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EXHIBIT 10.74
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the
11th day of April, 1997, by and among XXXXX MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation ("Xxxxx"), CARDINAL TECHNOLOGIES, INC., a Pennsylvania
corporation (the "Company"), VULCAN VENTURES INCORPORATED, a Washington
corporation ("Vulcan"), and the direct subsidiary of Xxxxx, XXXXX MERGER SUB.,
INC., a Pennsylvania corporation ("Merger Sub").
BACKGROUND
A. On March 12, 1997, Xxxxx, the Company and Vulcan entered into
that certain letter of intent for the purpose of proceeding with an all cash
merger between Merger Sub and the Company (the "Letter of Intent").
B. This Agreement and Plan of Merger constitutes the Definitive
Agreement as described in the Letter of Intent.
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, Xxxxx has
formed Merger Sub, a directly owned subsidiary formed under the Pennsylvania
Business Corporation Law (the "Pennsylvania BCL") for the purpose of
accomplishing the merger described herein. Upon the terms and subject to the
conditions set forth herein and in accordance with the Pennsylvania BCL, at the
Effective Time, Merger Sub shall be merged with and into the Company (the
"Merger"), and the separate existence of Merger Sub shall cease. The Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"). At the Closing Merger Sub and the Company
shall cause Articles of Merger in the form attached hereto as Exhibit "1.1(a)"
(the "Articles of Merger"), together with all other required certifications,
filings and instruments, to be duly filed with the Secretary of State of the
Commonwealth of Pennsylvania and cause all fees associated therewith to be paid.
The Merger
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shall be effective at the time of such filings with the said Secretary of State
(the "Effective Time").
(b) Conversion of Common Shares. At the
Effective Time, each outstanding share of capital stock of the Company (the
"Company Shares"), other than Company Shares held in the treasury of the Company
which shall be canceled and retired, shall be converted into and evidence the
right to receive an amount per Company Share equal to Two Million Five Hundred
Thousand Dollars ($2,500,000) (the "Merger Consideration") divided by the
aggregate number of Company Shares outstanding immediately prior to the
Effective Time (the "Merger Consideration Per Share"). At the Effective Time,
each outstanding common share, par value $.01 per share, of Merger Sub shall be
converted into one common share, par value $.01 per share, of the Surviving
Corporation.
(c) Stock Options. At the Effective Time, all
unexercised options to purchase Company Shares shall be converted into the right
to receive the Merger Consideration Per Share upon proper exercise of such
option.
(d) Dissenting Shares. Notwithstanding anything
in this Agreement to the contrary, Company Shares outstanding immediately prior
to the Effective Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing, and who has demanded to be paid the fair
value of such Company Shares in accordance with Chapter 15, Subchapter D of the
Pennsylvania BCL ("Dissenting Shares"), shall not be converted into the right to
receive the Merger Consideration , unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal but shall be canceled and
converted into the right, if and to the extent perfected in accordance with
applicable law, to receive the "fair value" thereof as determined in accordance
with the Pennsylvania BCL. If, after the Effective Time, such holder fails to
perfect or withdraws or loses his right to appraisal, such Company Shares shall
be treated as if they had been converted as of the Effective Time into the right
to receive the Merger Consideration, without interest thereon, upon surrender of
the certificate or certificates formerly representing such Company Shares less
any required withholding of taxes. The Company shall give Xxxxx and Merger Sub
prompt notice of all demands received by the Company for appraisal of Company
Shares prior to the Effective Time and the Surviving Corporation shall give
Vulcan prompt notice of all demands received by the Company for appraisal of
Company Shares after the Effective Time. Vulcan shall have the right and
obligation to direct all negotiations and proceedings with respect to such
demands.
(e) Articles of Incorporation; Bylaws; Officers
and Directors. The Articles of Incorporation and Bylaws of the Company shall be
amended and restated as of the Effective Time so that the Articles of
Incorporation and Bylaws of Merger Sub, copies of which are attached hereto as
Exhibit "1.1(e)," shall be the Amended and Restated Articles of Incorporation
and Bylaws of the Surviving Corporation following the Merger. At the Effective
Time, the Board of Directors of the Company shall no longer be the Board of
Directors of the Surviving Corporation. At the Effective Time, the officers of
the Company shall no longer be the officers of the Surviving Corporation. The
Board of Directors and the officers of Merger Sub
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shall become, at the Effective Time, the Board of Directors and officers of the
Surviving Corporation.
(f) Formation and Capitalization of Merger Sub.
Prior to the Effective Time, Xxxxx shall cause Merger Sub to take all such
corporate and other actions necessary to consummate the transactions
contemplated by this Agreement. Xxxxx agrees to vote its Merger Sub Stock in
favor of the Merger. Subject to the terms and conditions of this Agreement,
Xxxxx agrees to capitalize Merger Sub in at least the amount of Two Million Five
Hundred Thousand and No/Hundredths Dollars ($2,500,000.00).
(g) Shareholder Approval. The Company has or
shall prior to Closing 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.
(h) Payment for Company Shares . Promptly after
the Effective Time, the Surviving Corporation shall mail to each record holder,
as of the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Company Shares (the
"Certificates"), a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Surviving Corporation) and
instructions for effecting the surrender of the Certificates for payment of the
Merger Consideration. Upon surrender to the Surviving Corporation of a
Certificate (or an affidavit as to its loss with an appropriate indemnity),
together with a duly executed letter of transmittal and any other required
documents, the holder of such Certificate shall receive in exchange therefor (as
promptly as practicable) the Merger Consideration Per Share, without any
interest thereon, less any required withholding of taxes, and such Certificate
shall forthwith be canceled. If payment is to be made to a person other than the
person in whose name a Certificate so surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer, that the signatures on the
Certificate or any related stock power shall be properly guaranteed and that the
person requesting such payment shall either pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate so surrendered or establish to the satisfaction of Vulcan and
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this 1.1(h), each
Certificate (other than (i) Certificates representing Company Shares held in the
Company's treasury which shall be canceled at the Effective Time, or (ii)
Certificates representing Dissenting Shares, which shall represent for all
purposes only the right, if perfected, to receive fair value as provided in
Section 1.1(d)) shall represent for all purposes only the right to receive the
Merger Consideration Per Share. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of the
Company Shares which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
Per Share in accordance with procedures set forth in this Section 1.1(h). From
and after the Effective Time, the holders of Certificates evidencing ownership
of Company Shares outstanding immediately prior to the Effective Time shall
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cease to have any rights with respect to such Company Shares except as otherwise
provided herein or by applicable law. Such holders shall have no rights, after
the Effective Time, with respect to such Company Shares except to surrender such
Certificates in exchange for cash pursuant to this Agreement or to perfect any
rights to receive fair value as a holder of Dissenting Shares that such holders
may have pursuant to the Pennsylvania BCL. Any portion of the Merger
Consideration that remains unclaimed by the shareholders of the Company for one
year after the Effective Time shall be paid to and shall become the property of
Vulcan. Notwithstanding anything to the contrary in this Section 1.1, neither
Vulcan nor the Surviving Corporation shall be liable to a holder of a
Certificate formerly representing Company Shares for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.2 Effect of Merger; Tax Status of Merger. The Merger
shall have the effects set forth in Section 1929 of the Pennsylvania BCL.
Without limiting the generality of the foregoing, immediately after the Merger
the Surviving Corporation shall possess all of the rights, privileges, powers
and franchises of each of the Company and Merger Sub, and all property and other
interests due or belonging to the Company and Merger 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 provisions of the
Pennsylvania BCL. 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 Closing. The consummation of the Merger as provided
herein shall take place at the offices of Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC,
Suite 700, 0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000, on the next
business day following the fulfillment of the conditions to Closing set forth in
Section 5 and Section 6 hereof, but not later than April 16, 1997, at 10:00 A.M.
EST, or at such other time and place as the Company, Xxxxx and Vulcan 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 Xxxxx the
following:
(i) evidence of the filing of the
Articles of Merger with the Secretary of State of the Commonwealth of
Pennsylvania;
(ii) certificate of good standing for the
Company, as of the most recent practicable date, from the Secretary of State of
the Commonwealth of Pennsylvania;
(iii) executed consents and waivers and
copies of all authorizations required to close the Merger as set forth in this
Agreement and the Schedules hereto;
(iv) the opinions of counsel contemplated
by Section 6.8 hereof;
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(v) 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 Directors of the Company and the names of the
officers of the Company authorized to sign this Agreement, and any 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;
(vi) a copy of the resolutions of the
Board of Directors and the shareholders of the Company evidencing the approval
of this Agreement, the Merger, and the other matters contemplated hereby,
certified by the Secretary or an Assistant Secretary of the Company to be true,
complete and correct as of the Closing date;
(vii) the compliance certificate required
by Section 6.3 hereof; and
(viii) the documents required to be
delivered by the Company pursuant to Section 6.6 hereof; and
(ix) the Resignations, effective at the
Effective Time, of all Officers and Directors of the Company, and the releases
of the Company from each of Xxxxx Xxxxxxxx, Xxxx Xxxxxx and Xxxxx Xxxxx.
