TIBURON, INC.
7.5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
May 10, 2001
TABLE OF CONTENTS
1. Purchase and Sale of Series A Preferred Stock
1.1 Authorization of Series A Preferred Stock
1.2 Sale and Issuance of Series A Preferred Stock
1.3 Closing
2. Representations and Warranties of the Corporation
2.1 Organization, Good Standing and Qualification
2.2 Capitalization
2.3 Subsidiaries
2.4 Authorization
2.5 Valid Issuance of Preferred and Common Stock
2.6 Consents
2.7 Litigation
2.8 Employees; Employee Compensation
2.9 Patents and Trademarks
2.10 Compliance with Other Instruments
2.11 Compliance and Permits
2.12 Environmental and Safety Laws
2.13 Disclosure
2.14 Registration Rights
2.15 Title to Property and Assets
2.16 Agreements; Action
2.17 Stockholder Agreements
2.18 Brokers or Finders
2.19 Corporate Documents
2.20 Employee Benefit Plans
2.21 Qualified Small Business Stock
2.22 Financial Statements
2.23 Changes
2.24 Certain Transactions
2.25 Minute Books
2.26 Section 83(b) Elections
3. Representations and Warranties of the Investor
3.1 Organization and Good Standing
3.2 Experience
3.3 Investment
3.4 Rule 144
3.5 No Public Market
3.6 Access to Data
3.7 Authorization
3.8 Accredited Investor
4. Conditions of Investor's Obligations at Closing
4.1 No Injunction, etc
4.2 Representations and Warranties
4.3 Performance
4.4 Compliance Certificate
4.5 Blue Sky
4.6 Investor Rights Agreement
4.7 Corporate Proceedings
4.8 Legal Opinion
4.9 Officer's Certificate
4.10 Confidential Information and Invention Assignment Agreement
4.11 Board of Directors
4.12 Co-Sale Agreement
4.13 Non-Competition Agreements
4.14 Founder's Restricted Stock Purchase Agreement
5. Conditions of the Corporation's Obligations at Closing
5.1 Representations and Warranties
5.2 Securities Law Compliance
5.3 Investor Rights Agreement
5.4 Corporate Proceedings
6. Miscellaneous
6.1 Governing Law
6.2 Survival
6.3 Successors and Assigns
6.4 Entire Agreement; Amendment
6.5 Notices, Etc.
6.6 No Implied Rights
6.7 Delays or Omissions
6.8 Expenses
6.9 Finder's Fee
6.10 Counterparts
6.11 Severability
6.12 Attorneys' Fees
EXHIBITS
7.5% CUMULATIVE CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This 7.5% Cumulative Convertible Preferred Stock Purchase Agreement
(the "Agreement") is made as of the 10th day of May, 2001, by and among
Tiburon, Inc., a Virginia corporation (the "Company"), with its
principal office at 00000 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, XX 00000,xxx
CompuDyne Corporation, a Nevada Corporation (the "Investor") with its
principal office at 0000 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000.
THE PARTIES HEREBY AGREE AS FOLLOWS:
ARTICLE I
SALE AND TRANSFER OF THE STOCK
1. Purchase and Sale of 7.5% Cumulative Convertible Preferred Stock
("Preferred Stock")
1.1 Authorization of Preferred Stock. The Corporation shall duly
adopt and file with the Secretary of State of the Commonwealth
of Virginia the Amended and Restated Certificate of Incorporation in
the form attached hereto as Exhibit A (the "Restated Certificate"),
which shall be effective on or before the Closing Date (as defined
below), authorizing the issuance of the Preferred Shares.
1.2 Sale and Issuance of Preferred Stock. Subject to the terms
and conditions of this Agreement, the Investor agrees to purchase at
the Closing and the Company agrees to sell and issue to the Investor
at the Closing five hundred twenty thousand eight hundred thirty three
(520,833) shares of the Corporation's Preferred Stock, par value
$5.76, for the aggregate purchase price of three million dollars
($3,000,000)(the "Purchase Price"). The shares of Preferred Stock to
be sold pursuant to this Agreement are collectively referred to herein
as the "Preferred Shares."
