an Indemnifying Party or if an arbitration award is made in favor
of a Claimant, the Claimant, as a non-exclusive remedy, will have the right
to set-off the amount of such claim or award against any amount yet owed,
whether due or to become due, by the Claimant or any subsidiary thereof to
any Indemnifying Party by reason of this Agreement or any agreement or
arrangement or contract to be entered into at the Closing. If the
Indemnifying Party shall be obligated to indemnify the Indemnified Party
pursuant to this Article 9, the Indemnifying Party shall, upon payment of
such indemnity in full, be subrogated to all rights of the Indemnified Party
with respect to the loss, liability, damage, cost or expense to which such
indemnification relates; provided, however, that the Indemnifying Party shall
be subrogated only to the extent of any amount paid by it pursuant to this
Article 9 in connection with such loss, liability, damage, cost or expense.
9.7. REPRESENTATIVE.
Xxx Xxxxxxxxx (the "Representative") shall, by virtue of the Merger
and the execution of this Agreement by the Shareholders, be irrevocably
appointed attorney-in-fact and authorized and empowered to act, for and on
behalf of any or all of the Shareholders (with full power of substitution in
the premises) in connection with the indemnity provisions of this Article 9,
as they relate to the Shareholders generally, the notice provision of this
Agreement, such other matters as are reasonably necessary for the
consummation of the Transactions including, without limitation, to act as the
representative of such Shareholders, to compromise on their behalf with
Parent any claims asserted thereunder and to authorize payments to be made
with respect thereto and to take such further actions as are authorized in
this Agreement. Parent and the Surviving Corporation and each of their
respective affiliates shall be entitled to rely on such appointment and treat
such Representative as the duly appointed attorney-in-fact of each
Shareholder. Each Shareholder who receives any Parent Common Stock in
connection with the Merger, by acceptance thereof and without any further
action, confirms
21
such appointment and authority and acknowledges and agrees that such
appointment is irrevocable and coupled with an interest, it being understood
that the willingness of Parent to enter into this Agreement is based, in
part, on the appointment of a representative to act on behalf of the
Shareholders.
9.8. SOLE REMEDY.
Subject to Section 10.11 below, the indemnification obligations as
set forth in this Article 9 are the sole and exclusive remedy that Parent and
its affiliates and related parties may pursue against the Shareholders and
their affiliates or related parties for a breach of the terms of this
Agreement.
ARTICLE
10.
MISCELLANEOUS PROVISIONS
10.1. EXPENSES.
Each of the parties hereto will bear its own costs, fees and expenses
in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including without limitation fees, commissions and
expenses payable to brokers, finders, investment bankers, consultants,
exchange or transfer agents, attorneys, accountants and other professionals,
whether or not the Transactions are consummated.
10.2. AMENDMENT AND MODIFICATION.
Subject to applicable law, this Agreement may be amended or modified
by the parties hereto at any time prior to the Closing with respect to any of
the terms contained herein; provided, however, that all such amendments and
modifications must be in writing duly executed by all of the parties hereto.
10.3. WAIVER OF COMPLIANCE; CONSENTS.
Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the party
entitled hereby to such compliance, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. No single or partial exercise of a right or remedy will
preclude any other or further exercise thereof or of any other right or
remedy hereunder. Whenever this Agreement requires or permits the consent by
or on behalf of a party, such consent will be given in writing in the same
manner as for waivers of compliance.
10.4. NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement will entitle any person or entity (other
than a party hereto and his, her or its respective successors and assigns
permitted hereby) to any claim, cause of action, remedy or right of any kind.
10.5. NOTICES.
All notices, requests, demands and other communications required or
permitted hereunder will be made in writing and will be deemed to have been
duly given and effective: (i) on the date of delivery,
22
if delivered personally; (ii) on the earlier of the fourth (4th) day after
mailing or the date of the return receipt acknowledgment, if mailed, postage
prepaid, by certified or registered mail, return receipt requested; or (iii)
on the date of transmission, if sent by facsimile, telecopy, telegraph, telex
or other similar telegraphic communications equipment:
If to either Windward or any of the Shareholders:
To: Windward Technology Group, Inc.