(b) Xxxxx shall deliver to Vulcan the following:
(i) a copy of the resolutions of the
Board of Directors and shareholders, to the extent required of Merger Sub,
evidencing the approval of this Agreement, the Merger, and the other matters
contemplated hereby, certified by the Secretary or an Assistant Secretary of
Merger Sub, to be true, complete and correct as of the date of Closing;
(ii) a copy of the resolutions of the
Board of Directors and shareholders, to the extent required of Xxxxx, evidencing
the approval of this Agreement, the Merger, and the other matters contemplated
hereby, certified by the Secretary or an Assistant Secretary of Xxxxx, to be
true, complete and correct as of the date of Closing;
(iii) the opinion of counsel to Xxxxx
required by Section 5.6(a) hereof;
(iv) certificates of the Secretary or an
Assistant Secretary or other officer of Xxxxx and Merger Sub, dated the Closing,
certifying the names of the officers of Xxxxx and Merger Sub authorized to sign
this Agreement and the other documents, instruments or certificates to be
delivered pursuant to this Agreement by Xxxxx and/or Merger Sub, or any of
its/their officers, together with the true signatures of such officers;
(v) the documents required to be
delivered by Xxxxx pursuant to by Section 5.7 hereof;
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(vi) executed consents and waivers and
copies of all authorizations required to close the Merger, as set forth in this
Agreement and the Schedules hereto, and
(vii) the compliance certificate required
by Section 5.3.
(c) Vulcan shall deliver to Xxxxx the following:
(i) a copy of the resolutions of the
Board of Directors and Shareholders, to the extent required of Vulcan,
evidencing the approval of this Agreement, the Merger and the other matters
contemplated hereby, certified by the Secretary or an Assistant Secretary of
Vulcan, to be true, complete and correct as of the date of Closing;
(ii) the Certificates of the Secretary or
an Assistant Secretary or other officer of Vulcan, dated the Closing Date,
certifying the names of the officers of Vulcan authorized to sign this Agreement
and the other documents, instruments or certificates to be delivered pursuant to
this Agreement by Vulcan, or any of its officers, together with the true
signatures of such officers;
(iii) the documents required to be delivered
by Vulcan pursuant to Section 5.6 hereof;
(iv) the compliance certificate required by
Section 6.3 hereof; and
(v) the opinion of counsel required by
Section 6.8 hereof.
(d) Vulcan shall deliver to the Company the
following:
(i) certificates representing all of the
Company Shares owned by it;
(ii) the documents required to be delivered
by it pursuant to Section 6.6 hereof
(e) Other Documents. Each of the parties hereto
shall deliver to the appropriate other party all of the other documents required
to be delivered by this Agreement and the Transactions described herein.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Xxxxx, except as set forth on the Schedules of
Exception or in other Schedules contained in this Agreement, that each of the
following statements is true and correct on the date hereof and will be true and
correct immediately prior to the Effective Time of the Closing. For purposes of
the following, "best knowledge" shall be deemed to mean the knowledge of any
member of the Board of Directors of the Company, the interim CEO or the
Controller, after due
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inquiry as to the matters contained herein. Also, for purposes of this Section
2, all representations and warranties relating to material adverse effects on
the Company shall be deemed to apply to the Company and its subsidiaries, taken
as a whole.
2.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania (with respect to the Company)
and the laws of Germany and the laws of Japan, respectively, for each of the
Company's subsidiaries, and each has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted. The
Company 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, 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 are attached hereto as Exhibit "2.1".
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 125,000,000 shares of Common Stock of which 46,425,069 shares are
issued and outstanding as of the date hereof and 63,091,735 will be issued and
outstanding after the conversion of $10,000,000 debt and accrued interest
outstanding to Vulcan immediately before the Effective Time, in the manner
disclosed in the Schedule of Exceptions (less any shares of Common Stock as to
which the holder thereof has perfected its right to obtain the fair value
thereof in connection with the Red Wing Transaction and plus any shares of
Common Stock issued upon the proper exercise after the date hereof but prior to
the Effective Time, of existing employee stock options). Immediately prior to
the Effective Time, there are stock options issued to employees and former
employees of the Company entitling such holders to purchase an aggregate of
8,073,094 shares of Common Stock upon proper exercise thereof and payment of the
exercise price of $.51 per share. All such options are nontransferable and
expire 90 days from the termination of the holder's employment with the Company,
and at the Effective Time will represent only the right to receive the Merger
Consideration Per Share upon proper exercise thereof.
(ii) At the Effective Time, as a result of
the Merger, the entire authorized capital stock of the Surviving Corporation
shall consist of 1,000 Common Shares, of which 100 Common Shares shall be issued
and outstanding to Xxxxx.
(b) Agreements for Purchase of Securities.
Except for the rights granted pursuant to this Agreement, 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 of any shares of its
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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 capital
stock of the Company are duly and validly issued, fully paid and nonassessable,
and (i) the shares issued to Vulcan, CSK Venture Capital Co., Ltd (for CSK-1(A)
Investment Fund, CSK-1(B) Investment Fund, and CSK-2 Investment Fund)
(collectively, "CSK") and UMAX Data Systems, Inc. ("UMAX"), and (ii) to the best
knowledge of the Company, all other such shares of such capital stock and other
securities of the Company 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 Shareholder Ledger of the Company
includes a true, correct and complete list, both as of the date hereof and
immediately prior to the Merger, of all issued and outstanding shares of the
capital stock of the Company, together with a true, correct and complete list of
the shareholders.
2.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, partnership or other business entity, except for the Japanese
subsidiary and the German subsidiary as described on the Schedule of Exceptions.
2.4 Authorization. The Company has the capacity and
authority to execute and deliver this 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. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement and the other agreements, documents and
instruments to be entered into by the Company pursuant hereto and thereto has
been taken or will be taken on or prior to the Closing, and this Agreement and
all other agreements made and entered into by the Company pursuant to this
Agreement constitute valid and legally binding obligations of the Company
enforceable in accordance with each of their terms, except as affected by public
policy, equitable principles or the exercise of judicial discretion.
2.5 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 is required to be obtained in
connection with the Company's valid execution, delivery, or performance of this
Agreement, except as required pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx").
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2.6 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, 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 in connection with such individual's relationship
with, or actions taken on behalf of, the Company 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 adverse change in the assets,
condition, or prospects of the Company taken as a whole, financial or otherwise,
or any change in the current equity ownership of the Company. The Company is not
a party or subject to the provisions of any material settlement agreement,
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no Action by the Company currently pending or which
the Company intends to initiate.
2.7 Patents and Trademarks. To the best knowledge of the
Company, the Company's business as now conducted does 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,
financial or otherwise. To the best knowledge of the Company, the Company 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 or service marks, copyrights, mask works, trade secrets or other
proprietary rights of others. The Company has not received any communications
alleging that the Company (or any of its respective employees or consultants)
has violated or infringed 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 Schedule 2.7 hereto. 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. The Company is not 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, except for Royalty Agreements disclosed pursuant to
Section 2.9.
2.8 Compliance with Law. The execution and delivery of
this Agreement does not, and the consummation of the Merger and the other
transactions contemplated hereby will not, violate or constitute an occurrence
of default under any provision of the Articles of Incorporation or Bylaws of the
Company, or any judgment, order, writ or decree to which the Company is a party
or by which it is bound or its assets are affected, or violate in any material
respect foreign, domestic, federal, state or local statute, ordinance, rule or
regulation applicable to the Company, its business and assets. The Company 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
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the assets, condition or prospects of the Company, financial or otherwise. The
Company 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.
2.9 Agreements; Action.
(a) Except as provided in Schedule 2.9, there
are no agreements, understandings, instruments or contracts to which the Company
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 (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
(collectively, the "Material Agreements"). The Company is not in breach of any
Material Agreement in any material respect. To the Company's best knowledge no
other party thereto is in breach of any provision of or in default under any
Material Agreement to which the Company is a party, which breach or default
would have an adverse effect on the assets, condition or prospects of the
Company, financial or otherwise. 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 in default thereunder, and there is no basis for
termination thereunder. Each of the Material Agreements is, to the knowledge of
the Company, enforceable by the Company, and each of the Material Agreements is
enforceable against the Company in accordance with its terms, except as affected
by equitable principles or the exercise of judicial discretion. The execution
and delivery of this Agreement by the Company does 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 any Material Agreement ,
which violation or default would have a material adverse effect on the assets,
condition or prospects of the Company, financial or otherwise.