1.3 Closing. The purchase and sale of the Preferred Shares shall
take place simultaneously with the closing of the purchase of the
Company's shares of Common Stock pursuant to the Common Stock
Purchase Agreement of even date herewith ("Common Stock Purchase
Agreement"). The closing of the transactions contemplated hereby
("Closing") shall be held at the offices of the Investor at 0000
Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx on or about June 15, 2001 (the
"Closing Date").
1.4 Deliveries at the Closing. Subject to Sections VI, VII and X
hereof, at the Closing:
(a) The Company shall deliver to the Investor a certificate
or certificates representing the Preferred Shares, free and clear of
liens, encumbrances and claims.
(b) There shall be delivered to the Investor and the Company
the opinions, certificates and other documents and instruments provided
to be delivered under Articles IV and V hereof.
(c) The Investor shall deliver to the Company the Purchase
Price.
ARTICLE II
[INTENTIONALLY OMITTED]
ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure letter delivered by the
Company prior to the execution of this Agreement (the "Company
Disclosure Letter"), the Company hereby represents and warrants to the
Investor as of the date hereof as follows. All references to schedules
in this Article IV are intended as references to Schedules of the
Company Disclosure Letter.
4.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. The Company has full power and authority
(corporate and other) to own, operate and lease its properties and to
conduct its business in the manner in which and in the places where such
properties are owned, operated or leased and such business is now
conducted or proposed to be conducted. The Company is not in breach of
any provision of either of its articles of incorporation or by-laws,
complete and accurate copies of which are attached as Exhibit 4.1. The
minute books containing the records of meetings of the shareholders,
the board of directors and any committees of the board of directors,
the stock certificate books and the stock record books of the Company
are correct and complete.
The Company is duly qualified, licensed and authorized to do
business as a foreign corporation and is in good standing as a foreign
corporation in each jurisdiction listed on Schedule 4.1, and there is
no jurisdiction not so listed in which the ownership of the Company's
properties or the conduct of its business requires such qualification
in which the failure to so qualify would have a material adverse effect
on the Company's business or results of operations. The Company has
not received any written notice within the last three years from the
Secretary of State or comparable official of any jurisdiction to the
effect that the Company is required to be qualified or otherwise
authorized to do business therein, in which jurisdiction the Company
has not qualified or obtained such authorization.
4.2 Capitalization; Ownership of Stock. The authorized capital
stock of the Company consists of twenty million (20,000,000) shares of
common stock, par value $0.10 (the "Common Stock"),four million six
hundred forty five thousand seventeen (4,645,017) shares of which are
issued and outstanding, two million forty nine thousand seven hundred
fifty eight (2,049,758) shares of which are reserved for issuance upon
the exercise of conversion rights, options or warrants and none of which
are held as treasury shares, and ten thousand (10,000) shares of 1997
6.0% Cumulative Convertible Preferred stock, par value $100.00 (the
"6.0% Preferred Stock"), three thousand three hundred thirty four
(3,334) shares of which are outstanding and none of which are treasury
shares, and twenty five thousand (25,000) shares of 6.5% Cumulative
Convertible Preferred Stock, par value $100.00 (the "6.5% Preferred
Stock") one thousand four hundred (1,400) shares of which are issued
and outstanding and none of which are held as treasury shares, and,
subject to the completion of the closing under this Agreement, five
hundred twenty thousand eight hundred thirty three (520,833) shares of
7.5% Cumulative Convertible Preferred Stock, par value $5.76 (the "7.5%
Preferred Stock"), all shares of which are outstanding (collectively,
the Common Stock and the various series of preferred stock are referred
to as the "Capital Stock"). There are no other authorized shares of any
other class. All outstanding shares of Capital Stock have been validly
issued by the Company and are fully paid, non-assessable and free
of preemptive rights. Except as set forth in Schedule 4.2, no shares
of Capital Stock have been reserved for issuance for any purpose and
there is no subscription, option, warrant, call, right, contract,
commitment, understanding or arrangement relating to the issuance, sale
or transfer by the Company of any shares of Capital Stock including any
right of conversion or exchange under any outstanding security or other
instrument other than the Stockholder Agreements of even date
herewith between the Investor and certain of the Company's shareholders.
