1
EXHIBIT 10.26
XXXXX MICROCOMPUTER PRODUCTS, INC.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the
12th day of April, 1996, by and among XXXXX MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation (the "Company"), XXXXXX X. XXXXX, a Georgia resident
("Xxxxxx Xxxxx"), each of the individuals or entities listed on Schedule 1
hereto and identified thereon as the "Investors" (which are referred to herein
from time to time individually as an "Investor" or collectively as the
"Investors") and the direct or indirect subsidiary of one of the Investors,
formed or to be formed, as identified on Schedule 1 hereto ("Investor Sub").
BACKGROUND
A. On November 15, 1994, the Company filed a petition in the United
States Bankruptcy Court for the Northern District of Georgia (the "Bankruptcy
Court") seeking protection from its creditors and a reorganization under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code"), in the case
entitled In re Xxxxx Microcomputer Products, Inc., a/k/a Practical Peripherals,
Inc., Bankr. Case No. A94-75900-HR (the "Bankruptcy Case"). On May 15, 1995, the
Company filed with the Bankruptcy Court its Plan of Reorganization (as amended
on July 6, July 10, July 20, August 21, November 1, November 16 and December 8,
1995, January 8, 1996, and February 9, 1996, and pursuant to the Order (as
defined below), and as it may otherwise be amended in accordance with the terms
of this Agreement, the "Plan"). The Company is the Debtor-in-Possession in the
Bankruptcy Case, no trustee having been appointed.
B. The Company has obtained an Order of the Bankruptcy Court dated
March 8, 1996, pursuant to Section 1129 of the Bankruptcy Code and intends to
seek an Order in Aid of Confirmation (the "Order in Aid of Confirmation") (i)
confirming the Plan, including without limitation the amendment to the Company's
Articles of Incorporation contemplated by Section 1.1(d) and the merger of the
Company (as described in Section 1.1) including without limitation the issuance
of the Preferred Shares (as defined in Section 1.1) and the Warrant (as defined
in Section 1.3) to the Investors as set forth herein; (ii) approving any
required amendments to the Disclosure Statement with Regard to Debtor's Second
Amended and Restated Plan of Reorganization dated July 20, 1995; and (iii)
approving this Agreement and each of the agreements and certificates
contemplated by this Agreement, as such agreements may be amended from time to
time, such Orders as approved and entered by the Bankruptcy Court being
hereinafter referred to collectively as the "Order." The date upon which the
Plan becomes effective is hereinafter referred to as the "Effective Date."
C. The parties desire to consummate a merger that will constitute a
reorganization pursuant to Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended.
2
D. Pursuant to that certain Notice of Election of Alternative Treatment
under the Debtor's Second Amended and Restated Plan of Reorganization, as
Modified and Amended, filed on March 13, 1996 (the "Election"), Xxxxxx Xxxxxxx
Xxxxx has elected under the Plan to have the shares of Common Stock owned by her
redeemed by the Company for a total consideration of Eleven Million U.S. Dollars
(US $11,000,000) payable at such time and in the manner provided by the Plan,
which redemption shall occur simultaneously with the Closing (as defined in
Section 1.4).
AGREEMENT
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereby agree as follows:
1. Plan of Merger.
1.1 Terms and Conditions of Merger.
(a) Merger. Prior to the date hereof, Rinzai Limited
("Rinzai") has formed or will form Financial Sub, Inc. ("Financial Sub"), which
is a directly or indirectly owned subsidiary under the Georgia Business
Corporation Code (the "Georgia Code") for the purpose of accomplishing the
merger described herein, which is a party hereto. Upon the terms and subject to
the conditions set forth herein and in accordance with the Georgia Code, at the
Effective Time, Financial Sub shall be merged with and into the Company (the
"Merger"), and the separate existence of Financial Sub shall cease. The Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"). At the Closing, the Company shall cause a
Certificate of Merger in the form attached hereto as Exhibit "A" (the
"Certificate of Merger"), together with all other required certifications,
filings and instruments, to be duly filed with the Secretary of State of the
State of Georgia and cause all fees associated therewith to be paid. The Merger
shall be effective at the time of such filings with the Secretary of State (the
"Effective Time").
(b) Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any further action, each outstanding share of capital
stock of each of the Company and Financial Sub, subject to Section 1.1(c), shall
be converted into the right to receive the following property, deliverable to
the applicable holder of each such shares, without interest, upon the surrender
of the certificate(s) formerly representing such outstanding share(s):
(i) The Common Stock owned by Xxxxxx Xxxxx or owned by a
person or entity who would be a "Permitted Transferee" of Xxxxxx Xxxxx under
Section 7 of the Shareholders' Agreement to be entered into between the Company
and the Investors, in the form attached hereto as Exhibit "B" (hereinafter the
"Investors Shareholders' Agreement") at the Effective Time shall be converted
into the right to receive 4,943,221 shares of the Common Stock of the Surviving
Corporation;
- 2 -
3
(ii) As Xxxxxx Xxxxxxx Xxxxx has elected under the Plan to
receive Eleven Million Dollars (US $11,000,000) for the Common Stock owned by
her, at the Effective Time such Common Stock shall be converted into the right
to receive such payment, which shall occur simultaneously with the Closing, as
provided in Section 6.9 hereof, in the manner provided by the Plan and the
Election made by her;
(iii) The Common Stock owned by the Xxxxx Microcomputer
Products, Inc. Profit-Sharing, Saving and Stock Plan (the "Employee Stock Plan")
at the Effective Time shall be converted into the right to receive 156,779
shares of the Common Stock of the Surviving Corporation;
(iv) All outstanding shares (or fraction thereof) of the
stock of Financial Sub at the Effective Time shall be converted into the right
to receive that number of shares of the Series A Preferred Stock of the
Surviving Corporation (the "Preferred Shares") as set forth opposite Rinzai's
name on Schedule 1 hereto (the "Schedule of Investors"), which shall, in any
event, represent an aggregate number of shares to be issued to Rinzai equal to
twenty-eight and one hundredth seventy-five thousands percent (28.175%) of the
Surviving Corporation's capital stock issued and outstanding immediately after
the Merger and the sale and issuance of Preferred Shares pursuant to Section 1.3
(determined on an as-converted basis); and
(v) Any shares of capital stock of the Company or
Financial Sub which at the Effective Time are held in the treasury of such
company, shall be canceled and retired, and no payment shall be made with
respect thereto.
(c) Dissenters' Rights. Notwithstanding anything contained
herein to the contrary, any shares of the outstanding stock of the Company held
by a holder who has demanded and perfected the right to receive "fair value" for
such shares in accordance with Article 13 of the Georgia Code and who has not
effectively lost or withdrawn such right to receive "fair value" (a "Dissenter")
shall not be converted into the right to receive the merger consideration set
forth above, but the Dissenter shall be entitled to only such rights as are
granted by the Georgia Code. Any shares held by any Dissenter who withdraws
his/her/its demand to receive "fair value" or becomes ineligible to receive
"fair value" under the Georgia Code shall immediately be converted into and
become, as of the Effective Time, the right to receive the merger consideration
set forth herein, without interest or other consideration, and such holder shall
not thereafter be considered a "Dissenter."
(d) Articles of Incorporation; Bylaws; Officers and Directors.
The Articles of Incorporation of the Company, as amended pursuant to the
Certificate of Merger, shall be the Articles of Incorporation of the Surviving
Corporation following the Merger (the "Restated Articles"). The Certificate of
Merger shall amend the Articles of Incorporation of the Company to provide that
the Surviving Corporation shall be authorized to issue 100,000,000 shares of
common stock with $.01 par value and 10,000,000 shares of Series A Preferred
Stock having the preferences and designations described in Exhibit "A" hereto
(the "Series A Preferred Stock"). Prior to the Merger, the Bylaws of the Company
shall be amended and restated in the form set forth in Exhibit "C" hereto, which
Bylaws shall be the Bylaws of the Surviving Corporation. At the Effective Time,
the Board of Directors of the Company shall be the Board
- 3 -
4
of Directors of the Surviving Corporation. At the Effective Time, the officers
of the Company shall be the officers of the Surviving Corporation.
(e) Formation and Capitalization of Subsidiaries. Prior to the
Effective Time, Rinzai shall form Financial Sub, and shall cause it to take all
such corporate and other actions necessary to consummate the transactions
contemplated by this Agreement. Rinzai agrees to vote in favor of the Merger.
Subject to the terms and conditions of this Agreement, Rinzai agrees to
capitalize Financial Sub in the amount set forth on Schedule 1.
(f) Shareholder Approval. As soon as practicable following the
execution and delivery of this Agreement, the Company shall take such actions as
are necessary in accordance with applicable law to obtain the approval of its
shareholders to this Agreement, the Merger and the consummation of the
transactions contemplated hereby, including without limitation the following:
(i) duly call, give notice of, convene and hold a special
meeting of shareholders for the purpose of considering the Merger and taking
action upon this Agreement (or take such action as may be allowed under the
Articles of Incorporation and Bylaws of the Company by written consent of the
shareholders);
(ii) include in any notice of special meeting all
documents required by the Georgia Code and the recommendation of the Company's
Board of Directors that the shareholders vote in favor of the Merger and approve
and adopt this Agreement; and
(iii) use its reasonable best efforts to obtain shareholder
approval of the Merger and this Agreement.
(g) Xxxxxx Xxxxx Approval. Xxxxxx Xxxxx shall vote all shares
of Common Stock owned by him in favor of the Merger at any meeting of the
shareholders of the Company called for such purpose or in connection with any
written consent in lieu thereof.
(h) Delivery of Cash Consideration. Any shareholders entitled
to receive cash consideration in exchange for their stock of the Company in
connection with the Merger and who are not Dissenters at the Effective Time,
shall be paid the cash consideration specified in Section 1.1(b) above after the
Merger upon surrender by such shareholder to the Surviving Corporation of the
certificate(s) representing all of their shares of stock in the Company, duly
endorsed in blank for transfer, and such certificate(s) shall thereupon
immediately be canceled. Until surrendered, said certificate(s) shall represent
for all purposes only the right to receive the specified cash consideration,
without any interest.
1.2 Effect of Merger; Tax Status of Merger. The Merger shall have
the effects set forth in Section 14-2-1106 of the Georgia Code, and immediately
after the Merger the Surviving Corporation shall possess all of the rights,
privileges, powers and franchises of each of the Company and Financial Sub, and
all property and other interests due or belonging to the Company and Financial
Sub shall be vested in the Surviving Corporation. It is the intent of the
parties hereto that the Merger will be consummated in accordance with the
applicable
- 4 -
5
provisions of the Georgia Code, and that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code. It shall not be a condition to the consummation of the Merger that
any party shall have received a ruling of the Internal Revenue Service or an
opinion of tax counsel as to the federal income tax consequences of the Merger.
1.3 Sale and Issuance of Additional Preferred Shares and
Anti-Dilution Warrant.
(a) Subject to the terms and conditions of this Agreement, at
Closing each Investor (other than Rinzai) agree severally and not jointly to
purchase from the Company the number of Preferred Shares set forth opposite such
Investor's name on Schedule 1. The Preferred Shares shall be purchased at a
price per share equal to $7.142857 per share for the total purchase price for
each such Investor shown on Schedule 1.
(b) Subject to the terms and conditions of this Agreement,
Rinzai agrees to purchase, and the Company agrees to sell and issue to Rinzai at
the time and place of the Closing and at an aggregate purchase price of Ten U.S.
Dollars ($10.00), a Warrant, in the form attached hereto as Exhibit "D", to
purchase the number of shares of Common Stock and at an exercise price set forth
therein (the "Warrant"). The Preferred Shares and the Warrant are hereafter
collectively referred to as the "Securities."
1.4 Closing. The consummation of the Merger, including the
issuance of the Securities to the Investors as provided herein shall take place
at the offices of Parker, Johnson, Xxxx & Xxxxxxxx, Suite 700, 0000 Xxxxxxxxx
Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000 on the fifth (5th) business day following
the date on which the conditions set forth in sections 4.1, 4.5, 4.6, 4.9, 4.11,
5.1 and 5.4 herein shall have been satisfied or waived, or at such other time
and place as the Company and the Investors mutually agree upon (the time, date
and place are hereby designated as the "Closing"). At the Closing, each of the
following transactions shall occur:
(a) The Company shall deliver to the Investors the following:
(i) evidence of the filing of the Certificate of Merger
with the Secretary of State of the State of Georgia;
(ii) certificates of good standing for the Company and
each of its Subsidiaries, as of the most recent practicable date, from the
Secretary of State or other governmental authority of the jurisdiction of
incorporation for each such entity;
(iii) the Investors Shareholders' Agreement executed by
the Company;
(iv) executed consents and waivers and copies of all
authorizations required to be obtained pursuant to Sections 2.6 and 6.3 hereof;
(v) the opinions of counsel contemplated by Section 4.8
hereof;
- 5 -
6
(vi) a certificate of the Secretary or an Assistant
Secretary or other officer of the Company dated the date of Closing certifying
the names of the officers of the Company authorized to sign this Agreement, the
Warrant, the certificates for the Preferred Shares, the Investors Shareholders'
Agreement, the Employment Agreement, the Voting Trust Agreement (as defined in
Section 1.4(a)(xi)), and the other documents, instruments or certificates to be
delivered pursuant to this Agreement by the Company or any of its officers,
together with the true signatures of such officers;
(vii) a copy of the resolutions of the Board of Directors
and, if required, the shareholders of the Company evidencing the amendment to
the Company's Articles of Incorporation contemplated hereby, the approval of
this Agreement, the Merger, the Investors Shareholders' Agreement, the
Employment Agreement, the issuance of the Preferred Shares, the Warrant, the
Voting Trust Agreement and the other matters contemplated hereby, certified by
the Secretary of the Company to be true, complete and correct as of the Closing
date;
(viii) the compliance certificate required by Section 4.4
hereof;
(ix) a copy of the Order and the Order in Aid of
Confirmation;
(x) the Employment Agreement (as defined in Section 6.2
hereof) executed by the Company;
(xi) the Voting Trust Agreement to be entered into by
Xxxxxx Xxxxx in connection herewith in the form of Exhibit "E" attached hereto
(the "Voting Trust Agreement") executed by the Company;
(xii) the documents required by Section 4.11 hereof;
(xiii) in the case of Rinzai, stock certificates
representing the Preferred Shares issuable to Rinzai pursuant to Section
1.1(b)(iv) upon receipt from Rinzai of all certificates representing the
outstanding shares of the capital stock of Financial Sub and the funds required
to be transferred to the Company pursuant to Section 1.1(e); and
(xiv) in the case of all Investors other than Rinzai,
stock certificates representing the Preferred Shares issuable to such Investor
pursuant to Section 1.3(a) upon receipt from such Investor of the purchase price
set forth therein.