(b) 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 conduct research or development activities for
any Government Agency; and (iii) does not sell any products to any Government
Agency for which there is no readily available substitute which would perform
substantially the same function.
2.10 Title to Property and Assets. Schedule 2.10 contains
a true, correct and complete list of all real property and a list of all
material items of personal property owned or leased by the Company. The Company
owns its 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 ownership or use of such property or assets.
With respect to the property and assets it leases, the
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Company is 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.
2.11 Financial Statements.
(a) The Company has delivered to Xxxxx its
unaudited financial statements (balance sheet and profit and loss statement) at
and for the calendar year ended December 31, 1996 (the "12/31 Financial
Statements"), and its unaudited balance sheet for the period ended February 21,
1997 (the "2/21 Balance Sheet"). The 12/31 Financial Statements and the 2/21
Balance Sheet are true, complete and correct in all material respects and have
been prepared consistently with prior periods. The 12/31 Financial Statements
and the 2/21 Balance Sheet fairly present in all material respects the financial
condition, assets and liabilities and (for the 12/31 Financial Statements) the
operating results of the Company taken as a whole as of the dates, and for the
periods, indicated therein.
(b) In the context of the foregoing, the Company
confirms that the inventory of the Company ("Inventory") in excess of that
amount necessary to meet the Company's Manufacturing Resource Plan in effect at
February 1997 ("MRP") was fully reserved in the 2/21 Balance Sheet.
(c) In addition, the Company confirms that all
open, non-cancelable Purchase Orders of the Company at the date of the 2/21
Balance Sheet are for Inventory required to meet the MRP, or for resale at cost
to Red Wing Corporation.
2.12 Absence of Change or Event. Except for the matters
described in Section 2.26, since February 21, 1997, the Company has conducted
its business only in the ordinary course and has not:
(a) when considered as a whole, incurred any
obligation or liability, absolute, accrued, contingent or otherwise, whether due
or to become due, except liabilities or obligations incurred in the ordinary
course of business and consistent with prior practice or liabilities arising as
a matter of law as a consequence at the Company's insolvent financial condition;
(b) mortgaged, pledged or subjected to lien,
restriction or any other encumbrance any of the material property or assets,
tangible or intangible, of the Company;
(c) (i) sold, transferred, leased to others or
otherwise disposed of any of its material assets (or committed to do any of the
foregoing), except for the Red Wing Transaction, as defined in Section 2.28
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 12/31 Financial Statements or the 2/21 Balance
Sheet, in each case in
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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;
(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, financial
or otherwise;
(e) made or committed to make any capital
expenditures or capital additions or betterments to or for the Company;
(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;
(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, 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;
(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; or
(l) made any loans or advances to any person or
entity.
2.13 Proprietary Information. To the best knowledge of the
Company, The Company has not 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
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Company have executed a non-disclosure/invention assignment agreements in the
forms attached to Schedule 2.13. To the best knowledge of the Company, no
officer, director, employee or consultant of the Company in connection with such
employee's employment with the Company, has violated the terms of any agreement
with a previous employer. 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 has 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.
2.14 Permits. To the best knowledge of the Company, the
Company has all franchises, permits, licenses 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. To the knowledge of the
Company, The Company is not in default in any material respect under any of such
franchises, permits, licenses, or other similar authority. To the knowledge of
the Company, neither the execution nor delivery of this 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, and all such franchises, permits, licenses and rights will remain
vested in and inure to the benefit of the Company after the consummation of the
transactions contemplated by this Agreement.
2.15 Brokers or Finders. The Company has not engaged any
broker, investment banker (other than Xxxxxx Xxxxxx & Co. who has been engaged
for $35,000 to provide a fairness opinion, which amount will be paid by the
Company prior to Closing) or finder in connection with the transactions
contemplated by this Agreement.
2.16 Minute Books. The minute books of the Company and
each subsidiary as provided to Xxxxx contain a complete record of all meetings,
consents and actions of the Board of Directors and the shareholders of the
Company since the time of its incorporation, accurately reflecting all such
meetings, consents and actions in all material respects. The Company has made
available to Xxxxx all of the corporate records in its possession for the
Company's German and Japanese subsidiaries.
2.17 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) The Company has filed all required U.S.
federal tax returns and, to the best knowledge of the Company, all other tax
returns and has paid all U.S. federal taxes owed by the Company (whether or not
shown on any tax return) with respect to any period ending on or before the date
of Closing, except for taxes accrued but not yet payable. Such U.S. federal
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returns are correct and complete in all material respects and, to the best
knowledge of the Company, all other tax returns are complete and correct in all
material respects.
(b) The Company 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) The Company has adequately accrued amounts
with respect to the payment of all taxes that are not yet due and payable,
except that the Company has not accrued a tax liability in respect of the Red
Wing Transaction.
(d) The Company has not 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.
(e) The Company has no liability for taxes (i)
as a transferee or successor, or (ii) imposed by contract which would not be
otherwise paid by the Company.
(f) 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 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 Schedule 2.17. The Company is not being audited by the Internal
Revenue Service (the "IRS") or any other taxing authority. No request by the
Company for ruling or determination letters relating to foreign, federal, state
or local taxes is pending with any taxing authority. The Company has not 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 the Company has no knowledge that the IRS has proposed or purported to
require any such adjustment or change in accounting method.
2.18 Environmental Matters.
(a) To the best knowledge of the Company, the
Company has complied in all respects with and is in 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 its business, facilities and properties, and the Company
has obtained all environmental licenses and permits required for its business
and operations, a list of which is contained in Schedule 2.18, and all of which
are valid and in full force and effect.
(b) The Company has not received any notice of,
or to the best knowledge of the Company, 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 compliance or continued compliance by the
Company with any Environmental Law, (ii) may give rise to or result in any
liability of the
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Company 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 incurring any expense, cost, loss or
liability.
(c) To the best knowledge of the Company, it is
not, as a result of the operation or condition of its 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 (collectively, the "Company Properties") or (ii)
removal or remediation requirements under any Environmental Law, or any
reporting requirements related thereto.
(d) The Company has not been notified that it is
potentially liable or has received any requests for information or other
correspondence concerning any of the Company Properties or any other site or
facility, and is 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 .
(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 currently
conducts activities or operations; or (ii) was owned by the Company, or upon
which the Company or any of its 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 owned properties have been identified in
Schedule 2.18(g).
(h) No lien has been asserted on any Company
owned properties or, to the knowledge of the Company, any other Company Property
under Environmental Laws.
(i) Except as provided in Schedule 2.18(i), no
investigation or audit has been conducted by the Company or, to the best
knowledge of the Company, by any other person as to the environmental matters at
any of the Company Properties.
2.19 Insurance. The insurance policies held by the Company
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the date of the Closing that are due and payable
have been or will be paid, and no notice of cancellation
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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 is a party.
2.20 Affiliate Interests.
(a) Except for employment relationships,
Schedule 2.20(a) 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 received by the Company from, any affiliate of the Company,
or any shareholder, officer or director of the Company 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 to, or to the Company by, any affiliate of the Company, or any
shareholder, officer or director of the Company.
(b) Each contract, agreement or arrangement
between the Company, on the one hand, and any affiliate of the Company or any
shareholder, officer or director of the Company, on the other hand ("Affiliate
Agreements"), is described in Schedule 2.20(b), except for employment
relationships. Except as disclosed in Schedule 2.20(b), each of the transactions
described in Schedule 2.20(b) 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 Schedule 2.20(c), no
shareholder, officer or director of the Company has any 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.
2.21 Absence of Questionable Payments. Neither the Company
nor, to the best knowledge of the Company, any director, officer, agent,
employee or other person acting on behalf of the Company, 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 nor, to the best knowledge of
the Company, any current director, officer, agent, employee or other person
acting on behalf of the Company, has accepted or received any unlawful
contributions, payments, gifts, or expenditures.
2.22 Products.
(a) Schedule 2.22 sets forth all claims asserted
or, to the best knowledge of the Company, threatened at any time during the past
two (2) years against the Company 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, together with a description of
each such claim or action initiated with respect thereto and the disposition
thereof.
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(b) The Company has not experienced product
recall or warranty claims in excess of five percent 5% of aggregate gross sales
for any of the past two (2) years.
2.23 Benefit Plans. Except as set forth on Schedule 2.23,
the Company is in substantial 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 and any oral or written
contract or agreement with directors, officers, employees, independent
contractors, agency employees or unions, or consultants to which the Company is
a party or is subject. The Company has delivered to Xxxxx 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
Schedule 2.23.
The Company has not, and never has had, any union contracts or
collective bargaining agreement 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 employees. No collective bargaining agent has been
certified as a representative of any of the employees of the Company and no
representation campaign, strike, slowdown, picketing, work stoppage or other job
action has occurred within the last two years or is threatening to occur with
respect to any of the employees of the Company.
All employee benefit plans are in substantial 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.