The issuance and sale of all shares of Capital Stock have been in full
compliance with all applicable federal and state securities laws.
4.3 No Subsidiaries. Except as set forth on Schedule 4.3, the
Company has never owned, directly or indirectly, any capital stock or
other equity of any corporation or had any direct or indirect equity
or ownership interest in any other business entity. The Company is
not subject to any obligation or requirement to make any investment
(in the form of a loan, capital contribution or otherwise) in any
entity.
4.4 Authorization; Binding Agreement. The Company has full power
and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby, and such action has been duly
authorized by all necessary action by the Company's shareholders and
board of directors. Subject to the adoption of the amendment to the
Company's Articles of Incorporation as described in Section 8.11, this
Agreement constitutes and, when executed and delivered, each of the
other agreements to which the Company is a party delivered or to be
delivered to the Investor pursuant to this Agreement will constitute,
the valid and binding obligation of the Company, enforceable against
it in accordance with their respective terms.
Except as set forth on Schedule 4.4, the execution, delivery and
performance of this Agreement or any other agreement, document or
instrument by the Company and the consummation of the transactions
contemplated hereby do not and will not with the passage of time or the
giving of notice or both:
(a) conflict with or result in a breach of any provision of
the articles of incorporation or by-laws of the Company;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result
in the termination or in a right of termination or cancellation of, or
accelerate or create in any person the right to accelerate the
performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties
of the Company under, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, lease, contract, agreement or other
instrument or commitment or obligation to which the Company is a party
or by which it or any of its properties may be bound or affected; or
(c) violate any order, writ, injunction, decree, judgment or
ruling, or any law, rule or regulation of any court or governmental
authority, federal, state, local or foreign, applicable to the Company
or any of its properties, the violation of which would be material
to the Company.
4.5 Financial Statements and Undisclosed Liabilities. The Company
has delivered to the Investor audited Balance Sheets, income statements,
cash flow statements and statements of shareholder's equity for the
fiscal years ended June 30, 1997, June 30, 1998, June 30, 1999 and June
30, 2000, and the notes to such financial statements, as prepared by the
Company's accountants, PriceWaterhouse, n/k/a PricewaterhouseCoopers.
The Company has also delivered to the Investor monthly balance sheets
together with related statements of income, shareholders' equity and
cash flow as of the end of each of the nine months ending March 31,
2001. All of such financial statements of the Company are referred to
collectively as the "Financial Statements". The Financial Statements
have been prepared from and are in accordance with the books and
records of the Company, are true and correct and complete, and present
fairly the financial condition, results of operations and, except with
respect to unaudited interim financial statements, cash flows of the
Company as of the dates and for the periods indicated, in each case in
conformity with GAAP consistently applied during such periods, except
as otherwise stated in such financial statements or on Schedule 4.5,
and except to the extent that unaudited interim financial statements
may be condensed or summary statements and may omit footnotes to the
extent permitted by Rule 10.01(a)(5) of Regulation S-X of the Securities
and Exchange Commission. Except as and to the extent reflected in the
Financial Statements, the Company had at each such date no liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise and whether due or to become due). The books of account and
other financial records of the Company, all of which have been made
available to the Investor, are complete and correct and represent
actual, bona fide transactions and have been maintained in accordance
with sound business practices and the requirements of Section 13(b)(2)
of the Securities Exchange Act of 1934 (the "Exchange Act"), including
the maintenance of an adequate system of internal controls. Attached
to Schedule 4.5 are complete and correct copies of all letters from the
Company's Auditors to the Company's board of directors or its audit
committee during the 36 months preceding the execution of this
Agreement, together with complete and correct copies of all responses
thereto.