(b) The Company shall deliver to Rinzai the following:
(i) the Warrant purchasable by Rinzai pursuant to
Section 1.3.
- 6 -
7
(c) The Company shall deliver to Xxxxxx Xxxxx the following:
(i) stock certificates representing the Common Stock
issuable to him pursuant to Section 1.1(b)(i) upon receipt from Xxxxxx Xxxxx of
all certificates of the stock of the Company issued and outstanding in his name
at the Effective Time; and
(ii) the Employment Agreement executed by the Company.
(d) Each Investor shall deliver to the Company the following:
(i) in the case of Rinzai, all of the outstanding
shares of the capital stock of Financial Sub;
(ii) to the extent applicable to such Investor, evidence
of such Investor's compliance with its covenants described in Sections 1.1(a),
1.1(e) and 1.3(a) hereto and the condition described in Section 5.3 hereof;
(iii) in the case of Rinzai, a copy of the articles of
incorporation of Financial Sub, certified by the Secretary or an Assistant
Secretary thereof;
(iv) a copy of the resolutions of the Board of
Directors, and shareholders to the extent required by such Investor or Financial
Sub, of such Investor and Financial Sub, evidencing the approval of this
Agreement, the Merger, the Investors Shareholders' Agreement and the other
matters contemplated hereby, certified by the Secretary or an Assistant
Secretary of such Investor and Financial Sub, to be true, complete and correct
as of the date of Closing;
(v) the Investors Shareholders' Agreement executed by
such Investor;
(vi) the opinion of counsel to such Investor required by
Section 5.7 hereof;
(vii) certificates of the Secretary or an Assistant
Secretary or other officer of such Investor and its respective Investor Sub,
dated the Closing certifying the names of the officers of such Investor and its
respective Investor Sub, authorized to sign this Agreement and the Investors
Shareholders' Agreement and the other documents, instruments or certificates to
be delivered pursuant to this Agreement by such Investor and its respective
Investor Sub, or any of its officers, together with the true signatures of such
officers; and
(viii) the documents required by Section 5.6 hereof.
(e) Xxxxxx Xxxxx shall deliver to the Investors the following:
(i) the Employment Agreement executed by Xxxxxx Xxxxx;
- 7 -
8
(ii) the Investor Shareholders' Agreement executed by
Xxxxxx Xxxxx;
(iii) the Voting Trust Agreement executed by Xxxxxx
Xxxxx;
(iv) the compliance certificate required by Section 4.4
hereof; and
(v) the opinion of counsel required by Section 4.8
hereof.
1.5 Required Actions.
(a) The Company hereby agrees to propose to the Bankruptcy
Court as part of the Order in Aid of Confirmation, the transactions contemplated
by this Agreement, such that such order will authorize and direct the Company to
consummate the transactions contemplated hereby, without the necessity of
creditor approval. Subject to the Bankruptcy Court granting such order, the
Company, the Investors and Xxxxxx Xxxxx agree to proceed diligently to
effectuate such transactions on the terms and conditions described herein. The
Company shall not make any modifications to the Plan without the prior written
consent of Investors purchasing a majority of the Preferred Shares.
(b) Xxxxxx Xxxxx hereby agrees, in his capacity as the
principal shareholder of the Company classified as Class 5(a) under the Plan, to
take all lawful actions to support the Order in Aid of Confirmation and to
proceed diligently to seek such order by the Bankruptcy Court.
1.6 Termination. Anything contained in this Agreement other than in
this Section 1.6 to the contrary notwithstanding, this Agreement may be
terminated in writing at any time:
(a) without liability on the part of any party hereto by
mutual consent of the Company and the Investors purchasing a majority of the
Preferred Shares;
(b) without liability on the part of any party hereto (unless
occasioned by reason of a material breach by such party of any of its
representations, warranties or obligations hereunder) by either the Company or
any of the Investors, if the Closing shall not have occurred on or before April
22, 1996 (or such later date as may be agreed upon in writing by the Company and
the Investors);
(c) by the Company or any Investor, if any other Investor
shall materially breach any of its representations, warranties or obligations
hereunder and such breach shall not have been cured or waived, and such Investor
shall not have provided reasonable assurance that such breach will be cured on
or before the Effective Time;
(d) by any Investor, if the Company or Xxxxxx Xxxxx shall
materially breach any of their respective representations, warranties (which
determination for purposes of
- 8 -
9
this subsection 1.6(d) only shall be made by reading such representations and
warranties in question as if all materiality standards contained therein had
been deleted in their entirety) or obligations hereunder and such breach shall
not have been cured or waived by Investors purchasing a majority of the
Preferred Shares, and the Company or Xxxxxx Xxxxx, as the case may be, shall not
have provided reasonable assurance that such breach will be cured on or before
the Effective Time;
(e) without liability on the part of any party hereto, if the
Order in Aid of Confirmation in form and substance satisfactory to the Company
and the Investors purchasing a majority of the Preferred Shares is denied by the
Bankruptcy Court; or
(f) by any of the Investors upon delivery of written notice to
the other parties hereto, without any liability to any party hereunder, if the
terms and conditions of the new debt financing referred to in Section 4.9 are
modified in any respect which, in the respective and sole discretion of the
Investors purchasing a majority of the Preferred Shares, is not acceptable for
any reason whatsoever.
2. Representations and Warranties of the Company and Xxxxxx Xxxxx.
2A. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor, except as set forth on the Schedule of
Exceptions delivered to the Investors simultaneously herewith (the "Schedule of
Exceptions"), each of which exceptions shall specifically identify the Section
of this Agreement to which it applies and be deemed to be a representation and
warranty as if made hereunder, as follows:
2.1 Organization, Good Standing and Qualification. The Company
and each of its Subsidiaries (as defined in Section 2.3) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation (as described in the Schedule of Exceptions) and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company and each of its
Subsidiaries is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure so to qualify might result, individually
or in the aggregate, in a material adverse change in the assets, condition or
prospects of the Company or any of its Subsidiaries, financial or otherwise. A
true, correct and complete copy of the articles of incorporation as currently in
effect and the bylaws as currently in effect of the Company and each of the
Subsidiaries have been made available to each Investor.
2.2 Capitalization.
(a) Issued and Outstanding Stock.
(i) The entire authorized capital stock of the Company
currently consists, and immediately prior to the Merger will consist, of
100,000,000 shares of Common Stock of which 17,328,478.46496 shares are issued
and outstanding in the manner disclosed in the Schedule of Exceptions.
- 9 -
10
(ii) At the Effective Time, as a result of the Merger,
the entire authorized capital stock of the Surviving Corporation shall consist
of 100,000,000 shares of Common Stock and 10,000,000 shares of Series A
Preferred Stock, of which 5,100,000 shares of Common Stock and 4,900,000 shares
of Series A Preferred Stock shall be issued and outstanding in the manner
disclosed in the Schedule of Exceptions.
(b) Agreements for Purchase of Securities. Except for:
(i) the rights granted pursuant to this Agreement;
(ii) the conversion privileges and preemptive rights of
the Series A Preferred Stock; and
(iii) the rights of Xxxxxx Xxxxxxx Xxxxx pursuant to
Section 4 of that certain Shareholder Agreement dated July 6, 1988 among the
Company and the shareholders described therein (the "1988 Shareholder
Agreement") (which rights shall be terminated effective as of the Redemption (as
defined in Section 6.9));
prior to and as of the Effective Time there will not be any outstanding options,
warrants, rights (including conversion rights, preemptive rights or rights of
first offer) or agreements for the purchase or acquisition from the Company or
any Subsidiary of any shares of its capital stock or any obligation of the
Company to pay dividends on such shares or to purchase, redeem or retire such
shares.
(c) The issued and outstanding shares of the capital stock of
the Company and each Subsidiary are duly and validly issued, fully paid and
nonassessable, and such shares of such capital stock, and all outstanding
options, warrants, convertible notes and other securities of the Company and
each Subsidiary, have been issued in compliance with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Securities Act") or in compliance with applicable exemptions therefrom, the
registration and qualification requirements of all applicable securities laws of
states of the United States and all other provisions of applicable securities
laws of the states of the United States, including, without limitation,
anti-fraud provisions.
(d) The Schedule of Exceptions includes a true, correct and
complete list, both immediately prior to and immediately after the Merger and
the sale and issuance of Preferred Shares pursuant to Section 1.3, of all issued
and outstanding shares of the capital stock of the Company and each Subsidiary
and all options, warrants, convertible notes and other securities (and rights to
purchase any of the foregoing) of the Company and its Subsidiaries, together
with a true, correct and complete list of the shareholders, option holders,
warrant holders, convertible note holders and other security holders and holders
of other rights to receive securities of the Company and its Subsidiaries
(including number of shares affected).
2.3 Subsidiaries. The Schedule of Exceptions sets forth a
complete list of all direct or indirect Subsidiaries of the Company. As used in
this Agreement, the term "Subsidiary" shall mean any corporation, association,
partnership, limited liability company,
- 10 -
11
joint venture or other legal entity of which the Company directly or indirectly,
owns or controls capital stock, membership interests or partnership interests
representing more than fifty percent (50%) of the general voting power under
ordinary circumstances of such entity. Neither the Company nor any Subsidiary
presently owns or controls, directly or indirectly, any interest in any other
corporation, association, partnership or other business entity. The Company
owns, beneficially and of record, either directly or indirectly, all of the
capital stock or other equity ownership or proprietary interest in each
Subsidiary described as being owned by it on the Schedule of Exceptions. Such
capital stock or other equity or ownership or proprietary interests are owned by
the Company free and clear of all liens, claims, options, rights of first
refusal and other encumbrances of any kind or nature whatsoever.
2.4 Authorization. The Company has the capacity and authority to
execute and deliver this Agreement, the Warrant, the convertible promissory
notes deliverable pursuant to the Investors Shareholders' Agreement (the "Cap
Call Notes"), the Investors Shareholders' Agreement, the Employment Agreement,
the Voting Trust Agreement and the other documents, instruments and agreements
to be entered into pursuant hereto and thereto by it, to perform hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby
without the necessity of any act or consent of any other person whomsoever
(other than the entry of the Order in Aid of Confirmation by the Bankruptcy
Court). All corporate action on the part of the Company, its officers, directors
and shareholders necessary for the authorization, execution and delivery of this
Agreement, the Warrant, the Cap Call Notes, the Investors Shareholders'
Agreement, the Employment Agreement, the Voting Trust Agreement and the other
agreements, documents and instruments to be entered into by the Company pursuant
hereto and thereto, the performance of all obligations of the Company hereunder
and thereunder and the authorization, issuance (or reservation for issuance) and
delivery of the Preferred Shares, the Warrant, the Cap Call Notes and the
Preferred Shares issuable upon conversion of the Cap Call Notes, if applicable,
and the Common Stock issuable upon conversion of the Preferred Shares and the
exercise of the Warrant, has been taken or will be taken on or prior to the
Closing, and this Agreement constitutes, and the Warrant, the Cap Call Notes,
the Investors Shareholders' Agreement, the Voting Trust Agreement and the
Employment Agreement will upon execution and delivery thereof, constitute a
valid and legally binding obligation of the Company enforceable in accordance
with its terms, except as affected by public policy, equitable principles or the
exercise of judicial discretion.