The Company does not contribute to, has no obligation to
contribute to, or otherwise has no liability or, to the best knowledge of the
Company, potential liability with respect to (A) any Multiemployer Plan (as such
term is defined in Section 3(37) of ERISA), or (B) any plan which provides
health, life insurance or other "welfare type" benefits to current or future
retirees or current or former employees, their spouses or dependents, other than
in accordance with Section 4980B of the Code or applicable state continuation of
coverage law.
Except as disclosed on Schedule 2.25, the Company is not
obligated to pay separation, severance, termination or similar-type benefits
solely as a result of any transaction contemplated by this Agreement or solely
as a result of a "change in control", as such term is used in Section 280G of
the Code.
Each Employee benefit plan which is identified as, and has
been represented to be, a qualified plan under Section 401(a) or Section 401(k)
with an exempt trust under Section 501(a) of the Code has received a
determination letter from the Internal Revenue Service as to the qualification
under the Code with respect to such plan and is in substantial compliance with
all Code provisions and all applicable regulations with respect to Section
401(a) and Section 401(k)
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qualified plans and Section 501(a) exempt trusts. Each such plan and the funding
agreements and administrative forms and notices contain no language and, to the
best knowledge of the Company, the administrators and fiduciaries of such plan
have engaged in no acts of commission or omission which are likely to result in
the disqualification of such plan under Section 401(a) or Section 401(k) of the
Code or trust under Section 501(a) of the Code.
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 any person or entity against or with respect to any of the employee
benefit or compensation plans, programs, arrangements or agreements maintained
or previously maintained by the Company.
None of the Company or any of the plans subject to ERISA, nor
any fiduciary or any employee of the Company involved in the administration of
such plans, has engaged in transaction subject to either a civil penalty
pursuant to Section 409 or 502(i) or Section 502(1) of ERISA or a tax pursuant
to Section 4975 or 4976 of the Code in connection with which the Company has
directly or indirectly incurred, or may incur, liability.
All compensation and benefit plans, programs, arrangements and
agreements currently maintained by the Company may be amended or terminated by
the Company 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 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.
2.24 Disclosure. This Agreement (including the Schedules
and attachments thereto) do not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements herein or
therein not misleading.
2.25 Business Relationships. The Company has not entered
into any legally binding agreement or undertaking with or made legally binding
promises to Vulcan, as an inducement to enter into this Agreement or otherwise,
which would obligate the Company (i) to conduct business with Vulcan in the
future on any basis or (ii) to make any investment, directly or indirectly, in
any entity or facility of Vulcan.
2.26 Shut Down Matters. The Company has, or will have
prior to the Closing: (i) closed on the Red Wing Transaction, (ii) issued all
Worker Adjustment Retraining Notification Act ("WARN") notifications of the
Company, (iii) complied with all requirements of the Company pursuant to Section
7.2 herein; and (iv) completed, or will complete by the Closing, the conversion
of the $10 million of indebtedness owed by the Company to Vulcan into 16,666,666
shares of the Company Shares as described in Section 7.2(b).
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2.27 Shut Down. The Company has, since March 12, 1997 (and
will continue until the Closing), in coordination with and in cooperation with
Xxxxx, implemented applicable procedures and activities, or ceased applicable
activities, as appropriate, in order to complete the orderly cessation of all of
the Company's manufacturing of modems and other business which it carries on in
its existing Company facilities and locations ("Shut Down"). In proceeding with
the Shut Down, the Company has and shall use its good faith best efforts to
accomplish so much of the Shut Down matters as requested by Xxxxx which are
appropriate to be accomplished or commenced prior to the Closing and shall use
its good faith best efforts to accomplish or commence such Shut Down matters in
a cost efficient manner. The Company, to the extent not expended for Shut Down
matters prior to the Closing, shall have accrued or reserved the Shut Down costs
("Shut Down Accruals/Reserves") as provided on the Pro Forma, attached hereto as
Exhibit "2.27" ("Pro Forma"). The Company has used and shall continue to use its
good faith best efforts to achieve the projected Shareholders' equity as
reflected on the Pro Forma prior to Closing, taking into consideration the Shut
Down matters and/or Shut Down Accruals/Reserves, the consummation of the Red
Wing Transaction and other matters reflected therein and herein.
2.28 Red Wing Transaction. The Company has consummated the
Red Wing Transaction wherein Vulcan has, among other things, remitted $3 million
in cash to the Company in payment for the acquisition of the technology and
other matters to be acquired by Vulcan pursuant to the Red Wing Transaction as
evidenced by that Contract Assignment and Asset Purchase Agreement by and
between the Company and Vulcan dated March 7, 1997 (the "Red Wing Transaction").
Consummation of the Red Wing Transaction, including the related assignment of
contracts from the Company to Red Wing Corporation, did not result in a default
or event of default under any contracts or agreements to which the Company is a
party.
2.29 Intercompany Accounts. Beginning March 7, 1997, the
Company incurred employee, product development, lease and other costs for and on
behalf of Red Wing Corporation, a wholly owned subsidiary of Vulcan. The Company
has accurately accounted for all such costs and expenses and at the Effective
Time, the Company shall have received reimbursement from Red Wing Corporation
for all such costs and expenses and will not be obligated to incur any such
costs or expenses or any other cost or expense or obligation on behalf of Red
Wing Corporation or which inures to the benefit of Red Wing or Vulcan, after the
Effective Time.
3. Representations and Warranties of Vulcan. Vulcan hereby represents
and warrants to Xxxxx, each of which is true and correct on the date hereof and
will be true and correct immediately prior to the Effective Time of the Closing:
3.1 Title to Stock. Vulcan owns, beneficially and of
record, 31,633,333 Company Shares as of the date hereof and will own,
beneficially and of record 48,299,999 Company Shares at the Effective Time, free
and clear of all liens, claims and encumbrances whatsoever.
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3.2 Authorization. Vulcan has the capacity and authority
to execute and deliver this Agreement, and each other document, instrument and
agreement to be entered into by Vulcan 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. All corporate action on the part of Vulcan, its officers, directors
and shareholders necessary for the authorization, execution and delivery of this
Agreement and all other agreements, documents and instruments to be entered into
by Vulcan pursuant hereto and thereto, has been taken or will be taken on or
prior to the Closing, and this Agreement and other agreements entered into by
Vulcan pursuant to this Agreement constitute the valid and legally binding
obligations of Vulcan, enforceable in accordance with each of their terms,
except as affected by public policy, equitable principles or the exercise of
judicial discretion.
3.3 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 Vulcan is required to be obtained in
connection with Vulcan's valid execution, delivery, or performance of this
Agreement, or the other agreements entered into by Vulcan pursuant to this
Agreement, except as required pursuant to the HSR Act.
3.4 Litigation. There is no Action pending or, to the
best knowledge of Vulcan, currently threatened, against Vulcan or, to the best
knowledge of Vulcan, against any officer, director or employee of Vulcan in
connection with such officers', directors' or employees' relationship with, or
actions taken on behalf of, Vulcan which questions the validity of this
Agreement or the right of Vulcan to enter into this Agreement or to consummate
the transactions contemplated hereby.
3.5 Organization and Good Standing. Vulcan is a
corporation duly organized, valid existing and in good standing under the laws
of the State of Washington, and has all requisite corporate power and authority
to own the capital stock of the Company.
3.6 Brokers or Finders. Vulcan has not engaged any
broker, investment banker or finder in connection with the transactions
contemplated in this Agreement.
4. Representations and Warranties of Xxxxx. Xxxxx and Merger Sub
hereby represent and warrant to the Company and to Vulcan, each of which is true
and correct on the date hereof and will be true and correct immediately prior to
the Effective Time of the Closing:
4.1 Authorization. Xxxxx and Merger Sub have the capacity and
authority to execute and deliver this Agreement, and each other document,
instrument and agreement to be entered into by Xxxxx or Merger Sub 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. All corporate action on the part of
Xxxxx and Merger Sub, their respective officers, directors and shareholders
necessary for the authorization, execution and delivery of this Agreement and
all other agreements,
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documents and instruments to be entered into by Xxxxx and Merger Sub,
respectively, pursuant hereto and thereto, has been taken or will be taken on or
prior to the Closing, and this Agreement and other agreements entered into by
Xxxxx and Merger Sub pursuant to this Agreement constitute the valid and legally
binding obligations of Xxxxx and Merger Sub, enforceable in accordance with each
of their terms, except as affected by public policy, equitable principles or the
exercise of judicial discretion.
4.2 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 Xxxxx or Merger Sub is required to be
obtained in connection with Xxxxx' and Merger Sub's valid execution, delivery,
or performance of this Agreement, or the other agreements entered into by Xxxxx
or Merger Sub pursuant to this Agreement, except as required pursuant to the HSR
Act.