4.6 [Intentionally Omitted]
4.7 Taxes.
(a) Except as disclosed on Schedule 4.7, the Company has filed
all income, franchise, sales and other tax returns, declarations,
statements and reports of every nature, including any schedule or
attachment thereto and including any amendment thereof ("Tax Return")
required to be filed by it accurately reflecting any and all taxes
owing to the United States or any other government or any subdivision
thereof, state or local, or any other taxing authority, and has paid in
full or made or will make adequate provision as part of its current
liabilities in the Financial Statements for the payment of all taxes
with respect to all tax periods ending on or before the Closing Date
(including penalties and interest) for which the Company has or may
have liability, whether or not shown on any Tax Return. The Company
has delivered or made available to the Investor copies of, and Schedule
4.7 contains a complete and accurate list of, all Tax Returns filed by
the Company since December 31, 1999. Except as disclosed on Schedule
4.7. there is no unassessed tax deficiency proposed or to the knowledge
of the Company threatened against the Company. There are, and will
hereafter be, no net tax deficiencies (including penalties and interest)
of any kind assessed against or relating to the Company with respect to
any of the taxable periods ending on or before the Closing Date. The
Company is not currently the beneficiary of any extension of time
within which to file any Tax Return. Except as disclosed on Schedule
4.7, no claim has ever been made to the Company by any authority in a
jurisdiction where the Company does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction.
(b) There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state,
local or foreign tax return of the Company for any period. To the
Company's knowledge, the federal income tax returns of the Company
have never been audited by the Internal Revenue Service. To the
Company's knowledge, no state, local or foreign taxing authority has
ever audited any tax return or report filed therewith by the Company.
Proper amounts have been withheld by the Company from its employees,
independent contractors and other third parties in compliance with the
tax withholding provisions of all applicable federal, state, local,
foreign and other laws, and timely deposits have been made of all
payroll taxes due. Payment has been timely made by the Company of all
estimated income taxes and other taxes of any kind due.
The Company has not filed any consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. The Company has not made any payments, is
not obligated to make any payments and will not be so obligated by
reason of the transactions contemplated hereby, and is not a party to
any agreement that under certain circumstances could obligate it to
make any payments, that will not be deductible under Section 280G of
the Code. The Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to an underpayment of
federal income tax to which Section 6662 of the Code applies. The
Company is not a party to any tax allocation or sharing agreement. The
Company has never been a member of an Affiliated Group within the
meaning set forth in Section 1504(a) of the Code.
4.8 Environmental, Health and Safety Matters
Except as disclosed in Schedule 4.8:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. The Company has no basis to expect,
nor has any it received, any actual or threatened order, notice, or
other communication from (i) any governmental authority or private
citizen acting in the public interest, or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any
actual or threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any
Facility, or with respect to any property or Facility at or to
which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by the Company, or from
which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled or received.
(b) There are no pending or, to the knowledge of the Company,
threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any Facility.
(c) The Company has no knowledge of or any basis to expect,
nor has it received, any citation, directive, inquiry, notice, order,
summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the
cost of any Environmental, Health, and Safety Liabilities with respect
to any Facility, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
(d) The Company has no Environmental, Health, and Safety
Liabilities with respect to any Facility or, to the knowledge of the
Company, with respect to (i) any Facility or (ii) any property
geologically or hydrologically adjoining any Facility.
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or to the Company's knowledge at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether
movable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of
the Facility or such adjoining property, or incorporated into any
structure therein or thereon. Neither the Company nor, to the knowledge
of the Company, any other person, has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to any Facility
except in full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the knowledge of the
Company, Threat of Release, of any Hazardous Materials at or from any
Facility, or to the knowledge of the Company any geologically or
hydrologically adjoining property, whether by the Company or any other
person.