2.5 Valid Issuance of Preferred Shares and Warrant. The Preferred
Shares and the Warrant being sold hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable and, based in part upon
the representations of the Investors set forth in Section 3 of this Agreement,
will be issued in compliance with all applicable federal and state securities
laws free and clear of all restrictions on transfer (other than those arising
from application of the securities laws and those set forth in the Investors
Shareholders' Agreement) and free and clear of any liens, claims and
encumbrances. The shares of Common Stock issuable pursuant to the Merger will,
when issued in accordance with this Agreement, be issued in compliance with all
applicable federal and state securities laws and will be duly and validly
issued, fully-paid
- 11 -
12
and nonassessable, free and clear of any liens, claims and encumbrances. Upon
the issuance thereof, the shares of Series A Preferred Stock issuable upon the
conversion of the Cap Call Notes and Common Stock or Series A Preferred Stock
issuable upon exercise of the Warrant will be duly and validly issued,
fully-paid and nonassessable and free and clear of all restrictions on transfer
(other than those arising from application of the securities laws and those set
forth in the Investors Shareholders' Agreement) and free and clear of any liens,
claims and encumbrances. At Closing, the Preferred Shares and the Common Stock
issuable upon conversion of the Preferred Shares and the Cap Call Notes and the
exercise of the Warrant, will have been duly and validly reserved for issuance.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of the Company or any Subsidiary is required
to be obtained in connection with:
(a) the Company's valid execution, delivery, or performance of
this Agreement, the Warrant, the Cap Call Notes, the Investors Shareholders'
Agreement, the Voting Trust Agreement or the Employment Agreement; and
(b) the offer, sale, or issuance by the Company of the
Securities hereunder and the Cap Call Notes under the Investors Shareholders'
Agreement or (assuming the exemption provided by Section 3(a)(9) of the
Securities Act, in its current form is available and no commission is paid in
conjunction therewith) the issuance of Common Stock upon conversion of the
Preferred Shares and exercise of the Warrant, or the issuance of Series A
Preferred Stock upon the conversion of the Cap Call Notes;
except for the Order in Aid of Confirmation by the Bankruptcy Court, and as
required pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000
(xxx "XXX Xxx"), and except for any notices of sale required to be filed with
the Securities and Exchange Commission ("SEC") under Regulation D of the
Securities Act, or such post-closing filings as may be required under applicable
state securities laws, which will be timely filed within the applicable periods
therefor.
2.7 Litigation. There is no action, suit, proceeding, claim,
arbitration, audit or investigation (an "Action") pending or to the best
knowledge of the Company currently threatened against the Company or any
Subsidiary, its properties or assets or, to the best knowledge of the Company
against any officer, director, employee, consultant, independent contractor,
agency employee or other agent of the Company or any Subsidiary in connection
with such individual's relationship with, or actions taken on behalf of, the
Company or any Subsidiary which questions the validity of this Agreement or the
right of the Company to enter into this Agreement, or to consummate the
transactions contemplated hereby, or which might result, either individually or
in the aggregate, in any material adverse change in the assets, condition, or
prospects of the Company and its Subsidiaries taken as a whole, financial or
otherwise, or any change in the current equity ownership of the Company or any
Subsidiary. To the best knowledge of the Company, there is no factual basis for
any such Action that might result, individually or in the aggregate, in any
material adverse change in the assets, condition or prospects of the Company or
any Subsidiary, financial or otherwise. By way of example but
- 12 -
13
not by way of limitation, there are no Actions pending or, to the best knowledge
of the Company, threatened (or any basis therefor known to the Company) relating
to the prior employment of any officer, director, employee, consultant,
independent contractor, agency employee or other agent of the Company or any
Subsidiary, their use in connection with the Company's business of any
information, technology or techniques allegedly proprietary to any of their
former employers, clients or other parties, or their obligations under any
agreements with prior employers, clients or other parties which would result in
any material adverse change in the assets, condition, or prospects of the
Company and its Subsidiaries taken as whole, financial or otherwise. Neither the
Company nor any Subsidiary is a party or subject to the provisions of any
settlement agreement, order, writ, injunction, judgment or decree of any court
or government agency or instrumentality, other than orders of the Bankruptcy
Court in the Bankruptcy Case, true and complete copies of which orders have been
furnished to the Investors. There is no Action by the Company nor any Subsidiary
currently pending or which the Company or any Subsidiary intends to initiate.
2.8 Patents and Trademarks. The Company's and its Subsidiaries'
businesses as now conducted do not conflict with or infringe upon anyone's
patents, copyrights, trademarks, service marks, mask works, trade secrets, or
other proprietary rights in a manner which would have a material adverse effect
on the assets, condition or prospects of the Company or any Subsidiary,
financial or otherwise. The Company either directly or through its Subsidiaries
owns, or has the right to use, all patents, trademarks, service marks,
copyrights, mask works, trade secrets or other proprietary rights necessary for
the conduct of its business as it is presently conducted without infringing on
any patents, trademarks, service marks, copyrights, mask works, trade secrets or
other proprietary rights of others. Neither the Company nor any Subsidiary has
received any communications alleging that the Company or any Subsidiary (or any
of their respective employees or consultants) has violated or infringed or, by
conducting its business as proposed, would violate or infringe, any patents,
trademarks, service marks, copyrights, mask works, trade secrets or other
proprietary rights of any other person or entity. A complete list of all the
Company's patents, trademarks, service marks, copyrights, and mask works,
including applications for the foregoing, is attached as Annex A to the Schedule
of Exceptions. To the best knowledge of the Company, no third party has any
ownership right, title, interest, claim in or lien on any of the Company's
patents, trademarks, service marks, copyrights, mask works, trade secrets or
other proprietary rights and the Company has taken, and in the future the
Company intends to use its best efforts to take, all steps reasonably necessary
to preserve its legal rights in the same. Neither the Company nor any Subsidiary
is obligated to pay any royalties or other payments to third parties with
respect to the license or use of any patents, trademarks, service marks,
copyrights, mask works, trade secrets or other proprietary rights.
2.9 Compliance with Law. The execution and delivery of this
Agreement, the Employment Agreement, the Investors Shareholders' Agreement, the
Voting Trust Agreement and the Warrant by the Company do not, and the
consummation of the Merger and the issuance of the Cap Call Notes, the Common
Stock, the Preferred Shares and the other transactions contemplated hereby and
thereby will not, subject to the entry of the Order in Aid of Confirmation by
the Bankruptcy Court, violate or constitute an occurrence of default under any
provisions of the articles of incorporation or bylaws of the Company or any of
its Subsidiaries
- 13 -
14
or any judgment, order, writ or decree to which the Company, or any of its
Subsidiaries is a party or by which any of the foregoing is bound or its assets
are affected or violate any foreign, domestic, federal, state or local statute,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or their respective businesses and assets. The Company and each
Subsidiary is presently conducting its business so as to comply with all
applicable foreign, domestic, federal, state and local statutes, ordinances,
rules and regulations of any governmental authority, the violation of which
would have a material adverse effect on the assets, condition or prospects of
the Company or any Subsidiary, financial or otherwise. The Company and each
Subsidiary is presently conducting its business so as to comply in all respects
with all judgments, orders, writs and decrees to which it is a party or its
assets or businesses are affected.
2.10 Agreements; Action.
(a) There are no agreements, understandings, instruments or
contracts to which the Company or any Subsidiary is a party or by which it is
bound which involve (i) the leasing or subleasing of any real property or
material item of personal property (which shall exclude leases of personal
property having payment obligations of less than $100,000 per year), or (ii) the
employment of any individuals by the Company or any of its Subsidiaries, or
(iii) license of any patent, trademark, service xxxx, copyright, mask work,
trade secret or other proprietary right, or (iv) a joint venture or partnership,
acquisition or disposition of a material asset, or the purchase or sale of
securities, or (v) the settlement of any Action by or against the Company or any
Subsidiary (collectively, with the agreements and arrangements described in
items (x), (y) and (z) of the following sentence of this subsection, the
"Material Agreements"). The Schedule of Exceptions contains a true, correct and
complete list of (x) the top twenty (20) reseller agreements and arrangements of
the Company or any of its Subsidiaries, determined on the basis of expected
revenues during the current fiscal year; (y) the top twenty (20) agreements and
arrangements of the Company or any of its Subsidiaries, determined on the basis
of expected revenues during the current fiscal year; and (z) the top twenty (20)
agreements and arrangements of the Company or any of its Subsidiaries determined
on the basis of expected monetary obligations during the current fiscal year.
Neither the Company nor any Subsidiary has breached any Material Agreement in
any material respect. Neither the Company nor any Subsidiary has, and to the
Company's best knowledge no other party thereto has, breached any provision of
or is in default under any agreement or arrangement to which the Company or any
Subsidiary is a party, which breach or default would have a material adverse
effect on the assets, condition or prospects of the Company or any Subsidiary,
financial or otherwise. Xxxxxx Xxxxx has not breached, nor does the Company have
any knowledge of any claim or threat that Xxxxxx Xxxxx has breached, the 1988
Shareholder Agreement. Each Material Agreement is in full force and effect and,
to the best knowledge of the Company, no other party to such Material Agreement
is or threatens to be in default thereunder, and there is no basis for
termination thereunder. Each of the Material Agreements is enforceable by and
against the Company or its Subsidiaries in accordance with its terms, except as
affected by (i) the Bankruptcy Code or the Plan, or (ii) equitable principles or
the exercise of judicial discretion. The execution and delivery of this
Agreement, the Employment Agreement, the Warrant, the Voting Trust Agreement,
the Cap Call Notes and the Investors Shareholders' Agreement by the Company do
not, and the consummation of the Merger and the other transactions contemplated
hereby and thereby will not, violate or constitute an occurrence of default
under (A) any Material Agreement
- 14 -
15
or (B) any agreement, document or instrument to which the Company or any of its
Subsidiaries is a party or any of its assets or business is bound or affected
which violation or default would have a material adverse effect on the assets,
condition or prospects of the Company or any of its Subsidiaries, financial or
otherwise.
(b) The Company has not since September 30, 1995 (i) declared
or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock, or agreed to do any of the
foregoing, (ii) incurred any indebtedness for money borrowed or incurred any
other liabilities individually in excess of US $50,000 or in excess of US
$250,000 in the aggregate, other than obligations or liabilities of the Company
entered into (x) in the ordinary course of business and consistent with prior
practice or (y) in connection with the Bankruptcy Case of less than Six Million
U.S. Dollars (US $6,000,000) in the aggregate, (iii) made any loans or advances
to any person, or (iv) sold, exchanged or otherwise disposed of any of its
material assets or rights.
(c) The Company (i) is not a party to any contract with any
agency or instrumentality of the U.S. government (a "Government Agency") which
has been classified as to confidentiality by such Government Agency; (ii) does
not manufacture or sell any products which have been designed to transmit
encrypted voice, video or data traffic; (iii) does not manufacture or sell any
products or items which are controlled pursuant to the International Traffic in
Arms Regulations; (iv) does not conduct research or development activities for
any Government Agency; and (v) does not sell any products to any Government
Agency for which there is no readily available substitute which would perform
substantially the same function.
2.11 Registration Rights. Except for the registration rights
under the 1988 Shareholder Agreement (which rights will be terminated as of the
Redemption) and except as provided in the Investors Shareholders' Agreement, the
Company has not granted or agreed to grant any registration rights, including
piggy-back rights, to any person or entity.
2.12 Title to Property and Assets. Included in the Schedule of
Exceptions is a true, correct and complete list and brief description of all
real property and a list of all material items of personal property owned or
leased by the Company and each of its Subsidiaries. The Company and its
Subsidiaries own their property and assets free and clear of all mortgages,
liens, claims, loans and encumbrances, except such encumbrances and liens which
arise in the ordinary course of business (excluding liens for borrowed money, or
that may arise by reason of violations of law or breach of contract) and do not
materially impair the Company's or its Subsidiaries' ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company and each of its Subsidiaries are in compliance with such leases and, to
the best knowledge of the Company, holds a valid leasehold interest free of any
liens, claims or encumbrances, which liens, claims or encumbrances would be
materially adverse to the Company or such Subsidiary.
2.13 Voting Arrangements. The Company is not a party to, nor
to the best knowledge of the Company, are there any outstanding shareholder
agreements, voting trusts, proxies or other arrangements or understandings among
the shareholders of the Company relating to the voting of their respective
shares.
- 15 -
16
2.14 Financial Statements. The Company has delivered to each
Investor its audited financial statements (balance sheet and profit and loss
statement) at and for the fiscal year ended September 30, 1994, and its
unaudited financial statements (balance sheet, profit and loss statement) at and
for the year ended September 30, 1995 (the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and have been prepared on a
consistent basis throughout the periods indicated. The Company has also
delivered to the Investors true and complete copies of all reports prepared by
Xxxxxx Xxxxxxxx & Company and Deloitte & Touche with respect to the Company. The
Financial Statements fairly present the financial condition and operating
results of the Company and its Subsidiaries on a consolidated basis as of the
dates, and for the periods, indicated therein.
The Company and its Subsidiaries have incurred no liabilities or
obligations since September 30, 1995, whether absolute, accrued, contingent or
otherwise, except for (a) the liabilities and obligations of the Company
disclosed or provided for in the Plan, to the extent and in the amounts so
disclosed or provided for, and (b) liabilities incurred or accrued in the
regular and ordinary course of business which will not, either individually or
in the aggregate, have a material adverse effect on the assets, condition or
prospects of the Company or its Subsidiaries, financial or otherwise.
2.15 Changes. Since September 30, 1995, there has been no material
adverse change in the assets, liabilities (contingent or otherwise), condition,
operating results, business or prospects of the Company or any Subsidiary,
financial or otherwise.