4.3 Litigation. There is no Action pending or, to the
best knowledge of Xxxxx, currently threatened against Xxxxx or, to the best
knowledge of Xxxxx, against any officer, director or employee of Xxxxx in
connection with such officers', directors' or employees' relationship with, or
actions taken on behalf of, Xxxxx which questions the validity of this Agreement
or the right of Xxxxx or Merger Sub to enter into this Agreement or to
consummate the transactions contemplated hereby.
4.4 Organization, Good Standing and Qualification of
Merger Sub. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. Merger Sub is in good standing in
Pennsylvania 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.
4.5 Brokers or Finders. Xxxxx has not engaged any broker
(except for Cyrus X. Xxxxxx), investment banker or finder in connection with the
transactions contemplated in this Agreement.
5. Conditions of the Company's and Vulcan's Obligations at
Closing. The obligations of the Company and Vulcan under Section 1 of this
Agreement and to otherwise consummate the transactions contemplated in this
Agreement at Closing are subject to the fulfillment on or before the Closing of
each of the following conditions:
5.1 Representations and Warranties. The representations
and warranties of Xxxxx and Merger Sub given to the Company contained herein
shall be true in all material respects 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.
5.2 Performance. Xxxxx and Merger Sub shall have
performed and complied in all material respects with all agreements, obligations
and conditions contained in this
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Agreement that are required to be performed or complied with by each of them on
or before the Closing.
5.3 Compliance Certificate. At the Closing, the Chairman
of Xxxxx shall deliver to the Company and Vulcan a certificate dated as of the
Closing certifying that the conditions set forth in Sections 5.1 and 5.2
pertaining to the applicable party have been fulfilled as of the Closing.
5.4 Regulatory Approvals. Xxxxx 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.
5.5 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 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, if such action, proceeding,
investigation, regulation or legislation, in the reasonable judgment of the
Company would make it inadvisable to consummate such transactions.
5.6 Opinions.
(a) For Vulcan only, Xxxxx shall have delivered
the opinion of Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC, with respect to the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory to Vulcan.
(b) Vulcan shall have delivered the opinion of
Xxxxxx Pepper & Shefelman, in form and substance reasonably satisfactory to the
Company.
(c) Xxxxxx Xxxxxx & Co. shall have delivered its
opinion to the Company that the Merger is fair to the Company's shareholders
from a financial standpoint.
5.7 Closing Deliveries. Xxxxx and Merger Sub shall have
delivered to the Company each of the certificates, documents and agreements
required to be delivered by such party hereunder to the Company.
5.8 Investment Transaction. The transaction contemplated
by that certain Preferred Stock Purchase Agreement of even date between Xxxxx
and Vulcan shall have closed.
5.9 Cross-Guarantee. Xxxxx shall have provided Vulcan
with its cross- guarantee of the following Vulcan guarantees: (i) Amended and
Restated Corporate Guarantee dated April 11, 1997, in favor of U.S. Robotics,
Inc.; (ii) Vulcan Guaranty to Amplicon, Inc., dated October 12, 1994 and that
certain Standby Letter of Credit No. G193066 in favor of
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Amplicon, Inc.; and (iii) that certain Standby Letter of Credit No. G193876 in
favor of Tokai Financial Services, Inc.
5.10 Consents. The Company and/or Xxxxx shall have
obtained consents to the Merger, in form and substance acceptable to Vulcan in
its sole discretion, from (i) CIT, (ii) Amplicon, Inc. ("Amplicon"), and (iii)
Tokai Financial Services, Inc. ("Tokai"). It is understood that the Standby
Letters of Credit by Seattle-First National Bank in favor of Amplicon and Tokai
will be retired as provided in Section 7.11, and prior to Closing the parties
shall have agreed upon the form of Escrow Agreement required by Section 7.11.
6. Conditions of Xxxxx' Obligations at Closing. The obligations
of Xxxxx under Section 1 of this Agreement and to otherwise consummate the
transactions contemplated in this Agreement at Closing are subject to the
fulfillment on or before the Closing of each of the following conditions by:
6.1 Representations and Warranties. The representations
and warranties of the Company and the representations and warranties of Vulcan
given to Xxxxx contained herein shall be true in all material respects 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.
6.2 Performance. Vulcan and the Company shall have
performed and complied in all material respect with all agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by each of them on or before the Closing, and shall deliver to
Xxxxx at Closing evidence of the fulfillment by the Company of the obligations
under Section 2.26 hereof.
6.3 Compliance Certificate. At the Closing, the President
of the Company and Xxxxxxx X. Xxxxx, Vice President of Vulcan, shall deliver to
the Company a certificate dated as of the Closing certifying that the conditions
set forth in Sections 6.1 and 6.2 pertaining to the applicable party have been
fulfilled as of the Closing, including a statement of the number of shares
outstanding at the Effective Time.
6.4 Regulatory Approvals. The Company and Vulcan 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.
6.5 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 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, if such action, proceeding,
investigation, regulation or legislation, in the reasonable judgment of the
Company would make it inadvisable to consummate such transactions.
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6.6 Closing Deliveries. Each of the Company and Vulcan
shall have delivered to Xxxxx each of the certificates, documents and agreements
required to be delivered by such party hereunder to Xxxxx.
6.7 Proceedings and Documentation. All corporate and
other proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto and deliverable by the Company or
Vulcan shall be reasonably satisfactory in form and substance to counsel to
Xxxxx, and such counsel shall have received all such counterpart originals and
certified or other copies of such documents as they may reasonably request.
6.8 Opinions.
(a) The Company shall have delivered the
opinions of Drinker Xxxxxx & Xxxxx with respect to the transactions contemplated
by this Agreement, in form and substance reasonably satisfactory to Xxxxx.
(b) Vulcan shall have delivered the opinion of
Xxxxxx Pepper & Shefelman, in form and substance reasonably satisfactory to
Xxxxx.
6.9 Major Adverse Change. No major uninsured loss,
casualty or other damage shall have occurred having a material adverse effect on
the Company's assets and liabilities as reflected in the Pro Forma taken as a
whole.
6.10 USR Supply Commitment. Xxxxx shall have no
substantial reason to believe U.S. Robotics will dishonor its supply commitment
in respect of the Company's purchase orders Number PO9006-PO90011 and PO90046
after Closing.
6.11 Vulcan Guaranty of Equipment Leases. Vulcan shall
have agreed to continue its guaranty for all of the Company's equipment leases
in effect on February 21, 1997 (or as terminated and not renewed and with
respect to additional equipment leases entered into since such date, all of
which are in the ordinary course of the business of the Company), but in each
case for not less than sixty (60) days after the Closing.
6.12 Preferred Stock Purchase. Consummation of the
investment in Xxxxx by Vulcan pursuant to the closing on the transactions
described in that certain Preferred Stock Purchase Agreement by and between
Xxxxx and Vulcan of even date herewith (the "Stock Purchase Agreement").
6.13 Consents. The Company and/or Xxxxx shall have
obtained consents to the Merger from (i) CIT, (ii) Amplicon, and (iii) Tokai,
with the Amplicon and Tokai consent being in form and substance acceptable to
Xxxxx in its sole discretion. It is understood that the Standby Letters of
Credit by Seattle-First National Bank in favor of Amplicon and Tokai will be
retired as provided in Section 7.11, and prior to Closing the parties shall have
agreed upon the form of Escrow Agreement required by Section 7.11.
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6.14 Red Wing Transactions. The Company and/or Vulcan
shall have obtained an assignment and assumption agreement, in form and
substance acceptable to Xxxxx in its sole discretion, whereby that certain lease
by and between the Company and High Properties dated July 28, 1995, as amended
to include additional space as of July 15, 1996, will be assigned by the Company
to Red Wing Corporation and all obligations of the Company thereunder released
by the lessor thereof. In addition, the Company shall have delivered to Xxxxx an
intercompany reconciliation of accounts, in form and substance acceptable to
Xxxxx in its sole discretion, properly allocating expenses incurred by the
Company for Red Wing Corporation, and Red Wing Corporation shall have reimbursed
the Company therefor, as set forth in Section 2.29 hereof.
7. Covenants.
7.1 Liabilities Undertaking.
(a) Effective at the Effective Time, Xxxxx will
cause the Company, subject to the limitations contained herein, to perform, pay
or discharge the following:
(i) all unpaid debts and liabilities of
the Company existing at the Closing, but only if they are disclosed to Xxxxx or
reserved against in the 12/31 Financial Statements or the 2/21 Balance Sheet, or
are incurred subsequent to the date of the 2/21 Balance Sheet and prior to
Closing in the ordinary course of the Company's business and otherwise in
conformity with this Agreement (the "Debts"); and
(ii) all unperformed and unfulfilled
obligations which are required to be performed and fulfilled by the Company
under the terms of all executory written contracts, agreements, leases,
licenses, commitments and undertakings which are disclosed to Xxxxx in the
Company's Disclosure Schedules attached hereto or reserved against in the 12/31
Financial Statements or the 2/21 Balance Sheet, or are entered into by the
Company subsequent to the date of the 2/21 Balance Sheet and prior to Closing in
the ordinary course of the Company's business and disclosed to Xxxxx in the
Company's Disclosure Schedules attached hereto (the "Obligations").