0000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Attention: Xxx Xxxxxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx Xxx Xxxxx
Fax: 404/000-0000
or to such other person or address as either Windward or the Shareholders
will furnish to the other parties hereto in writing in accordance with this
Section.
If to Parent or the Acquiring Sub:
To: Eltrax Systems, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Clunet X. Xxxxx
Fax: (000) 000-0000
With a copy to:
Jaffe, Raitt, Heuer & Xxxxx
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
or to such other person or address as either Parent or Acquiring Sub will
furnish to the other parties hereto in writing in accordance with this
Section.
10.6. ASSIGNMENT.
This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned (whether
voluntarily, involuntarily,
23
by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other parties, provided, however, that Parent
may assign this Agreement upon notice to Windward and the Shareholders, in
whole or in any part, and from time to time, to a wholly-owned, direct or
indirect, subsidiary of Parent, if Parent remains bound hereby.
10.7. GOVERNING LAW.
This Agreement and all legal relations among the parties hereto will
be governed by and construed in accordance with the internal substantive laws
of the State of Georgia (without regard to principles of conflict of laws
that might otherwise apply) as to all matters, including without limitation
matters of validity, construction, effect, performance and remedies.
10.8. COUNTERPARTS.
This Agreement may be executed simultaneously in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
10.9. HEADINGS.
The table of contents and the headings of the sections and Sections
of this Agreement are inserted for convenience only and will not constitute a
part hereof.
10.10. ENTIRE AGREEMENT.
The Schedules and the Exhibits referred to in this Agreement,
together with this Agreement embody the entire agreement and understanding of
the parties hereto in respect of the transactions contemplated by this
Agreement and together they are referred to as "this Agreement" or the
"Agreement". This Agreement supersedes all prior and contemporaneous oral
and written agreements and understandings between the parties with respect to
the transaction or transactions contemplated by this Agreement (including
without limitation the letter of intent dated January 25, 1999 between Parent
and Windward and all amendments and extensions thereof).
10.11. INJUNCTIVE RELIEF.
It is expressly agreed among the parties hereto that monetary damages
would be inadequate to compensate a party hereto for any breach by any other
party of its covenants in Sections 5.2 and 5.6. Accordingly, the parties
agree and acknowledge that any such violation or threatened violation will
cause irreparable injury to the other and that, in addition to any other
remedies which may be available, such party will be entitled to injunctive
relief against the threatened breach of Sections 5.2 and 5.6 hereof or the
continuation of any such breach without the necessity of proving actual
damages and may seek specific enforcement of the terms thereof.
10.12. ARBITRATION.
With the sole exception of the injunctive relief contemplated by
Section 10.11 hereof, any controversy or claim arising out of or relating to
this Agreement, or the making, performance or interpretation hereof,
including without limitation alleged fraudulent inducement hereof, will be
settled by binding arbitration in Atlanta, Georgia by a panel of three
arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon any arbitration
24
award may be entered in any court having jurisdiction thereof and the parties
consent to the jurisdiction of the courts of the State of Georgia for this
purpose.
10.13. ATTORNEYS FEES.
If any arbitration, litigation or similar proceedings are brought by
any party to enforce any obligation or to pursue any remedy under this
Agreement, the party prevailing in any such arbitration, litigation or
similar proceedings will be entitled to costs of collection, if any, and
reasonable attorneys fees incurred in connection with such proceedings and in
collecting or enforcing any award granted therein.
10.14. KNOWLEDGE OF WINDWARD AND SHAREHOLDERS.
Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the knowledge of Windward and the
Shareholders, such phrase means the actual present knowledge of either one or
all of the Shareholders.