2.16 Absence of Change or Event. Since September 30, 1995, the
Company and the Subsidiaries have conducted their respective businesses only in
the ordinary course and have not:
(a) when considered as a whole, incurred any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, in excess of US $50,000 individually or $250,000 in the aggregate, except
liabilities or obligations incurred in the ordinary course of business and
consistent with prior practice;
(b) mortgaged, pledged or subjected to lien, restriction or
any other encumbrance any of the material property, businesses or assets,
tangible or intangible, of the Company or any Subsidiary;
(c) (i) sold, transferred, leased to others or otherwise
disposed of any of its material assets (or committed to do any of the
foregoing), including the payment of any loans owed to any affiliate, except for
inventory sold to customers or returned to vendors and payments to any
non-affiliates on account of accounts payable or scheduled payments in respect
of indebtedness for money borrowed disclosed in the Financial Statements or in
the Schedule of Exceptions, in each case in the ordinary course of business and
consistent with prior practice, or (ii) canceled, waived, released or otherwise
compromised any debt or claim or any right of significant value;
- 16 -
17
(d) suffered any damage, destruction or loss (whether or not
covered by insurance) which has had or could have a material adverse effect on
the assets, condition or prospects of the Company and its Subsidiaries,
financial or otherwise;
(e) when considered as a whole, made or committed to make any
capital expenditures or capital additions or betterments in excess of an
aggregate of US $100,000, excluding individual items of less than $10,000 which
would not in the aggregate exceed $500,000;
(f) encountered any labor union organizing activity or had any
actual or threatened employee strikes, work stoppages, slow-downs or lock-outs;
(g) instituted any litigation, action or proceeding before any
court, governmental body or arbitration tribunal relating to it or its property,
except for litigation, actions or proceedings instituted in connection with the
Bankruptcy Case or in the ordinary course of business and consistent with prior
practice;
(h) declared or paid any dividend or made or agreed to make
any other payment or distribution in respect of its capital stock, or directly
or indirectly redeemed, purchased or otherwise acquired any of its capital stock
or agreed to do any of the foregoing;
(i) increased or agreed to increase the compensation of any
officer, director, employee, consultant, independent contractor, agency employee
or other agent of the Company or any Subsidiary, directly or indirectly,
including by means of any bonus, loan, retention plan, pension plan, profit
sharing, deferred compensation, savings, insurance, retirement, incentive,
severance, stock purchase or stock option plan or any other employee benefit
plan, compensation or remuneration plan, program or arrangement, except with
respect to ordinary or semi-annual increases to base pay consistent with past
practices;
(j) increased promotional or advertising expenditures except
in the ordinary course of business consistent with prior practice or otherwise
changed its policies or practices with respect thereto; or
(k) made or changed any election concerning taxes or tax
returns, changed an annual accounting period, adopted or changed any accounting
method, filed any amended return, entered into any closing agreement with
respect to taxes, settled any tax claim or assessment or surrendered any right
to claim a refund of taxes or obtained or entered into any tax ruling,
agreement, contract, understanding, arrangement or plan.
2.17 Proprietary Information. None of the Company, any Subsidiary
or Xxxxxx Xxxxx has done anything to compromise the secrecy, confidentiality or
value of any of its trade secrets, know-how, inventions, prototypes, designs,
processes or technical data required to conduct its business as now conducted.
All of the officers, directors and employees of the Company and each of its
Subsidiaries have executed a non-disclosure/invention assignment agreements in
the forms attached to the Schedule of Exceptions. To the best knowledge of the
- 17 -
18
Company, no officer, director, employee or consultant of the Company or any
Subsidiary in connection with such employee's employment with the Company or any
Subsidiary, has violated the terms of any agreement with a previous employer. To
the best knowledge of the Company, none of the officers, directors, employees or
consultants of the Company or any Subsidiary are obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would conflict with their obligation to use their best efforts to
promote the interests of the Company and its Subsidiaries or that would conflict
with the Company's business as conducted. It is currently not necessary nor will
it be necessary for the Company or any of its Subsidiaries to utilize, nor will
the Company or any of its Subsidiaries utilize, any inventions of any of its
directors, officers, employees or consultants (or people it currently intends to
hire) made or owned (by the directors, officers, employees or consultants or
their former employees) prior to their employment with or engagement by the
Company or any of its Subsidiaries in violation of any limitations or
restrictions to which any such director, officer, employee or consultant is a
party. To the best knowledge of the Company, none of the directors, officers,
employees or consultants (including without limitation former directors,
officers, employees and consultants) of the Company or any of its Subsidiaries
have taken, removed or made copies of any proprietary documentation, manuals,
products, materials, or any other tangible item from his or her previous
employer relating to the business as conducted or proposed to be conducted of
such previous employer.
2.18 Permits. The Company and its Subsidiaries have all franchises,
permits, licenses, orders of the Bankruptcy Court and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could materially and adversely affect the business, properties,
prospects, or financial condition of the Company or any of its Subsidiaries and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as currently planned to be conducted. Neither
the Company nor any of its Subsidiaries is in default in any material respect
under any of such franchises, permits, licenses, or other similar authority.
Neither the execution nor delivery of this Agreement, the Employment Agreement,
the Warrant, the Voting Trust Agreement, the Cap Call Notes or the Investors
Shareholders' Agreement, nor the consummation of the transactions contemplated
hereby and thereby will result in the termination of any material franchise,
permit, license or right held by the Company or any Subsidiary, and all such
franchises, permits, licenses and rights will remain vested in and inure to the
benefit of the Company and the Subsidiaries after the consummation of the
transactions contemplated by this Agreement.
2.19 Brokers or Finders. None of the Company, any Subsidiary or
Xxxxxx Xxxxx has engaged any broker, investment banker or finder in connection
with the sale of the Securities.
2.20 Minute Books. The minute books of the Company and each
Subsidiary as provided to the Investors contain a complete record of all
meetings, consents and actions of the Board of Directors and the shareholders of
the Company and such Subsidiaries since the time of its incorporation,
accurately reflecting all such meetings, consents and actions in all material
respects.
- 18 -
19
2.21 Tax. As used in this Agreement, "taxes" or "tax liability"
means all taxes (including but not limited to income taxes, excise taxes, sales
taxes, property taxes, occupational or employment taxes, gross receipts taxes or
any other taxes), including applicable interest additions to tax and penalties.
(a) Each of the Company and its Subsidiaries has filed all
required tax returns, and has paid all taxes owed by any of the Company and its
Subsidiaries (whether or not shown on any tax return) with respect to any period
ending on or before the date of Closing or any period on or before the last day
of the taxable year of the Company's consolidated group in which the Closing
date occurs (determined with respect to such year by closing the books of the
Company and its Subsidiaries as of the end of the Closing date). Such returns
are correct and complete in all material respects.
(b) Each of the Company and its Subsidiaries has withheld and
paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party.
(c) Each of the Company and its Subsidiaries has adequately
accrued amounts with respect to the payment of all taxes that are not yet due
and payable and that relate to periods through the date hereof and the Closing
date.
(d) Neither the Company nor any of its Subsidiaries has been a
member of an affiliated group filing a consolidated federal income tax return,
or any consolidated or combined or unitary group filing a state tax return,
other than a group the common parent of which is the Company.
(e) None of the Company or its Subsidiaries has any liability
for taxes (i) as a transferee or successor, or (ii) imposed by contract which
would not be otherwise paid by the Company or such Subsidiary.
There are no unpaid foreign, federal, state or local taxes assessed
or asserted in writing in respect of any tax returns filed by the Company or any
of its Subsidiaries or claimed in writing to be due by the appropriate taxing
authority, except those, if any, currently being contested in good faith which
are disclosed on the Schedule of Exceptions. Neither the Company nor any of its
Subsidiaries is being audited or has ever been audited by the Internal Revenue
Service (the "IRS") or any other taxing authority. No request by the Company or
any of its Subsidiaries for ruling or determination letters relating to foreign,
federal, state or local taxes is pending with any taxing authority. Neither the
Company nor any of its Subsidiaries has agreed to or is required to make any
adjustment pursuant to Section 481(a) of the Code, by reason of a change in
accounting method initiated by it or required by law, and neither the Company
nor Xxxxxx Xxxxx has any knowledge that the IRS has proposed or purported to
require any such adjustment or change in accounting method.
- 19 -
20
2.22 Environmental Matters.
(a) The Company and its Subsidiaries have complied in all
material respects with and are in material compliance with all foreign, federal,
state and local laws, statutes, rules, regulations, ordinances, permits and
licenses relating to the protection of the environment ("Environmental Laws")
applicable to their respective businesses, facilities and properties, and the
Company and its Subsidiaries have obtained all environmental licenses and
permits required for their respective businesses and operations, a list of which
is contained in the Schedule of Exceptions, and all of which are valid and in
full force and effect.
(b) Neither the Company nor any of its Subsidiaries has
received any notice or is subject to any claim or demand from any person or
governmental body concerning any emission, discharge, spill, leak, release,
threatened release, event, condition, circumstance, activity, practice or
incident of or relating to Hazardous Materials (as hereinafter defined) that (i)
may interfere with or prevent material compliance or continued compliance by the
Company or its Subsidiaries with any Environmental Law, (ii) may give rise to or
result in any liability of the Company or its Subsidiaries to any person or
governmental body for damage or injury to natural resources, wildlife, human
health or the environment, or (iii) could reasonably be expected to result in
the Company or its Subsidiaries incurring any expense, cost, loss or liability.
(c) The Company and its Subsidiaries are not, as a result of
the operation or condition of their business or assets, subject to any (i)
contingent liability in connection with any release or threatened release of
Hazardous Materials (as hereafter defined) into the environment whether on or
off any property or facility now or previously owned, leased or used by the
Company or its Subsidiaries (collectively, the "Company Properties") or (ii)
removal or remediation requirements under any Environmental Law, or any
reporting requirements related thereto.
(d) Neither the Company nor its Subsidiaries have been
notified that any of them are potentially liable or have received any requests
for information or other correspondence concerning any of the Company Properties
or any other site or facility, and are not otherwise aware that they are
considered potentially liable under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any similar state law.
(e) No use, storage, handling, disposal, release, burial or
placement of hazardous or toxic substances, wastes, pollutants, or contaminants,
or petroleum, gas products, biomedical waste or asbestos-containing materials
(as any of such terms may be defined under federal, state or local law)
(hereinafter collectively referred to as "Hazardous Materials") by the Company
has occurred, except in accordance with law, on, in, at, or about the Company
Properties or to the knowledge of the Company, any other facility or site to
which Hazardous Materials from the Company or its Subsidiaries may have been
taken at any time in the past.
- 20 -
21
(f) To the best knowledge of the Company, there has been no
disposal, release, burial or placement of Hazardous Materials on any property
which (i) is currently owned or upon which the Company or its Subsidiaries
currently conduct activities or operations; or (ii) was owned by the Company, or
upon which the Company, its Subsidiaries, or any of their predecessors
previously conducted activities or operations which may result or has resulted
in contamination of, or beneath, any of the Company Properties.
(g) All of the above ground and underground storage tanks
located on Company and Subsidiary owned properties have been identified in the
Schedule of Exceptions.
(h) No lien has been asserted on any Company or Subsidiary
owned properties or to the knowledge of the Company any other Company Property
under Environmental Laws.
(i) Except as provided in the Schedule of Exceptions, no
audit, investigation or audit has been conducted by the Company, or to the
knowledge of the Company by any other person as to the environmental matters at
any of the Company Properties.
2.23 Insurance. The insurance policies held by the Company and
its Subsidiaries are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date of the Closing have been or
will be paid, and no notice of cancellation or termination has been received
with respect to any such policy. Such policies are sufficient for compliance
with all requirements of law and all agreements to which the Company and each
Subsidiary is a party; are valid, outstanding and enforceable policies; provide
adequate insurance coverage for the assets and operations of the Company and
each Subsidiary; will remain in full force and effect through the Closing
without the payment of additional premiums; and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. The Schedule of Exceptions identifies all risks which have been
designated as being self insured. None of the Company and the Subsidiaries has
been refused any insurance with respect to the respective assets or operations
of the Company or any Subsidiary, nor has any such coverage been limited, by any
insurance carrier to which the Company or any Subsidiary has applied for any
such insurance or with which the Company or any Subsidiary has carried insurance
during the last five years.
2.24 Affiliate Interests.
(a) The Schedule of Exceptions sets forth all amounts in
excess of US $10,000 in the aggregate paid (or deemed for accounting purposes to
have been paid) and services provided by the Company or any Subsidiary to, or
received by the Company or any Subsidiary from, any affiliate of the Company,
any Subsidiary or any shareholder, officer or director of the Company or any
Subsidiary during the last fiscal year for products or services (including any
charge for administrative, purchasing, financial or other services) and all such
amounts currently owed by the Company or any Subsidiary to, or to the Company or
any Subsidiary by, any affiliate of the Company, any Subsidiary, or any
shareholder, officer or director of the Company or any Subsidiary.
- 21 -
22
(b) Each contract, agreement or arrangement between the
Company or any Subsidiary, on the one hand, and any affiliate of the Company or
any Subsidiary or any shareholder, officer or director of the Company or any
Subsidiary, on the other hand ("Affiliate Agreements") is described in the
Schedule of Exceptions. Except as disclosed in the Schedule of Exceptions, each
of the transactions described in the Schedule of Exceptions and each of the
Affiliate Agreements was entered into in the ordinary course of business and on
commercially reasonable terms and conditions.