(b) Nothing contained herein shall prevent the
Company or Xxxxx from negotiating for discounts or amendments to the terms of
Debts and Obligations; provided that the Company or Xxxxx shall not engage in
litigation, bankruptcy or other adversarial proceedings in respect of a Debt or
Obligation unless the Company has a bona fide, good faith basis to contest the
validity or amount of such Debt or Obligation.
(c) Vulcan is the sole intended beneficiary of
this Section 7.1. There are no intended third party beneficiaries of this
Section.
7.2 Conduct of Business Prior to the Closing Date. The Company
agrees that, between the date hereof and the date of Closing:
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(a) Except as contemplated by this Agreement,
and specifically the matters described in Sections 2.27 and Section 2.28 (Red
Wing Transaction), or permitted by written consent of Xxxxx, the Company shall
operate its business only in the ordinary course consistent with prior practice
and not to:
(i) take any action of the nature referred
to in Section 2.12, except as permitted therein;
(ii) change the Company's banking or safe
deposit arrangements;
or
(iii) change the Company's articles of
incorporation or bylaws.
(b) The Company and Vulcan, prior to the
Closing, shall convert $10 million of indebtedness ($9,200,000 of principal and
$800,000 of interest) of the Company to Vulcan in consideration for the issuance
of 16,666,666 shares of common stock of the Company.
(c) The Company shall endeavor to preserve the
business organization of the Company intact and shall use its good faith best
efforts to preserve for the Company the goodwill of the Company's suppliers,
customers, distributors, sales representatives and others having business
relations with the Company.
(d) The Company shall maintain in force the
insurance policies referred to in Section 2.19 or insurance policies providing
the same or substantially similar coverage; provided, however, that the Company
will notify Xxxxx prior to the expiration of any of such insurance policies.
(e) Except as contemplated by this Agreement or
permitted by written consent of Xxxxx, no plan, fund, or arrangement described
in Section 2.23 has been or will be:
(i) terminated by the Company;
(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 of maintaining such plan, fund, or
arrangement.
7.3 Consents. The Company agrees 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.
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7.4 Examination of Records. Subject to any applicable
court orders, during the period prior to the Closing, the Company shall allow
Xxxxx, its 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 shall furnish Xxxxx and
its counsel and representatives with all available information concerning the
affairs of the Company which is reasonably requested or as necessary to allow
Xxxxx to make the determination that the condition set forth in Sections 6.1 and
6.3 have been satisfied.
7.5 Delivery of Interim Financial Statements. Prior to
Closing, the Company shall promptly deliver to Xxxxx all regularly prepared
unaudited financial statements of the Company, in format historically utilized
internally, as soon as available.
7.6 Notification of Certain Matters. Promptly after
receipt of notice thereof, each of the Company, Xxxxx, and Vulcan 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.
7.7 Best Efforts. The Company, Xxxxx and Vulcan agree to
use their best efforts to fulfill, prior to or at Closing, all conditions to
Closing which are to be fulfilled by them.
7.8 Capitalization of Subsidiaries. Xxxxx shall have duly
formed and capitalized Merger Sub in the amount and as specified in Section
1.1(f) hereof.
7.9 Vulcan Shares. At the Closing, Vulcan shall transmit
all of its capital stock of the Company pursuant to the terms and provisions of
the Merger as described in Section 1.1 hereof, and shall cooperate and assist in
authorizing and causing the Merger to occur.
7.10 State Taxes. The parties acknowledge that the Company
shall recognize a significant taxable gain in respect of the Red Wing
Transaction which, if not offset by losses recognized prior to the Effective
Time, will result in a Pennsylvania state income tax liability, and a U.S.
Federal Alternative Minimum Tax ("AMT") liability, to be paid by the Company
after the Closing. The Company has cooperated with Xxxxx prior to the Closing in
accelerating the recognition of losses and taking such other actions as Xxxxx
has reasonably requested to minimize the Company's Pennsylvania state income and
AMT tax liability.
7.11 Release of Letters of Credit. Xxxxx hereby covenants
and agrees to obtain the release of that certain Standby Letter of Credit issued
by Vulcan in the amount of $1,800,000 in favor of Amplicon, Inc. no later than
October 17, 1997, and to obtain the release of that certain Standby Letter of
Credit issued by Vulcan in the amount of $480,000 in favor of Tokai
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Financial Services, Inc. within sixty (60) days after the Closing Date. In
addition, Xxxxx agrees to establish a depository account within ten (10) days
after the Closing Date with a financial institution acceptable to Vulcan (the
"Depository") and to deposit with such Depository a sum equal to two (2) months
rental payment under the Company's Lease Agreement with Amplicon, Inc. dated
October 8, 1994 (the "Amplicon Lease") and to maintain such amount on deposit
with the Depository at all times until the release of Vulcan's Standby Letter of
Credit in favor of Amplicon, Inc. has been obtained. The Depository shall
directly pay to Amplicon from the funds on deposit by Xxxxx, each monthly
installment under the Amplicon Lease on or before the due date thereof. The
Depository will further agree to notify Vulcan in writing in the event that the
amount of funds on deposit by Xxxxx is less than the two (2) months rental
amount as specified above. In such event, Vulcan will have the right to make any
payment under the Amplicon Lease directly to Amplicon or to deposit sufficient
funds with the Depository for payment of the Amplicon Lease, and such amount
will be repaid to Vulcan as provided in the Cross Guarantee contemplated by
Section 5.9 hereof.
8. Indemnification.
8.1 First Indemnification by Vulcan. Subject to the
matters described in Sections 8.5, 8.6 and 8.7, and effective at the Effective
Time, Vulcan hereby agrees to defend, indemnify and hold harmless (the "First
Vulcan Indemnity") Xxxxx and its successors, assigns and affiliates and the
Surviving Corporation (collectively, the "Xxxxx 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, "Xxxxx
Losses"), which for purposes of this first Vulcan Indemnity are caused by,
result from or arise out of:
(a) (i) breaches of any representation or
warranty on the part of the Company herein 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 pursuant to the transactions
or obligations hereunder;
(b) (i) breaches of any representation or
warranty on the part of Vulcan herein or in any Schedule or Exhibit hereto or in
any other written statement, certificate or other instrument delivered by Vulcan
pursuant hereto, except those specific representations listed in Section 8.2(c)
which are covered by the Second Vulcan Indemnity below; and (ii) failures by
Vulcan to perform or otherwise fulfill any of its undertakings or other
agreements or obligations hereunder; or
(c) any and all actions, suits, proceedings,
claims or demands incident to any of the foregoing or such indemnification.
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8.2 Second Indemnification by Vulcan. Subject to matters
described in Sections 8.5, 8.6(b)-(d) and 8.7, and effective at the Effective
Time, Vulcan hereby agrees to defend, indemnify and hold harmless (the "Second
Vulcan Indemnity") each Xxxxx Indemnitee from and against any and all Xxxxx
Losses, and which, for purposes of this Second Vulcan Indemnity, are caused by,
result from or arise out of:
(a) the conduct of Vulcan, Vulcan's affiliates,
the Company or any of their directors or officers, or otherwise arising in any
manner and is the subject of a claim by any shareholder of the Company who was a
shareholder at any time prior to the Effective Time of the Merger ("Prior
Company Shareholders") in connection with the Merger or the Red Wing Transaction
(specifically including, but not limited to claims by any Prior Company
Shareholder for "Fair Value" pursuant to "Dissenters' Rights" under applicable
Pennsylvania law, breach of fiduciary obligations by the Company, Vulcan or any
directors or officers thereof in connection with the Red Wing Transaction or the
Merger, and the disbursement of the Merger Consideration pursuant to Section
1.1(h) hereof);
(b) any failure by Red Wing Corporation to honor
its obligations set forth in Section 5.5 of the Contract Assignment and Asset
Purchase Agreement dated March 7, 1997;
(c) breaches of any representation or warranty
on the part of Vulcan or the Company contained in Sections 2.2(a), 2.2(d), 2.15,
3.1 or 3.6 hereof;
(d) the exercise of any stock options of the
Company which are outstanding at the Effective Time or the conversion of such
options into the right to receive the Merger Consideration Per Share as provided
in Section 1.1(c) hereof; provided that the amount of Vulcan's indemnification
obligation pursuant to this Section 8.2(d) shall be reduced by the amount of the
net cash received by the Company from the exercise of any such stock options;
(e) any default or breach, whether now existing
or hereafter arising under any contract, agreement or obligation assigned by the
Company to and assumed by Red Wing Corporation; or
(f) any and all actions, suits, proceedings,
claims, or demands, incident to any of the foregoing or such indemnification.