10.15. VENUE JURISDICTION.
The parties agree that all actions or proceedings arising in
connection with this Agreement and the instruments, agreements and documents
executed pursuant to the terms of this Agreement shall be tried, litigated
and arbitrated only in the courts of the United States located in the
Northern District of Georgia, the Georgia state courts, or the office of the
American Arbitration Association located nearest Atlanta, Georgia. Each of
Windward, the Shareholders and Parent irrevocably accept for itself or
himself and in respect of its or his property, generally and unconditionally,
the jurisdiction of such courts. Each of Windward, Shareholders and Parent
irrevocably consent to the service of process out of any such courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party, at its address as set forth
in this Agreement, or in the records of the Surviving Corporation, such
service to become effective ten (10) days after such mailing. Nothing in
this Section 10.15 shall affect the right of any party to serve process in
any other manner permitted by law. Each of Windward, the Shareholders and
Parent irrevocably waive any right it or he may have to assert the doctrine
of forum non conveniens or to object to venue to the extent any proceeding is
brought in accordance with this Section 10.15.
(SIGNATURES FOLLOW ON NEXT PAGE)
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PARENT: WINDWARD:
------- ---------
Eltrax Systems, Inc. Windward Systems, Inc.
By: /s/ Clunet X. Xxxxx By: /s/ Xxx Xxxxxxxxx
---------------------------------- ------------------------------------
Clunet X. Xxxxx, its Secretary and Xxx Xxxxxxxxx, its President
General Counsel
ACQUIRING SUB: SHAREHOLDERS:
-------------- -------------
Windward Acquiring Corp.
/s/ Xxxxx X. Able
---------------------------------------
Xxxxx X. Able
By: /s/ Clunet X. Xxxxx
----------------------------------
Clunet X. Xxxxx, its /s/ Xxx Xxxxxxxxx
President ---------------------------------------
Xxx Xxxxxxxxx
/s/ Xxxx X. Xxxxxxx
---------------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxxx Xxxxxxx
---------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxx Xxxxxx
---------------------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxx
---------------------------------------
Xxxx Xxx
/s/ Xxx Xxxxxxxx
---------------------------------------
Xxx Xxxxxxxx
/s/ Xxxxxx Xxxx
---------------------------------------
Xxxxxx Xxxx
/s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxxx
/s/ Xxxxxxx Xxxxxx
---------------------------------------
Xxxxxxx Xxxxxx
26
EXHIBITS AND SCHEDULES
Schedule 2.1 Windward Disclosure Regarding Corporate Organization
Schedule 2.2 Windward Disclosure Regarding Capitalization
Schedule 2.4 Windward Disclosure Regarding Non-Contravention
Schedule 2.5 Windward Disclosure Regarding Financials
Schedule 2.6 Windward Disclosure Regarding Accounts Receivable
Schedule 2.7 Windward Disclosure Regarding Liabilities
Schedule 2.8 Windward Disclosure Regarding Litigation
Schedule 2.9 Windward Disclosure Regarding Adverse Changes
Schedule 2.10 Windward Disclosure Regarding Title to Assets
Schedule 2.11 Windward Disclosure Regarding Taxes
Schedule 2.12 Windward Disclosure Regarding Insurance
Schedule 2.13 Windward Disclosure Regarding Benefit Plans
Schedule 2.14 Windward Disclosure Regarding Contracts
Schedule 2.15 Windward Disclosure Regarding Labor Matters
Schedule 2.16 Windward Disclosure Regarding Intellectual Property
Schedule 2.17 Windward Disclosure Regarding Hazardous Substances
Schedule 2.18 Windward Disclosure Regarding Brokers and Finders
Exhibit 2.20 Investor Questionnaire
Exhibit 5.4 Registration Rights of Shareholders
Exhibit 5.6 Form of Employment Letter
In accordance with Item 601(b)(2) of Regulation S-K, the exhibits and
schedules described in the List of Exhibits and Schedules of this Agreement
have not been filed with the Current Report on Form 8-K to which this
Agreement is an exhibit. The Registrant hereby agrees to furnish
supplementally copies of such exhibits and schedules to the Commission upon
request.