(c) Except as set forth in the Schedule of Exceptions, no
shareholder, officer or director of the Company or any Subsidiary has any
material interest in any property, real or personal, tangible or intangible,
including without limitation, inventions, patents, trademarks, service marks or
trade names, used in or pertaining to the business of the Company or any
Subsidiary.
2.25 Customers, Suppliers, Distributors, Etc. No material supplier,
customer, distributor or sales representative of the Company or any Subsidiary
has canceled or otherwise terminated, or made any written threat to the Company
or any Subsidiary or to any of their affiliates to cancel or otherwise
terminate, for any reason, including the consummation of the transactions
contemplated hereby, its relationship with the Company or any Subsidiary, or has
at any time on or after September 30, 1995 decreased materially its services or
supplies to the Company or any Subsidiary in the case of any such supplier,
distributor or sales representative, or its usage of the services or products of
the Company or any Subsidiary in the case of any customer. To the best knowledge
of the Company, no such supplier, customer, distributor or sales representative
intends to cancel or otherwise terminate its relationship with the Company or
any Subsidiary or to decrease materially its services or supplies to the Company
or any Subsidiary or its usage of the services or products of the Company or any
Subsidiary, as the case may be.
2.26 Absence of Questionable Payments. Neither the Company or any
Subsidiary nor, to the best knowledge of the Company, any director, officer,
agent, employee or other person acting on behalf of the Company or any
Subsidiary, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Neither the
Company or any Subsidiary nor, to the best knowledge of the Company, any current
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary, has accepted or received any unlawful contributions,
payments, gifts, or expenditures. Each of the Company and the Subsidiaries that
is required to file reports pursuant to Section 12 or 15(d) of the Exchange Act
is in compliance with the provisions of Section 13(b) of the Exchange Act.
- 22 -
23
2.27 Products.
(a) The Schedule of Exceptions sets forth all claims asserted
or, to the best knowledge of the Company, threatened at any time during the past
five years against the Company or any Subsidiary in respect of personal injury,
wrongful death or property damage (excluding claims of property damage of less
than $10,000 individually or $250,000 in the aggregate) alleged to have resulted
from products or services provided by the Company or any Subsidiary, together
with a description of each such claim or action initiated with respect thereto
and the disposition thereof.
(b) The Company and the Subsidiaries have not experienced
product recall or warranty claims in excess of 5% of aggregate gross sales for
any of the past five (5) years.
2.28 Benefit Plans. Neither the Company nor any of its Subsidiaries
is in material default with respect to compliance with the provisions of any
employment, bonus, profit sharing, compensation, loan remuneration, employee
benefit, incentive, pension or retirement, stock purchase or stock option,
retention or employment agreement, plan, program or arrangement or any oral or
written contract or agreement with directors, officers, employees, independent
contractors, agency employees or unions, or consultants to which the Company or
any of its Subsidiaries is a party or is subject. The Company has delivered to
the Investors true, correct and complete copies of all such obligations (to the
extent they are in writing or written descriptions to the extent they are oral),
each of which is attached to the Schedule of Exceptions.
Neither the Company nor any of its Subsidiaries has, and never has
had, any union contracts or collective bargaining agreements with, or employee
benefit plans for collective bargaining groups or pursuant to collective
bargaining agreements, or any other obligations to, employee organizations or
groups relating to the Company's business or the Company's or its Subsidiaries'
employees. No collective bargaining agent has been certified as a representative
of any of the employees of the Company or any Subsidiary and no representation
campaign, strike, slowdown, picketing, work stoppage or other job action has
occurred or is threatened to occur with respect to any of the employees of the
Company or any of its Subsidiaries.
All plans are in full compliance with all applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code") and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and regulations
issued under the Code and ERISA.
All employee benefit plans which are identified as, and have been
represented to be, qualified plans under Section 401(a) or Section 401(k) with
exempt trusts under Section 501(a) of the Code are in full compliance with all
Code provisions and all applicable regulations with respect to Section 401(a)
and Section 401(k) qualified plans and Section 501(a) exempt trusts. Such plans
and their funding agreements and administrative forms and notices contain no
language and the administrators and fiduciaries of such plans have engaged in no
acts of commission or omission which may result in the disqualification of such
plans under Section 401(a) or Section 401(k) of the Code or trusts under Section
501(a) of the Code.
- 23 -
24
To the best knowledge of the Company, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, or
on behalf of, against or with respect to any of the employee benefit or
compensation plans, programs, arrangements or agreements maintained or
previously maintained by the Company or any of its Subsidiaries.
None of the Company, any of its Subsidiaries or any of the plans
subject to ERISA, nor any fiduciary or any employee of the Company or any of its
Subsidiaries involved in the administration of such plans has engaged in a
transaction subject to either a civil penalty pursuant to Section 409 or 502(i)
or Section 502(l) of ERISA or a tax pursuant to Section 4975 or 4976 of the Code
in connection with which the Company or any of its Subsidiaries has directly or
indirectly incurred, or may incur, liability.
All compensation and benefit plans, programs, arrangements and
agreements currently maintained by the Company or any of its Subsidiaries may be
amended or terminated by the Company or its applicable Subsidiary at any time
upon reasonable notice without reservation or penalty except for customary
"run-out" provisions. All terminated compensation and benefit plans, programs,
arrangements and agreements of the Company or any of its Subsidiaries were
terminated in accordance with the written provisions of the plan, program,
arrangement or agreement and of applicable provisions of the Code and ERISA. Any
employee pension benefit plan which was qualified under Code Section 401(a)
retained its qualified plan status at the time of termination of the plan.
To the extent that the Employee Stock Plan and any predecessor to
that plan holds or held securities of the Company or any Subsidiary as an
investment of the plan, the Employee Stock Plan, its sponsors, fiduciaries and
trustee have complied in all material respects with all requirements of the
federal or state securities laws, ERISA and the Code which apply to the
purchase, holding or sale of such securities by an employee pension benefit plan
which is intended to be a qualified plan under Section 401(a) of the Code. Such
compliance includes, but is not limited to, all applicable disclosure, reporting
and registration requirements; benefit distribution requirements; and voting
requirements.
2.29 Disclosure. None of (i) this Agreement (including the Schedule
of Exceptions); (ii) all other written statements made or delivered in
connection herewith, including the Confidential Disclosure Memorandum dated
November 17, 1995 (the "Disclosure Memorandum"); or (iii) the information
concerning the Company which is set forth in the "Disclosure Statement of Debtor
with Regard to Debtor's Amended and Restated Plan of Reorganization dated July
20, 1995," contain any untrue statement of a material fact or omit to state a
material fact necessary to make statements herein or therein not misleading. The
Disclosure Memorandum and the information contained therein shall not modify any
representation and warranty of the Company contained in this Agreement.
2.30 Business Relationships. The Company has not entered into any
legally binding agreement or undertaking with or made legally binding promises
to any Investor, as an inducement for such Investor to enter into this Agreement
or otherwise, which would obligate the Company (i) to conduct business with such
Investor in the future on any basis or (ii) to make any investment, directly or
indirectly, in any entity or facility.
- 24 -
25
2B. Representations and Warranties of Xxxxxx Xxxxx. Xxxxxx Xxxxx hereby
represents and warrants to each Investor, except as set forth on the Schedule of
Exceptions, which exceptions shall specifically identify the Section to which it
applies and shall be deemed to be a representation and warranty as if made
hereunder, as follows:
2B.1 Title to Stock. Xxxxxx Xxxxx owns, beneficially and of record,
15,216,974.2181 shares of Common Stock of the Company free and clear of all
liens, claims and encumbrances whatsoever. Xxxxxx Xxxxx owns of record, in trust
for the Company, those shares of stock of the Subsidiaries as shown in the
Schedule of Exceptions, free and clear of all liens, claims and encumbrances
whatsoever.
2B.2 Authorization. Xxxxxx Xxxxx has the capacity and authority to
execute and deliver this Agreement, the Investors Shareholders' Agreement, the
Employment Agreement, the Voting Trust Agreement and each other document,
instrument and agreement to be entered into by Xx. Xxxxx pursuant hereto or
thereto, to perform hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby without the necessity of any act or consent of
any other person whomsoever. This Agreement constitutes, and the Investors
Shareholders' Agreement, the Employment Agreement and the Voting Trust Agreement
will upon the execution and delivery thereof constitute, the valid and legally
binding obligations of Xxxxxx Xxxxx, enforceable in accordance with their terms
except as affected by (i) bankruptcy or insolvency laws, and (ii) equitable
principles, public policy or the exercise of judicial discretion.
2B.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of Xxxxxx Xxxxx is required to be obtained in
connection with Xxxxxx Xxxxx' valid execution, delivery, or performance of this
Agreement, the Investors Shareholders' Agreement, the Voting Trust Agreement or
the Employment Agreement.
2B.4 Litigation. There is no Action pending or to the knowledge of
Xxxxxx Xxxxx currently threatened against Xxxxxx Xxxxx, his properties or assets
which questions the validity of this Agreement or the right of Xxxxxx Xxxxx to
enter into this Agreement, or to consummate the transactions contemplated
hereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, or prospects of the Company
and its Subsidiaries taken as a whole, financial or otherwise, or any change in
the current equity ownership of the Company or any Subsidiary. By way of example
but not by way of limitation, there are no Actions pending or, to the best
knowledge of Xxxxxx Xxxxx threatened (or any basis therefor known to Xxxxxx
Xxxxx) relating to his prior employment, his use in connection with the
Company's business of any information, technology or techniques allegedly
proprietary to any of his former employers, clients or other parties, or his
obligations under any agreements with prior employers, clients or other parties
which would result in any material adverse change in the assets, condition, or
prospects of the Company and its Subsidiaries taken as whole, financial or
otherwise. Xxxxxx Xxxxx is not a party or subject to the provisions of any
settlement agreement, order, writ, injunction, judgment or decree of any court
or government
- 25 -
26
agency or instrumentality, other than orders of the Bankruptcy Court in the
Bankruptcy Case, true and complete copies of which orders have been furnished to
the Investors. There is no Action by Xxxxxx Xxxxx currently pending or which
Xxxxxx Xxxxx intends to initiate.
2B.5 Voting Arrangements and Other Ownership Interests. Except for
the 1988 Shareholder Agreement and the Investors Shareholders' Agreement and
Voting Trust Agreement to be entered into in connection herewith, Xxxxxx Xxxxx
is not a party to, nor to the best knowledge of Xxxxxx Xxxxx, are there any
outstanding shareholder agreements, voting trusts, proxies or other arrangements
or understandings among the shareholders of the Company relating to the voting
of their respective shares. Xxxxxx Xxxxx has not breached, nor is he aware of
any threat that he has breached, the 1988 Shareholder Agreement. Except as set
forth in Section 2.3 of the Schedule of Exceptions, neither Xxxxxx Xxxxx, Xxxx
Xxxxx nor any affiliate of Xxxxxx Xxxxx presently owns or controls, directly or
indirectly, any interest in any other corporation, association, partnership or
other business entity that conducts any material business with or has any
material business relationship with the Company or any of its Subsidiaries.
2B.6 Company Representations. To the best knowledge of Xxxxxx
Xxxxx, each of the representations and warranties of the Company contained in
Article 2A hereof is true and correct.
3. Representations and Warranties of Each Investor. Each Investor
hereby severally and not jointly represents and warrants with respect to itself
that except as set forth in such Investor's Schedule of Exceptions delivered to
the Company simultaneously herewith (provided that the representation and
warranty in Section 3.5 is made as of the date of Closing only):
3.1 Authorization. Such Investor has the capacity and authority to
execute and deliver this Agreement, the Investors Shareholders' Agreement and
the other documents, instruments and agreements to be entered into pursuant
hereto by such Investor, to perform hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby without the necessity of any
act or consent of any other person whomsoever (other than the expiration or
early termination of the HSR Act waiting period). All corporate action on the
part of such Investor, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement and the Investors
Shareholders' Agreement and the performance of all obligations of such Investor
hereunder and thereunder has been taken or will be taken on or prior to the
Closing. This Agreement constitutes, and the Investor Shareholders' Agreement
will on the date of Closing constitute such Investor's valid and legally binding
obligation, enforceable in accordance with its terms except as affected by (i)
bankruptcy or insolvency laws, and (ii) equitable principles, public policy or
the exercise of judicial discretion. Each Investor hereby represents that the
person executing this Agreement on its behalf is duly authorized to do so.
3.2 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of such Investor is required in connection
with such Investor's valid execution, delivery, or performance of this Agreement
of the Investors Shareholders' Agreement except the Order in Aid of Confirmation
of the Plan
- 26 -
27
and as required pursuant to the HSR Act, and except for any notices of sale
required to be filed with the SEC under Regulation D of the Securities Act, or
such post-closing filings as may be required under applicable state securities
laws, which will be timely filed within the applicable periods therefor.
3.3 Litigation. There is no Action pending or currently threatened
against such Investor or, to the best knowledge of the Investor, against any
officer, director or employee of such Investor in connection with such
officer's, director's or employee's relationship with, or actions taken on
behalf of such Investor which questions the validity of this Agreement or the
right of such Investor to enter into this Agreement, or to consummate the
transactions contemplated hereby.