(g) The Company has delivered to the Investor true and
complete copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance, by the Company or any other person for whose
conduct it is or may be held responsible, with Environmental Laws.
As used in this Section 4.8 and Section 5.6, the following
capitalized terms shall have the following meanings:
"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters and ocean waters), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor
air), plant and animal life, and any other environmental medium or
natural resource.
"Environmental, Health and Safety Liabilities" -- any cost,
damages, expense, liability, obligation, or other responsibility
arising from or under any Environmental Law or Occupational
Safety and Health Law, including those consisting of or relating to:
(a) any environmental, health, or safety matter or condition
(including on-site or off-site contamination, occupational safety and
health, and regulation of any chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response,
remedial, or inspection cost or expense (other than costs and expenses
of routine inspections) arising under any Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by any
Environmental Law or Occupational Safety and Health Law (whether or
not such Cleanup has been required or requested by any governmental
authority or any other person) and for any natural resource damages; or
(d) any other corrective, or remedial measure required under
any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA").
"Environmental Law" -- any statute, regulation or other legal
requirement that requires or relates to:
(a) advising appropriate authorities, employees, or the
public of intended or actual Releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and the commencement of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the Release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the Release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been Released,
preventing the threat of Release, or paying the costs of such clean up
or prevention; or
(h) making responsible parties pay private parties, or
groups of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"Facilities" -- for purposes of Section 4.8, any real property,
leasehold or other interest in real property currently or formerly
owned or operated by the Company, including the tangible personal
property being used or operated by the Company at the respective
locations of the real property specified on Schedule 4.8, provided
that any representation or warranty with respect to any Facility
shall be limited to the knowledge of the Company except to the extent
related to the period during which the Company owned or operated the
Facility; and for purposes of Section 5.6, any real property, leasehold
or other interest in real property currently or formerly owned or
operated by the Purchaser, including the tangible personal property
being used or operated by the Purchaser at the respective locations of
any real property owned or operated by the Purchaser.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment,
or use (including any withdrawal or other use of groundwater) of
Hazardous Material in, on, under, about, or from any of the Facilities
or any part thereof into the Environment, and any other act, business,
operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities.
"Hazardous Materials" -- any substance that is or contains:
(a) any "hazardous substance" as now or hereafter defined in
Section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA")
(42 U.S.C. Section 9601 et. seq.) or any regulations promulgated under
CERCLA.
(b) any "hazardous waste" as now or hereafter defined in the
Resource Conservation and Recovery Act, as amended ("RCRA") (42 U.S.C.
Section 6901 et. seq.) or any regulations promulgated under RCRA.
(c) any substance now or hereafter regulated by the Toxic
Substances Control Act, as amended ("TSCA") (15 U.S.C. Section 2601
et. seq.) or any regulations promulgated under TSCA.
(d) petroleum, petroleum by-products, gasoline, diesel fuel,
or other petroleum hydrocarbons.
(e) asbestos and asbestos-containing material, in any form,
whether friable or non-friable.
(f) polychlorinated biphenyls;
(g) lead and lead-containing materials;
(h) radon gas; or
(i) any additional substance, material or waste on, under or
related to any Facility which requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined),
causes or threatens to cause a nuisance on such Facility or any
adjacent premises or poses or threatens to pose a hazard to the health
or safety of persons in or on such Facility or any adjacent premises;
or which, if it emanated or migrated from such Facility, could
constitute a trespass, or which is now or is hereafter classified or
considered to be hazardous or toxic under any Environmental Laws.
"Occupational Safety and Health Law" -- any statute, regulation or
other legal requirement designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards,
including the Occupational Safety and Health Act.
"Release" -- any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching, or migration on or into the Environment
or into or out of any property.