8.3 Indemnification by the Company. Subject to matters
described in Sections 8.5, 8.6(b)-(d) and 8.7, the Company hereby agrees to
defend, indemnify and hold harmless each Xxxxx Indemnitee from and against any
and all Xxxxx Losses (but only if the Merger does not occur), 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 any Schedule or Exhibit hereto
or in any other written statement, certificate or other instrument delivered by
the Company pursuant hereto; and (ii) failures by the Company
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to perform or otherwise fulfill any of its undertakings or other agreements or
obligations hereunder;
(b) any and all actions, suits, proceedings,
claims or demands, incident to any of the foregoing or such indemnification.
8.4 Indemnification by Xxxxx. Subject to the matters
described in Sections 8.6(b)-(d) and 8.7, Xxxxx hereby agrees to defend,
indemnify and hold harmless the Company and its successors, assigns and
affiliates (but only if the Merger does not occur) and effective at the
Effective Time, Vulcan and its successors, assigns and affiliates (collectively,
the "Company Indemnitees") from and against any and all losses, deficiencies,
liabilities, damages, assessments, judgments, costs and expenses, including
reasonable 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 Xxxxx herein or in any Schedule or Exhibit hereto or in
any other written statement, certificate or other instrument delivered by Xxxxx
pursuant hereto; and (ii) failures by Xxxxx to perform or otherwise fulfill any
of its undertakings or other agreements 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 claim, liability, demand,
assessment, action, suit or proceeding shall be asserted by a third party naming
a Company Indemnitee in respect of which a Company Indemnitee proposes to demand
indemnification from Xxxxx (a "Third Party Company Indemnified Claim"), such
Company Indemnitee shall notify Xxxxx thereof, provided further, however, that
the failure to so notify Xxxxx shall not reduce or affect the obligations of
such claimant with respect thereto except to the extent that Xxxxx is materially
prejudiced thereby. Subject to Section 8.7 of this Agreement and to rights of or
duties to any insurer or other third person having liability therefor, 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 Company
Indemnified Claims; provided, however, that Xxxxx may not compromise or settle
any such claim without Vulcan's written consent (which consent shall not be
unreasonably withheld) if such settlement does not provide all Company
Indemnitees with a complete release by the claimant and such settlement seeks to
bind Vulcan to any nonmonetary obligation. Vulcan shall be entitled to
participate in the defense of any such claim at its own expense.
8.5 Third Party Claims. If any claim, liability, demand,
assessment, action, suit or proceeding shall be asserted by a third party naming
a Xxxxx Indemnitee or the Company as a party to an action or otherwise making a
claim or seeking recovery from a Xxxxx Indemnitee in respect of which a Xxxxx
Indemnitee proposes to demand indemnification (a "Third Party Xxxxx Indemnified
Claim") pursuant to the First and the Second Vulcan Indemnity, such Xxxxx
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Indemnitee shall notify Vulcan (or the Company, as appropriate), provided,
however, that the failure to so notify Vulcan (or the Company, as the case may
be), except with respect to the time limitation described in Section 8.6(b),
shall not reduce or affect the obligations herein with respect thereto except to
the extent that Vulcan is materially prejudiced thereby. Subject to Section 8.7
of this Agreement and to rights of or duties to any insurer or other third
person having liability therefor, Vulcan (or the Company, as the case may be)
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 Xxxxx
Indemnified Claims; provided that Vulcan (or the Company, as the case may be)
may not compromise or settle any such claim without Xxxxx' written consent
(which consent shall not be unreasonably withheld) if such settlement does not
provide all Xxxxx Indemnitees with a complete release by the claimant; and
either: (i) it would exceed the amount of the limitations on Vulcan's
indemnification obligation set forth in Section 8.7 (ii) or such settlement
seeks to bind Xxxxx and/or the Company to any nonmonetary obligation. Xxxxx
shall be entitled to participate in the defense of any such claim at its own
expense.
8.6 Certain Limitations.
(a) The obligations of Vulcan to indemnify
pursuant to the First Vulcan Indemnity pursuant to Section 8.1 of this Article
shall accrue only if the aggregate Xxxxx Losses for all matters indemnifiable
under Section 8.1 exceed One Hundred Thousand Dollars (US $100,000), and then
Vulcan shall be liable only for Xxxxx Losses in excess of such amount, subject
to the maximum amount described below. The obligations of Vulcan to indemnify
the Xxxxx Indemnitees under Section 8,1 shall not exceed the aggregate of Two
Million Five Hundred Thousand U.S. Dollars (US $2,500,000). The limitations
described in this Section 8.6(a) shall not apply to the Second Vulcan Indemnity
as described in Section 8.2.
(b) No claim for indemnification pursuant to
Section 8.1, 8.2, 8.3 or 8.4 may be made unless written notice of such claim,
accompanied by a description of the particular facts involved and the provisions
of this Agreement implicated, is delivered to the indemnifying party
("Indemnification Notice"). For purposes of the First Vulcan Indemnity pursuant
to Section 8.1, the Indemnification Notice must be received on or before
eighteen (18) months from the Effective Time; provided, however, no 18 month
time limit shall apply to indemnification claims pursuant to Indemnification
Notices provided to the indemnifying party before the expiration of such 18
month period where such claim(s) shall not have been fully resolved by such
expiration date; and provided further, no such term limit shall apply with
respect to the indemnification provided pursuant to Sections 8.2, 8.3 or 8.4.
(c) The amount of Vulcan's indemnification
obligation in respect of any Xxxxx Loss shall be reduced by the amount of any
insurance proceeds received by Xxxxx, the Company or the Surviving Corporation
in respect of such Loss.
(d) The amount of Vulcan's indemnification
obligation hereunder shall be reduced by the amount determined to be owing to
Vulcan by Xxxxx pursuant to Section 9.12 of that certain Preferred Stock
Purchase Agreement of even date herewith.
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8.7 Defense of Certain Claims. In any Third Party Xxxxx
Indemnified Claims or any Third Party Company Indemnified Claims defended by the
Company, Xxxxx or Vulcan 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 party's own 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, Xxxxx or Vulcan, as
applicable, shall make available to the indemnifying party and its accountants
and legal representatives all books and records of the Company, Xxxxx or Vulcan
relating to such Third Party Xxxxx Indemnified Claims or Third Party Company
Indemnified Claims, as applicable, and (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 Xxxxx Indemnified Claims, as
applicable.
8.8 No Impairment of Investors' Rights. Neither the
examination or inspection by audit of the properties, financial condition or
other matters of the Company or its business prior to the Closing, nor the fact
that the Company itself is providing representations, warranties, schedules,
exhibits and entering into the covenants and other matters pursuant to this
Agreement, shall in no way limit, affect or impair the ability of Xxxxx or the
Company to rely upon the representations, warranties, covenants and obligations
of the Company and Vulcan set forth in this Agreement or otherwise limit the
indemnification obligations set forth in this Article 8.
9. Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Xxxxx, Merger
Sub, Vulcan and the Company;
(b) by either Xxxxx or the Company if the Merger
shall not have been consummated before April 16, 1997 (unless the failure to do
so consummate the Merger by such date shall be due to the action or failure to
act of the party seeking to terminate this Agreement;
(c) by either Xxxxx or the Company if any
governmental entity shall have issued a final permanent order, decree or ruling
or taken any other final action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall become
nonappealable;
(d) by Xxxxx and Merger Sub, if (i) there shall
have been a breach on the part of the Company or Vulcan of any representation or
warranty of the Company or of Vulcan set forth herein, or (ii) there shall have
been any failure of the Company or Vulcan to perform or comply with the
covenants or agreements hereunder and in either case, the aggregate effect of
all such breaches or failures, as the case may be, would be material; or
(e) by the Company if (i) there shall have been
a breach of any representation or warranty on the part of Xxxxx or Merger Sub or
(ii) there shall have been a
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failure of Xxxxx or Merger Sub to perform or comply its covenants and agreements
hereunder and, in either case, the aggregate effect of all such breaches and
failures would be material.
9.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders. Nothing contained in this Section 9.2 shall relieve any party from
liability for any breach of this Agreement.
10. Miscellaneous.
10.1 Survival of Warranties. The warranties and
representations of the Company, Xxxxx, and Vulcan contained in or made pursuant
to this Agreement shall survive the execution and delivery of this Agreement.
10.2 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 permitted assigns any rights,
remedies, 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 no assignment shall relieve
such party from or diminish or affect such party's obligations hereunder, unless
pursuant to written permission from the party or parties to whom said
obligation(s) is/are owed.
10.3 Governing Law; Dispute Resolutions. This Agreement
shall be governed by and construed under the laws of the Commonwealth of
Pennsylvania without reference to its conflicts of law principles.