3.4 Purchase Entirely for Own Account. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor confirms,
that the Securities to be received by such Investor hereunder will be acquired
for investment for such Investor's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, such Investor
purchasing Securities hereunder further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities, or any portion thereof. Each Investor
that is an entity represents that it has full power and authority to enter into
this Agreement.
3.5 Disclosure of Information. Such Investor believes it has
received all the information it has requested from the Company for deciding
whether to purchase the Securities. Such Investor further represents that it has
had an opportunity to ask questions and receive answers and to obtain copies of
any documents or other instruments from the Company regarding the terms and
conditions of the offering of the Securities and is not relying on the due
diligence or financial or legal representation of any other Investor. The
foregoing does not modify the Company's and Xxxxxx Xxxxx' representations and
warranties set forth herein or the Investor's right to rely thereon.
3.6 Investment Experience. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, Investor also represents it has not been organized
solely for the purpose of acquiring the Securities.
3.7 Accredited Investor. Such Investor is an "Accredited Investor"
as defined in Regulation D of the Securities Act.
3.8 Brokers or Finders. Such Investor has not engaged any broker,
investment banker or finder in connection with the purchase of the Securities.
- 27 -
28
3.9 Organization and Capitalization. Such Investor is and will be
at the Effective Time a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. To the extent
applicable to each Investor, each Investor hereby represents and warrants that
its Investor Sub will be at Closing a newly formed corporation, in good standing
under the laws of the State of Georgia with no operating history and will have
no obligations, liabilities or encumbrances of any kind or nature whatsoever,
other than its obligations under this Agreement.
3.10 Business Relationships. Such Investor has no legally binding
agreement or understanding with the Company (i) which obligates the Company to
conduct business with such Investor in the future on any basis, or (ii) to make
any investment, directly or indirectly, in any entity or facility.
4. Conditions of Each Investor's Obligations at Closing. The
obligations of each Investor under Section 1 of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions:
(a) the entry of the Order in Aid of Confirmation; and (b) the satisfaction or
waiver, as determined by the Investors purchasing a majority of the Preferred
Shares (which determination shall be at the sole and absolute discretion of such
Investors and may be made without regard to the interests of any other
Investor), of each of the conditions set forth below, the waiver of which shall
be effective if waived in writing by Investors purchasing a majority of the
Preferred Shares:
4.1 Expiration of Bankruptcy Appeal. The Effective Date will have
passed such that the Order and the Order in Aid of Confirmation will have become
final, subject only to the provisions of Section 1144 of the Bankruptcy Code. As
used herein, the Order and the Order in Aid of Confirmation shall be deemed
"final" when (i) the time to appeal, petition for certiorari or to seek
reargument or rehearing has expired and no appeal, reargument, certiorari
petition or rehearing is pending; or (ii) if any appeal, reargument, writ of
certiorari or rehearing thereof has been sought, the Order or the Order in Aid
of Confirmation has been affirmed by the highest court to which the Order or the
Order in Aid of Confirmation was appealed or from which the reargument,
certiorari, or rehearing was sought, and the time to take any further appeal or
to seek certiorari or further reargument or rehearing has expired. The Order in
Aid of Confirmation shall be in form and substance satisfactory to the Investors
purchasing a majority of the Preferred Shares in such Investors' sole
discretion.
4.2 Representations and Warranties. The representations and
warranties of the Company and Xxxxxx Xxxxx contained in Section 2 shall be true
on and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
4.3 Performance. The Company and Xxxxxx Xxxxx shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it or him on or
before the Closing. The entering into, delivery and performance of this
Agreement by the Company shall have been duly authorized by all necessary
corporate action.
- 28 -
29
4.4 Compliance Certificate. At the Closing, Xxxxxx Xxxxx as the
President of the Company, and personally shall deliver to each Investor a
certificate dated as of the Closing certifying that the conditions set forth in
Sections 4.1, 4.2 and 4.3 have been fulfilled as of the Closing, provided that
Xxxxxx Xxxxx' personal certificate shall apply to his representations and
warranties and the performance of his covenants only.
4.5 Regulatory Approvals. The Company and the Investors shall have
filed all required reports and satisfied all requests for additional information
pursuant to the HSR Act, and all applicable waiting periods shall have expired
or been terminated.
4.6 No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement, the Investors Shareholders' Agreement, the
Warrant, the Voting Trust Agreement, the Employment Agreement, the Merger or the
consummation of the transactions contemplated hereby or thereby, or which is
related to or arises out of the business of the Company or any of its
Subsidiaries, if such action, proceeding, investigation, regulation or
legislation, in the reasonable judgment of the Investors purchasing a majority
of the Preferred Shares would make it inadvisable to consummate such
transactions.
4.7 Investor Performance. With respect to each Investor, each other
Investor shall have performed and complied with all agreements and obligations
contained in this Agreement that are required to be performed and complied with
by it on or before Closing and its representations and warranties shall be true
on and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
4.8 Opinions.
(a) The Company shall have delivered the opinions of Parker,
Johnson, Xxxx & Dunlevie with respect to the transactions contemplated by this
Agreement, and Lamberth, Bonapfel, Xxxxxxx, Xxxxxxx & Xxxxxx, P.A., with respect
to the Bankruptcy Case, in each case in form and substance reasonably
satisfactory to the Investors purchasing a majority of the Preferred Shares.
(b) Xxxxxx Xxxxx shall have delivered the opinion of Greene,
Buckley, Xxxxx & XxXxxxx in form and substance reasonably satisfactory to the
Investors purchasing a majority of the Preferred Shares.
4.9 Completed Financing. All conditions to the lender's (or
lenders') obligations to make loans to the Company under the definitive
agreements between the Company and the CIT Group/Credit Finance, Inc. in respect
of new debt financing in an amount available to be borrowed of up to $70 million
(the "New Debt Financing") shall have been satisfied or waived (other than any
such conditions related solely to receipt of evidence of satisfaction or waiver
of the conditions to the obligations of the parties to this Agreement to
consummate the transactions contemplated hereby).
- 29 -
30
4.10 Closing Deliveries. The Company and Xxxxxx Xxxxx shall have
delivered to the Investors each of the certificates, documents and agreements
required to be delivered by such party hereunder.
4.11 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto and deliverable by the Company, its Subsidiaries and
Xxxxxx Xxxxx at the Closing shall be reasonably satisfactory in form and
substance to counsel to the Investors purchasing a majority of the Preferred
Shares, and such counsel shall have received all such counterpart originals and
certified or other copies of such documents as they may reasonably request.
5. Conditions of the Company's and Xxxxxx Xxxxx' Obligations at
Closing. The obligations of the Company and Xxxxxx Xxxxx under Section 1 of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions by each Investor:
5.1 Expiration of Bankruptcy Appeal. The Effective Date will have
passed such that the Order and the Order in Aid of Confirmation will have become
final, subject only to the provisions of Section 1144 of the Bankruptcy Code. As
used herein, the Order and the Order in Aid of Confirmation shall be deemed
"final" when (i) the time to appeal, petition for certiorari or to seek
reargument or rehearing has expired and no appeal, reargument, certiorari
petition or rehearing is pending; or (ii) if any appeal, reargument, writ of
certiorari or rehearing thereof has been sought, the Order or the Order in Aid
of Confirmation has been affirmed by the highest court to which the Order or the
Order in Aid of Confirmation was appealed or from which the reargument,
certiorari, or rehearing was sought, and the time to take any further appeal or
to seek certiorari or further reargument or rehearing has expired. The Order in
Aid of Confirmation shall be in form and substance reasonably satisfactory to
the Company.
5.2 Representations and Warranties. The representations and
warranties of the Investors contained in Section 3 hereof shall be true on and
as of the date of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.3 Capitalization of Subsidiaries. Rinzai shall have duly formed
and capitalized Financial Sub in the amount and as specified in Section 1.1(e)
hereof.
5.4 Regulatory Approvals. The Company and the Investors shall have
filed all required reports and satisfied all requests for additional information
pursuant to the HSR Act and all applicable waiting periods shall have expired or
terminated.
5.5 Closing Deliveries. Each of the Investors shall have delivered
to the Company each of the certificates, documents and agreements required to be
delivered by such party hereunder.
5.6 Proceedings and Documentation. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto
- 30 -
31
and deliverable by the Investors or the Investor Subs shall be reasonably
satisfactory in form and substance to counsel to the Company, and such counsel
shall have received all such counterpart originals and certified or other copies
of such documents as they may reasonably request.
5.7 Investor Opinions. Each of the Investors shall have delivered
the opinion of counsel to such Investor with respect to the transactions
contemplated by this Agreement in form and substance reasonably satisfactory to
the Company.
6. Covenants.
6.1 Conduct of Business Prior to the Closing Date. The Company
agrees that, between the date hereof and the date of Closing:
(a) Except as contemplated by this Agreement or permitted by
written consent of the Investors purchasing a majority of the Preferred Shares,
the Company and each Subsidiary shall operate their respective businesses only
in the ordinary course consistent with prior practice and not to:
(i) take any action of the nature referred to in
Section 2.16, except as permitted therein;
(ii) change the Company's or any Subsidiary's banking or
safe deposit arrangements; or
(iii) change the Company's or any Subsidiary's certificate
or articles of incorporation or bylaws.
(b) The Company shall preserve the business organization of
the Company and each Subsidiary intact and shall use its best efforts to keep
available to the Company the services of the present officers and employees of
the Company and each Subsidiary and to preserve for the Company the goodwill of
the Company's and each Subsidiary's suppliers, customers, distributors, sales
representatives and others having business relations with the Company or any
Subsidiary.
(c) The Company and each Subsidiary shall maintain in force
the insurance policies referred to in Section 2.23 or insurance policies
providing the same or substantially similar coverage; provided, however, that
the Company will notify the Investors prior to the expiration of any of such
insurance policies.
(d) Except as contemplated by this Agreement or permitted by
written consent of the Investors, no plan, fund, or arrangement described in
Section 2.28 has been or will be:
(i) terminated by the Company or any Subsidiary;
- 31 -
32
(ii) amended (except as expressly required by law) in any
manner which would directly or indirectly increase the benefits accrued, or
which may be accrued, by any participant thereunder; or
(iii) amended in any manner which would materially
increase the cost to the Company or any Subsidiary of maintaining such plan,
fund, or arrangement.
6.2 Employment Agreement. At the Closing, Xxxxxx Xxxxx and the
Company shall enter into an Employment Agreement in the form attached hereto as
Exhibit "F" (the "Employment Agreement").
6.3 Consents. The Company and Xxxxxx Xxxxx agree to take all
actions and effect all filings necessary to obtain all licenses, consents,
approvals and authorizations of all third parties and governmental bodies
necessary for it to consummate the Merger and the other transactions
contemplated by this Agreement.
6.4 Chief Executive and Chief Financial Officers. During the period
prior to the Closing, the Company agrees not to appoint, or enter into any
agreement or arrangement to appoint, a new Chief Executive Officer or Chief
Financial Officer without first obtaining the prior written consent of the
Investors purchasing a majority of the Preferred Shares, which consent may be
withheld by any such party in exercise of its sole and absolute discretion.
6.5 Examination of Records. Subject to any applicable court orders,
during the period prior to the Closing, the Company shall allow the Investors,
their respective counsel and other representatives reasonable access during
normal business hours to all books, records, files, documents, assets,
properties, contracts and agreements of the Company and its Subsidiaries and
shall furnish Investors and their respective counsel and representatives with
all available information concerning the affairs of the Company and its
Subsidiaries which is reasonably requested or as necessary to allow the Investor
to make (i) the representation and warranty contained in Section 3.5 hereof, or
(ii) the determination that the condition set forth in Section 4.9 has been
satisfied.
6.6 Delivery of Interim Financial Statements. During the period
prior to the Closing, the Company shall promptly deliver to each Investor all
regularly prepared unaudited financial statements of the Company, in format
historically utilized internally, as soon as available.
6.7 Notification of Certain Matters. Promptly after receipt of
notice thereof, each of the Company, Xxxxxx Xxxxx, and the Investors shall
advise the other parties hereto of (i) the occurrence or failure to occur of any
event, the occurrence or failure of which is reasonably believed by such party
to cause any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect any time from the
date hereof through the Closing Date; and (ii) any material failure of such
party to comply with or satisfy any covenant or condition to be complied with or
satisfied by him or it hereunder prior to the Closing; and such party shall use
his or its commercially reasonably efforts to remedy the same.
- 32 -
33
6.8 Debt Financing. The Company agrees, and Xxxxxx Xxxxx as
President of the Company agrees, to cause the Company to use its reasonable best
efforts to obtain funding of the new debt financing referred to in Section 4.9
hereof.
6.9 Redemption of Common Stock of Xxxxxx Xxxxxxx Xxxxx. All Common
Stock of the Company owned by Xxxxxx Xxxxxxx Xxxxx shall be redeemed by the
Company simultaneously with the Closing in accordance with and as provided in
the Plan and the Election made by her pursuant thereto (the "Redemption").