(a) Policy - Mediation. The parties hope there
will be no disputes arising out of their relationship. To that end, each commits
to cooperate in good faith and to deal fairly in performing its duties under
this agreement in order to accomplish their mutual objectives and avoid
disputes. But if a dispute arises, the parties agree to resolve all disputes,
except as set forth below, by the following alternate dispute resolution
process:
(i) first, the parties will seek a fair
and prompt negotiated resolution in
accordance with the following
procedures:
(A) Upon the written request of
either party hereto, each
of the parties will appoint
a designated representative
whose task it will be to
meet for the purpose of
endeavoring to resolve such
dispute.
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(B) The designated
representatives shall meet
as often as necessary to
gather and furnish to the
other all information with
respect to the matter in
issue which is appropriate
and germane in connection
with its resolution.
(C) Such representatives shall
discuss the problem and
negotiate in good faith in
an effort to resolve the
dispute without the
necessity of any formal
proceeding relating
thereto.
(D) During the course of such
negotiations all reasonable
requests made by one party
to the other for non-
privileged information
reasonably related to this
Agreement, will be honored
in order that each of the
parties may be fully
advised of the other's
position.
(E) The specific format for
such discussions will be
left to the discretion of
the designated
representatives, but may
include the preparation of
agreed upon statements of
fact or written statements
of position furnished to
the other party.
(ii) If the designated representatives
cannot resolve the dispute within
sixty (60) days after the initial
request to negotiate the dispute,
then the dispute shall be escalated
to the Chairman of Xxxxx, or his
designee, and the Chief Executive
Officer of Vulcan, for their review
and resolution. If the dispute
cannot be resolved within thirty
(30) days after referral to such
officers, then the provisions of
Subsection (b) below shall apply.
(b) Arbitration. Except as provided below, all
disputes not resolved in accordance with the above procedures shall be resolved
by binding arbitration. The parties recognize that negotiation or mediation may
not be appropriate to resolve some disputes and agree that either party may
proceed with arbitration without negotiating or mediating. The parties confirm
that by agreeing to this alternate dispute resolution process, they intend to
give up their right to have any dispute decided in court by a judge or jury.
Notwithstanding the foregoing or anything to the contrary herein, if a dispute
arises out of or relates to a breach of the Confidentiality Agreements between
the parties dated February 19, 1997 (between the Company and Xxxxx) or dated
March 20, 1997 (between Vulcan and Xxxxx), or any other agreement or provision
for which a party is seeking injunctive relief, then such dispute shall not be
subject to the provisions of this Section 10.3 and may be resolved by formal
judicial or equitable resolution.
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(c) Binding Arbitration. Except as provided
above, any claim between the parties, including but not limited to those arising
out of or relating to this agreement and any claim based on or arising from an
alleged tort, shall be determined by arbitration in Atlanta, Georgia. In any
arbitration proceeding, there shall be three (3) arbitrators, one selected by
Xxxxx, one selected by Vulcan, and the third selected by the two arbitrators
chosen by the parties. If the parties (or their respective arbitrators) cannot
agree on the identity of the arbitrator(s) within ten (10) days of the
arbitration demand, the arbitrator(s) shall be selected by the administrator of
the American Arbitration Association (AAA) office in Atlanta, Georgia from its
Large, Complex Case Panel (or have similar professional credentials). Each
arbitrator shall be an attorney with at least fifteen (15) years' experience in
commercial law and shall reside in the Atlanta metropolitan area. Whether a
claim is covered by this agreement shall be determined by the arbitrator(s). All
statutes of limitations which would otherwise be applicable shall apply to any
arbitration proceeding hereunder.
(d) Procedures. The arbitration shall be
conducted in accordance with the AAA Commercial Arbitration Rules with Expedited
Procedures, in effect on the date hereof, as modified by this agreement. There
shall be no dispositive motion practice. As may be shown to be necessary to
ensure a fair hearing: the arbitrator(s) may authorize limited discovery; and
may enter pre-hearing orders regarding (without limitation) scheduling, document
exchange, witness disclosure and issues to be heard. The arbitrator(s) shall not
be bound by the rules of evidence or of civil procedure, but may consider such
writings and oral presentations as reasonable business people would use in the
conduct of their day-to-day affairs, and may require the parties to submit some
or all of their case by written declaration or such other manner of presentation
as the arbitrator(s) may determine to be appropriate. The parties intend to
limit live testimony and cross-examination to the extent necessary to ensure a
fair hearing on material issues.
(e) Hearing - Law - Appeal Limited. The
arbitrator(s) shall take such steps as may be necessary to hold a private
hearing within one hundred twenty (120) days of the initial demand for
arbitration and to conclude the hearing within three (3) days; and the
arbitrator(s)'s written decision shall be made not later than fourteen (14)
calendar days after the hearing. The parties have included these time limits in
order to expedite the proceeding, but they are not jurisdictional, and the
arbitrator(s) may for good cause afford or permit reasonable extensions or
delays, which shall not affect the validity of the award. The written decision
shall contain a brief statement of the claim(s) determined and the award made on
each claim. In making the decision and award, the arbitrator(s) shall apply
applicable substantive law. Absent fraud, collusion or willful misconduct by an
arbitrator, the award shall be final, and judgment may be entered in any court
having jurisdiction thereof. The arbitrator(s) may award injunctive relief or
any other remedy available from a judge, including the joinder of parties or
consolidation of this arbitration with any other involving common issues of law
or fact or which may promote judicial economy, and may award attorneys' fees and
costs to the prevailing party but shall not have the power to award punitive or
exemplary damages. The decision and award of the arbitrators need not be
unanimous; rather, the decision and award of two arbitrators shall be final.
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(f) Provisional Remedies. Pending selection of
the arbitrator(s), either party may request the AAA to appoint unilaterally an
arbitrator for the limited purpose of awarding temporary or preliminary relief.
This award may be immediately entered in any federal or state court having
jurisdiction over the parties even though the decision on the underlying dispute
may still be pending. Once appointed, the arbitrator(s) may, upon request of a
party, issue a superseding order to modify or reverse such temporary or
preliminary relief or may confirm such relief pending a full hearing on the
merits of the underlying dispute. Any such initial or superseding order of
temporary or preliminary relief may be immediately entered in any federal or
state court having jurisdiction over the parties even though the decision on the
underlying dispute may remain pending. Such relief may be granted by the
arbitrator(s) only after notice to and opportunity to be heard by the opposing
party unless the party applying for such relief demonstrates that its purpose
would be rendered futile by giving notice.
10.4 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; however, original counterpart signature pages shall be promptly
delivered to all parties and attached to as the counterpart original of the
applicable documents.
10.5 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.
10.6 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, one (1) day 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 and an original of such notice is, on or before the next day of U.S.
Postal Service operations following such transmission, sent by First Class Mail,
postage prepaid, 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 10.6:
(a) If to Xxxxx:
if by hand or overnight courier:
Xxxxx Microcomputer Products, Inc.
0000 Xxxxxxxxx Xxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx and
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Contracts Administration
Telecopy: (000) 000-0000
if by United States mail:
Xxxxx Microcomputer Products, Inc.
Xxxx Xxxxxx Xxx 000000
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
and Contracts Administration
with a required copy to:
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: G. Xxxxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) If to the Company:
Cardinal Technologies, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000
with a required copy to:
Drinker Xxxxxx & Xxxxx
Suite 300
1000 Westlakes Drive
Berwyn, Pennsylvania 19312-2409
Attention: Xxxxxx X. Xxxxxx, Xx., Esquire
Telecopy: (000) 000-0000
(c) If to Vulcan:
Vulcan Ventures Incorporated
000-000xx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
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with a required copy to:
Xxxxxx Pepper & Shefelman
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esquire
Telecopy: (000) 000-0000
10.7 Expenses. Each party hereto shall pay all fees and
expenses of such party's respective counsel, accountants and other paid
representatives and all other expenses incurred by such party incident to the
negotiation, preparation and execution of this Agreement and the consummation of
the transaction contemplated hereby.
10.8 Amendments and Waivers. Any term of this Agreement
may be amended only with the written consent of each of the parties hereto.
10.9 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.
10.10 Entire Agreement. This Agreement, the Exhibits and
Schedules attached hereto, and such are hereby incorporated herein, 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.
10.11 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;
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.
10.12 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 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.
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10.13 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 or the events and the actions contemplated
hereby.
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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: Chairman
XXXXX MERGER SUB, INC.,
a Pennsylvania corporation
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
---------------------------
Title: President
---------------------------
CARDINAL TECHNOLOGIES, INC.,
a Pennsylvania corporation
By: /s/ Xxxxx Xxxxxxxx
---------------------------
Name: Xxxxx Xxxxxxxx
Title: President
VULCAN VENTURES INCORPORATED,
a Washington corporation
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
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