7. Indemnification.
7.1 Indemnification by the Company. The Company hereby agrees to
defend, indemnify and hold harmless each Investor and their respective
successors, assigns and affiliates (collectively, the "Investor Indemnitees")
from and against any and all losses (including, without limitation, any
diminution in value of the Investor's investment in the Company, based on the
valuation of the Company as of the date of Closing of US $71,400,000),
deficiencies, liabilities, damages, assessments, judgments, costs and expenses,
including attorneys' fees (both those incurred in connection with the defense or
prosecution of the indemnifiable claim and those incurred in connection with the
enforcement of this provision) (collectively, "Investor Losses"), caused by,
resulting from or arising out of:
(a) (i) breaches of any representation or warranty on the part
of the Company herein or in the Schedule of Exceptions or any Schedule or
Exhibit hereto or in any other written statement, certificate or other
instrument delivered by it pursuant hereto; and (ii) failures by the Company to
perform or otherwise fulfill any of its undertakings or other agreements
(including, without limitation, the Investors Shareholders' Agreement, the Cap
Call Notes, the Voting Trust Agreement and the Warrant) or obligations
hereunder;
(b) any and all actions, suits, proceeding, claims or demands
arising out of, or otherwise relating to, the Employee Stock Plan in respect of
the period prior to the ninetieth (90th) day following the date of Closing;
(c) any and all actions, suits, proceedings, claims or demands
arising out of, or otherwise relating to, brokers or finders fees sought by The
Xxxxxxxx-Xxxxxxxx Company, Inc.;
(d) any and all actions, suits, proceedings, claims or demands
relating to Xxxx X. Xxxxxx, Xxxx X. Xxxxxxx and Xxxxxx Xxxxxxx (the "Employee
Actions"); and
(e) any and all actions, suits, proceedings, claims or demands
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted by a third party naming an Investor
Indemnitee as a party to an action or otherwise making a claim or seeking
recovery from an Investor Indemnitee in respect of which an Investor Indemnitee
proposes to demand indemnification (a "Third Party Investor Indemnified
- 33 -
34
Claim") from the Company, such Investor Indemnitee shall notify the Company,
provided further, however, that the failure to so notify the Company shall not
reduce or affect the obligations of the Company with respect thereto except to
the extent that the Company is materially prejudiced thereby. Subject to Section
7.6 of this Agreement and to rights of or duties to any insurer or other third
person having liability therefor, the Company shall have the right promptly upon
receipt of such notice to assume the control and defense of, and to compromise
or settle, any such Third Party Investor Indemnified Claims, unless the Investor
Indemnitee notifies the Company that such Investor Indemnitee has determined, in
the exercise of its reasonable discretion, that a conflict of interest makes
separate representation by such Investor Indemnitee's own counsel advisable. If
the Investor Indemnitee gives the foregoing notice, it will have the right,
subject to Section 7.6 hereof, to assume the control and defense of and to
compromise and settle any such Third Party Investor Indemnified Claim. The
Company shall be responsible for the costs and expenses of such defense.
7.2 Indemnification by Xxxxxx Xxxxx. Xxxxxx Xxxxx hereby agrees to
defend, indemnify and hold harmless each Investor Indemnitee from and against
any and all Investor Losses, caused by, resulting from or arising out of:
(a) (i) breaches of any representation or warranty on the part
of Xxxxxx Xxxxx herein or in the Schedule of Exceptions or any Schedule or
Exhibit hereto or in any other written statement, certificate or other
instrument delivered by him pursuant hereto; and (ii) failures by Xxxxxx Xxxxx
to perform or otherwise fulfill any of his undertakings or other agreements
(including, without limitation, the Investors Shareholders' Agreement, the Cap
Call Notes, the Voting Trust Agreement and the Employment Agreement) or
obligations hereunder; or
(b) any and all actions, suits, proceedings, claims or
demands, incident to any of the foregoing or such indemnification;
provided, however, that if any Third Party Investor Indemnified Claim shall be
asserted in respect of which an Investor Indemnitee proposes to demand
indemnification from Xxxxxx Xxxxx, such Investor Indemnitee shall notify Xxxxxx
Xxxxx of such Third Party Investor Indemnified Claim, provided further, however,
that the failure to so notify Xxxxxx Xxxxx shall not reduce or affect the
obligations of Xxxxxx Xxxxx with respect thereto except to the extent that
Xxxxxx Xxxxx is materially prejudiced thereby. Subject to Section 7.6 of this
Agreement and to rights of or duties to any insurer or other third person having
liability therefor, Xxxxxx Xxxxx shall have the right promptly upon receipt of
such notice to assume the control and defense of, and to compromise or settle,
any such Third Party Investor Indemnified Claims, unless the Investor Indemnitee
notifies Xxxxxx Xxxxx that such Investor Indemnitee has determined, in the
exercise of its reasonable discretion, that a conflict of interest makes
separate representation by such Investor Indemnitee's own counsel advisable. If
the Investor Indemnitee gives the foregoing notice, it will have the right,
subject to Section 7.6 hereof, to assume the control and defense of and to
compromise and settle any such Third Party Investor Indemnified Claim. Xxxxxx
Xxxxx shall be responsible for the costs and expenses of such defense on a pro
rata basis.
- 34 -
35
7.3 Indemnification by the Investors. Each Investor hereby
respectively and severally, and not jointly, agrees to defend, indemnify and
hold harmless the Company and its respective successors, assigns and affiliates
and Xxxxxx Xxxxx (collectively, the "Company Indemnitees") from and against any
and all losses, deficiencies, liabilities, damages, assessments, judgments,
costs and expenses, including attorneys' fees (both those incurred in connection
with the defense or prosecution of the indemnifiable claim and those incurred in
connection with the enforcement of this provision) (collectively, "Company
Losses"), caused by, resulting from or arising out of:
(a) (i) breaches of any representation or warranty on the part
of such Investor herein or in any Schedule or Exhibit hereto or in any other
written statement, certificate or other instrument delivered by such Investor
pursuant hereto; and (ii) failures by such Investor to perform or otherwise
fulfill any of its undertakings or other agreements (including, without
limitation, the Investors Shareholders' Agreement and the Cap Call Notes) or
obligations hereunder; and
(b) any and all actions, suits, proceedings, claims or demands
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted by a third party naming a Company
Indemnitee as a party to an action or otherwise making a claim or seeking
recovery from a Company Indemnitee in respect of which a Company Indemnitee
proposes to demand indemnification from an Investor (a "Third Party Company
Indemnified Claim"), such Company Indemnitee shall notify the Investor thereof,
provided further, however, that the failure to so notify the Investor shall not
reduce or affect the obligations of such Investor with respect thereto except to
the extent that such Investor is materially prejudiced thereby. Subject to
Section 7.6 of this Agreement and to rights of or duties to any insurer or other
third person having liability therefor, such Investor shall have the right
promptly upon receipt of such notice to assume the control and defense of, and
to compromise or settle, any such Third Party Company Indemnified Claims, unless
the Company Indemnitee notifies such Investor that such Company Indemnitee has
determined, in the exercise of its reasonable discretion, that a conflict of
interest makes separate representation by such Company Indemnitee's own counsel
advisable. If the Company Indemnitee gives the foregoing notice, it shall have
the right, subject to Section 7.6 hereof, to assume the control and defense of
and to compromise and settle any such Third Party Company Indemnified Claim. The
indemnifying Investor shall be responsible for the costs and expense of such
defense.
7.4 Certain Limitations.
(a) The obligations of the Company to indemnify Investor
Indemnitees under Section 7.1(a)(i) of this Article shall accrue only if the
aggregate Investor Losses for all matters indemnifiable under this Article 7
exceed Five Hundred Thousand Dollars (US $500,000), and then the Company shall
be liable for all such Investor Losses, subject to the maximum amount described
below; provided, however, that there shall be no such limitation on Investor
Losses arising from a breach of any of the representations or warranties in
Sections 2.2, 2.4, 2.5 and 2.19 hereof. The obligations of the Company to
indemnify the Investors under this Article 7 shall not exceed the aggregate of
Seventeen Million Five Hundred Thousand U.S.
- 35 -
36
Dollars (US $17,500,000), plus fifty percent (50%) of the amount of all advances
made by the Investors which are converted into capital stock of the Surviving
Corporation as contemplated by the Investors Shareholders' Agreement, plus fifty
percent (50%) of the aggregate of all amounts paid by Rinzai upon any exercise
of the Warrant; provided, however, that there shall be no such limitation with
respect to a breach of Sections 2.2, 2.4, 2.5 and 2.19 hereof. Notwithstanding
the foregoing provisions of this subsection 7.5(a), there shall be no limitation
on the obligations of the Company to indemnify Investor Indemnitees against
Investor Losses arising from Third Party Investor Indemnified Claims.
(b) The obligations of Xxxxxx Xxxxx to indemnify Investor
Indemnitees under Section 7.2(a)(i) of this Article 7 (other than in respect of
Third Party Investor Indemnified Claims) shall accrue only if the aggregate
Investor Losses for all matters indemnifiable under this Article 7 exceed Two
Million Five Hundred Thousand Dollars (US $2,500,000) (the "Minimum Amount") and
then Xxxxxx Xxxxx shall be liable for all such Investor Losses, subject to the
maximum amount described below; provided, however, that there shall be no such
requirement to exceed the Minimum Amount on Investor Losses arising from a
breach of any of the representations or warranties in Sections 2B.1, 2B.2, 2B.4,
2B.5 and 2B.6 (to the extent such breach relates to Section 2.2, 2.4, 2.5 or
2.19). The obligations of Xxxxxx Xxxxx to make a payment to an Investor
Indemnitee pursuant to Section 7.2 of this Article 7 in respect of any Third
Party Investor Indemnified Claims which relate to a breach of Section 2B.6 shall
arise only when such Investor Indemnitee has diligently sought payment from the
Company and determined in good faith that the Company has insufficient assets to
satisfy such Third Party Investor Indemnified Claim; provided, however, that no
such Investor Indemnitee shall be required to seek to recover payment from the
Company in the event that the Company is subject to Chapter 7 or Chapter 11 of
the Bankruptcy Code. The obligations of Xxxxxx Xxxxx to indemnify the Investors
under this Article 7 shall not exceed the aggregate of Three Million Five
Hundred Thousand Dollars (US $3,500,000).
(c) The obligations of each Investor to indemnify the Company
Indemnitees under Section 7.3(a)(i) of this Article 7 shall accrue only if the
aggregate of its respective Company Losses of the Company Indemnitees for all
matters indemnifiable under this Article 7 exceed Five Hundred Thousand Dollars
(US $500,000) and then such Investor shall be liable for all such Company
Losses, subject to the maximum amount described below; provided, however, that
there shall be no such limitation on Company Losses arising from a breach of any
of its representations and warranties in Sections 3.1, 3.4, 3.6, 3.7, 3.8 and
3.9 hereof. The obligations of each Investor to indemnify the Company
Indemnitees under this Article 7 shall not exceed one-half (1/2) of the purchase
price of the Preferred Shares purchased by it pursuant to Section 1.3(a), or, in
the case of Rinzai only, one-half (1/2) of its capital contribution to its
Investor Sub pursuant to Section 1.1(e).
7.5 Waiver. Xxxxxx Xxxxx hereby irrevocably waives any right
against the Company or the Surviving Corporation of subrogation, contribution,
indemnity or reimbursement to which he may be entitled in any capacity in
respect of his payment of Investor Losses pursuant to this Article 7.
7.6 Defense of Certain Claims. In any Third Party Investor
Indemnified Claims or any Third Party Company Indemnified Claims defended by the
Company, Xxxxxx Xxxxx or an Investor pursuant to this Agreement (i) the party
not controlling the defense of such claim shall have the right to be represented
by counsel and accountants, at such person's own
- 36 -
37
expense, (ii) the party controlling the defense of such claim shall keep the
other party fully informed of the status of such claim at all stages thereof,
whether or not such other party is represented by its own counsel, (iii) the
Company, Xxxxxx Xxxxx or the Investor, as applicable, shall make available to
the indemnified party and its accountants and legal representatives all books
and records of the Company, Xxxxxx Xxxxx or the Investor relating to such Third
Party Investor Indemnified Claims or Third Party Company Indemnified Claims, as
applicable, (iv) the parties shall render to each other such assistance as may
reasonably be requested in order to insure the proper and adequate defense of
such Third Party Investor Indemnified Claims or Third Party Company Indemnified
Claims, as applicable, and (v) the party controlling the defense of such claim
shall not make any settlement or claim without the written consent of the other
party, which consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be unreasonable for an indemnified
party to withhold consent to a settlement that does not provide for the complete
and unconditional release of such indemnified party with respect to such Third
Party Investor Indemnified Claims or Third Party Company Indemnified Claims, as
applicable.
7.7 No Impairment of Investors' Rights. Any examination or
inspection by audit of the properties, financial condition or other matters of
the Company and its Subsidiaries or their respective businesses or of Xxxxxx
Xxxxx conducted by any Investor or their respective affiliates or
representatives prior to the Closing shall in no way limit, affect or impair the
ability of any Investor to rely upon the representations, warranties, covenants
and obligations of the Company and Xxxxxx Xxxxx set forth in this Agreement or
otherwise limit the indemnification obligations set forth in this Article 7.
8. Miscellaneous.
8.1 Survival of Warranties. The warranties and representations of
the Company, Xxxxxx Xxxxx, and the Investors contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing for a period beginning on the date of Closing and expiring on the
earlier of (i) two (2) years from the date of Closing and (ii) the date of the
closing of the Company's initial public offering of its securities pursuant to a
Registration Statement declared effective by the Securities and Exchange
Commission, and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company; provided,
however, that notwithstanding the foregoing, the representations and warranties
of Xxxxxx Xxxxx and the Company set forth in Sections 2.2, 2.4, 2.5, 2.19, 2.21,
2.28, 2B.1, 2B.2, 2B.5 and 2B.6 (to the extent it relates to Sections 2.2, 2.4,
2.5, 2.19, 2.21 and 2.28) and their obligations to indemnify the Investor
Indemnitees pursuant to Article 7 hereof with respect to a breach thereof or
otherwise shall survive the Closing indefinitely; provided, further, that any
representation or warranty that is the subject of an outstanding written
indemnification claim on the date it would otherwise expire shall survive beyond
such date for purposes of such claim until such claim is finally resolved.
8.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
- 37 -
38
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. The rights and obligations of the parties
hereto may not be assigned without the express written consent of the other
parties hereto; provided however, that each Investor may assign its respective
rights and obligations to a wholly owned direct or indirect subsidiary of such
Investor, so long as such assignment is not made at a time which would cause a
delay in or interfere with the Closing or cause a breach of this Agreement; and
provided further that no assignment by an Investor shall relieve such Investor
from or diminish or affect such Investor's obligations hereunder.
8.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Georgia without reference to its
conflicts of law principles. Any action brought hereunder shall be heard by a
court sitting in the County of Xxxxxx, State of Georgia.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, including counterparts transmitted by telecopier or telefax, all
of which shall be considered one and the same agreement. Facsimile copies with
signatures of the parties to this Agreement, or their duly authorized
representatives, shall be legally binding and enforceable. All such facsimile
copies are declared as originals and accordingly admissible in any jurisdiction
or tribunal having jurisdiction over any matter relating to this Agreement.
8.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 Notices. All notices, requests and other communications that
any party is required or elects to give hereunder shall be in writing and shall
be deemed to have been given (a) upon personal delivery thereof, including by
overnight courier service, five (5) days after delivery to the courier or, if
earlier, upon delivery against a signed receipt therefor or (b) upon
transmission by facsimile or telecopier, which transmission is confirmed, in
either case addressed to the party to be notified at the address set forth below
or at such other address as such party shall have notified the other parties
hereto, by notice given in conformity with this Section 8.6:
(a) If to the Company:
Xxxxx Microcomputer Products, Inc.
0000 Xxxxxxxxx Xxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
- 38 -
39
with a required copy to:
Parker, Johnson, Xxxx & Dunlevie
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: G. Xxxxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) If to Acma or Rinzai:
Acma Limited
00 Xxxxxx Xxxx Xxxx
Xxxxxxxxx 000000
Attention: President
Telecopy: 011 65 2640125
If to Xxxxxxx GTS Limited or Lao Hotel (H.K.) Limited:
Xxxxxxx GTS Limited
000 Xxxx Xxxxxx # 00-00
Xxxxxxxxx 000000
Attention: Xx. Xxxxxx Xxx
Telecopy: 000 00 000-0000
If to XX Xxx Holdings Limited or Saliendra Pte Ltd.:
XX Xxx Holdings Limited
00 Xxxxxxx Xxxxx
#00-00 Xxxxx Xxxxx
Xxxxxxxxx 000000
Attention: Xx. Xxx Xxxxx Xxxx
Telecopy: 000 00 000-0000
If to S.P. Quek Investments:
x/x Xxxx Xxxxxxx
00 Xxxxxx Xxxx Xxxx
Xxxxxxxxx 000000
Attention: President
Telecopy: 000 00 000-0000
with a required copy in any such case to:
Xxxxxxx Xxxxx Xxxx & Black, LLP
00 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
(c) If to Kaifa Technology (H.K.) Limited:
- 39 -
40
Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Xxxxx Industrial Building
31-39 Wo Xxxx Xxxx Street
Xxxx Xxxxx, New Territories
Hong Kong
Attention: Xx. Xxx Man Chi, President
Telecopy: (000) 0000-0000
with a required copy to:
Xxxxxx Xxxx & Company
00/X, Xxx Xxxxxxxx Xxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxx
Xxxx Xxxx
Attention: Xx. Xxxxxx Xxxxxxx
Telecopy: (000) 0000-0000
(d) If to RPH: If to Xxxx'x:
Rolling Profits Holdings, Ltd. Xxxx'x International (Holdings) Limited
Arion Commercial Center Xxxx'x Industrial Centre
Third Floor, Room 304 180 Xxx Xxx Street
0-00 Xxxxx'x Xxxx Xxxx Xxxx Xxxx
Xxxx Xxxx Xxxxxxx
Attention: President Hong Kong
Telecopy: (000) 0000-0000 Attention: President
Telecopy: (000) 0000-0000
with a required copy in either case to:
Xxxxxxx, Xxxxxx & Bruiniers
000 Xxxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telecopy: (000) 000-0000
8.7 Finder's Fee. Each Investor severally agrees to indemnify and
hold harmless the Company from any liability for any commission or compensation
in the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which such investor or any of its
officers, partners, employees or representatives is or is alleged to be
responsible. The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is or is alleged to be responsible.
8.8 Expenses. In the event the Merger is consummated, or if the
Merger is not consummated solely because of a breach of a representation,
warranty or covenant of the Company or Xxxxxx Xxxxx, the Company shall bear the
expenses incurred by the parties hereto
- 40 -
41
in connection with the negotiation, preparation, execution and consummation of
this Agreement, including the fees, expenses and disbursements of their legal
counsel incurred in connection herewith.
8.9 Amendments and Waivers. Except as otherwise provided with
respect to the Investors purchasing a majority of the Preferred Shares, any term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors.
8.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Entire Agreement. This Agreement, the respective
Confidentiality Agreements between the Company and the Investors (or their
affiliates) dated June 4, 1995, March 29, 1996 and October 1, 1995 (the
"Confidentiality Agreements), the Exhibits and Schedules attached hereto, the
Schedule of Exceptions and the other documents and agreements delivered pursuant
hereto constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof and supersedes any prior
agreements (including any memorandum of understanding or letters of intent)
between the parties regarding the subject matter hereof. Notwithstanding the
foregoing, the parties agree that Section 7 entitled "Standstill" of the
Confidentiality Agreements shall automatically terminate at the Effective Time,
and any provision in any such agreement which would prohibit any public
announcements which would be permitted under Section 8.12 hereof is hereby
terminated. Any other confidentiality or nondisclosure agreements or letters
between the Company and any of the Investors are hereby terminated as of the
date hereof. The parties further agree that any and all provisions contained in
any of the above referenced Confidentiality Agreements which would prohibit the
disclosure of the fact that any investigations, discussions or negotiations are
taking place between the parties concerning the transactions contemplated hereby
are hereby terminated as of the date hereof. The letter agreement of Xxxxx in
favor of Acma, dated on or about March 30, 1996, is not superseded by and
expressly survives this Agreement and the closing of this transaction.
8.12 Public Announcements. No party shall make any public
announcement of the execution of this Agreement or the transactions contemplated
hereby without first obtaining the prior consent of the other parties hereto (or
in the case of the Investors' prior consent, the consent of the Investors
purchasing a majority of the Preferred Shares); provided however, that nothing
contained herein shall prohibit any party hereto from making any public
announcement that such party determines in good faith, is required by applicable
law or the rules or regulations of any applicable securities exchange; provided,
that in such event, such party shall use its reasonable efforts to consult with
the other parties hereto prior to making such disclosure and in any case will
promptly notify all other parties of such disclosure.
8.13 Further Assurances. Each party covenants that at any time, and
from time to time, after the date of Closing, it will execute such additional
instruments and take such
- 41 -
42
actions as may be reasonably requested by the other parties to confirm or
perfect or otherwise to carry out the intent and purposes of this Agreement.
8.14 No Third Party Beneficiaries. This Agreement is not intended
for the benefit of and shall not create rights in any persons other than the
parties hereto and their respective successors and permitted assigns, except as
expressly contemplated otherwise in Section 1.1 hereof.
8.15 Tax Consequences of the Parties. The parties agree that no
parties make any representations or warranties herein as to the tax consequences
of this Agreement and in the events and the actions contemplated hereby.
8.16 Schedules and Exhibits Incorporated. All Schedules and
Exhibits attached hereto are incorporated herein by reference.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
- 42 -
43
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
XXXXX MICROCOMPUTER PRODUCTS, INC.,
a Georgia corporation
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chairman
XXXXXX XXXXX
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
Xxxxxx X. Xxxxx
"INVESTOR"
RINZAI LIMITED
By: /s/ Chou Kong Seng
----------------------------------------
Name: Chou Kong Seng
--------------------------------------
Title: Authorized Signatory
-------------------------------------
FINANCIAL SUB, INC.
By: /s/ Xxxxx Xxxxx
----------------------------------------
Name: Xxxxx Xxxxx
--------------------------------------
Title: President
-------------------------------------
"INVESTOR"
KAIFA TECHNOLOGY (H.K.) LIMITED
By: /s/ Tam Man Chi
----------------------------------------
Name: Tam Man Chi
--------------------------------------
Title: President
-------------------------------------
[EXECUTION CONTINUED ON FOLLOWING PAGE]
44
[EXECUTION CONTINUED FROM PREVIOUS PAGE]
"INVESTOR"
ROLLING PROFIT HOLDINGS, LTD.
By: /s/ Xxxxxxx X. X. Xxxx
-------------------------------------------
Name: Xxxxxxx X. X. Xxxx
-----------------------------------------
Title: Director and Group Financial Controller
----------------------------------------
LAO HOTEL (H.K.) LIMITED
By: /s/ Low Check Xxxxx
-------------------------------------------
Name: Low Check Xxxxx
-----------------------------------------
Title: Director
----------------------------------------
SALIENDRA PTE LTD.
By: /s/ Xx. Xxx Teong Sang
-------------------------------------------
Name: Xx. Xxx Xxxxx Xxxx
-----------------------------------------
Title: Director
----------------------------------------
S.P. QUEK INVESTMENTS:
By: /s/ Sim Pin Quek
-------------------------------------------
Name: Sim Pin Quek
-----------------------------------------
Title: Director
----------------------------------------
45
The undersigned, Acma Limited, the sole shareholder of Rinzai
Limited, is made a party hereto as the guarantor and joint obligor of all
obligations, covenants and agreements of Rinzai Limited hereunder.
ACMA LIMITED
By: /s/ Xxx Xxxxx
----------------------------------------
Name: Xxx Xxxxx
----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned, Xxxx'x International (Holdings) Limited, the
sole shareholder of Rolling Profit Holdings, Ltd., is made a party hereto as the
guarantor and joint obligor of all obligations, covenants and agreements of
Rolling Profit Holdings, Ltd. hereunder.
XXXX'X INTERNATIONAL (HOLDINGS) LIMITED
By: /s/ Xxxxxxx X. X. Xxxx
-------------------------------------------
Name: Xxxxxxx X. X. Xxxx
-----------------------------------------
Title: Director and Group Financial Controller
----------------------------------------
The undersigned X.X. Xxx Holdings Limited, the sole
shareholder of Saliendra Pte Ltd., is made a party hereto as the guarantor and
joint obligor of all obligations, covenants and agreements of Saliendra Pte Ltd.
hereunder.
X.X. XXX HOLDINGS LIMITED
By: /s/ Xx. Xxx Xxxx Xxxx
-------------------------------------------
Name: Xx. Xxx Xxxx Xxxx
-----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned Xxxxxxx GTS Limited, the sole shareholder of
Lao Hotel (H.K.) Limited, is made a party hereto as the guarantor and joint
obligor of all obligations, covenants and agreements of Lao Hotel (H.K.) Limited
hereunder.
XXXXXXX GTS LIMITED
By: /s/ Xxxxxx Xxx Xxxx Xxxx
-------------------------------------------
Name: Xxxxxx Xxx Xxxx Xxxx
-----------------------------------------
Title: Director
----------------------------------------
46
SCHEDULE 1
SCHEDULE OF INVESTORS
Series A Preferred Stock and Warrant
"INVESTORS" Percentage of Capital
the Company's Number of Contribution
capital stock issued Preferred to Financial
and outstanding Shares to Sub/Preferred
immediately after be issued Stock
the Closing at Closing Purchase Price
------------------------- ---------- --------------
SERIES A PREFERRED STOCK:
-------------------------
Rinzai Limited 28.175% 2,817,500 $20,125,000
Kaifa Technology (H.K.) Limited 8.167% 816,667 $ 5,833,333
Rolling Profit Holdings, Ltd. 4.083% 408,333 $ 2,916,666
Lao Hotel (H.K.) Limited 3.675% 367,500 $ 2,625,000
Saliendra Pte Ltd. 2.450% 245,000 $ 1,750,000
S.P. Quek Investments Pte Ltd. 2.450% 245,000 $ 1,750,000
WARRANT
Rinzai Limited Anti-Dilution Warrants to purchase capital
stock sufficient to maintain ownership at
20.2%
INVESTOR SUBS:
- Financial Sub, Inc., a Georgia corporation and wholly-owned subsidiary
of Rinzai Limited