"Representative" -- with respect to a particular person, any
director, officer, manager, employee, agent, consultant, advisor,
accountant, financial advisor, legal counsel or other representative
of that Person.
"Threat of Release" -- a reasonable likelihood of a Release that
may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
4.9 Title to and Condition of Assets. The Company has (i) good,
valid and marketable title to all personal property relating to its
operations, business or properties, which it purports to own, including,
without limitation, Intellectual Property, as that term is defined in
Section 4.11 hereto, and (ii) to the knowledge of the Company, good,
valid and marketable leasehold estates to the leasehold premises
described on Schedule 4.9. All such properties which the Company
purports to own are held free and clear of all title defects and any
liens, pledges, claims, charges, security interests or other
encumbrances and are not, in the case of real property, subject to
any rights of way, building or use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever, except, with
respect to all such properties, real and personal, (a) as set forth in
Schedule 4.9, (b) liens for current taxes not yet due and assessments
not in default and (c) other liens and encumbrances incidental to the
conduct of its business or the ownership of its assets which were not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not in the aggregate materially detract
from the value of its assets or materially impair the use thereof in the
operation of its business. There are no claims adverse or challenges
to the title or ownership of any property which the Company purports to
own. Except as disclosed on Schedule 4.9, all personal property and all
buildings, structures and fixtures used by the Company in the conduct
of its business are in good operating condition (subject to normal
maintenance and repair) and the Company has not received any notice of
any violation (which has not been cured) of any building, zoning or
other law, ordinance or regulation in respect of such property or
structures or its use thereof.
Schedule 4.9 lists each lease (which term shall include subleases)
of real property to which the Company is a party, true copies of which
leases (including all amendments thereof and modifications thereto)
have been delivered to the Investor prior to the date hereof. All such
leases are valid and binding obligations of the Company and in full
force and effect; there are no material defaults by the Company or, to
the knowledge of the company, the lessors thereunder; and no event
has occurred which (whether with or without notice, lapse of time or
both) would constitute a material default by the Company or, to the
knowledge of the Company, the lessors thereunder. To the knowledge of
the Company, no premises leased under any such lease are subject to any
lien, encumbrance, easement, right of way, building or use restriction,
exception, variance, reservation or limitation as might interfere with
or impair the present and continued use thereof in the usual and
normal conduct of the business of the Company. No party to any such
lease has repudiated any provision thereof and there are no disputes,
oral agreements or forbearance programs in effect as to any such lease.
Except as disclosed on Schedule 4.9, all assets other than motor
vehicles owned, used, or operated by the Company are located at
premises listed on Schedule 4.9.
Except as disclosed on Schedule 4.9, to the knowledge of the
Company, there is no existing, proposed or contemplated, plan to modify
or realign any street or highway or any existing, proposed or
contemplated eminent domain proceeding that would result in the taking
of all or any part of any real property owned or leased by the Company
or that would prevent or hinder the continued use of such real property
as heretofore used in the conduct of the business of the Company.
Except as disclosed on Schedule 4.9, to the knowledge of the Company
there are no encroachments onto any such real property by any
improvements on any adjoining property. To the knowledge of the
Company, there are no encroachments onto any adjoining property by any
improvements on such real property that have an adverse impact on the
present use of such adjoining property. There are no unpaid taxes,
local improvement levies, assessments (special, general or otherwise)
or bonds of any nature affecting any real property owned by the Company
or any portion thereof. All covenants, conditions, restrictions,
easements and similar matters affecting any real property owned by the
Company have been complied with by the Company. Neither this Agreement
nor anything provided to be done under this Agreement violates or will
violate any contract, document, understanding, agreement, arrangement
or instrument affecting any real property owned by the Company.
4.10 Conduct of the Business. The Company is not a party to, or
subject to or bound by, nor are any of its assets subject to or bound
by, any agreement, oral or written, or any statute or any judgment,
rule, regulation, order, writ, injunction or decree of any court or
governmental or administrative body, which prohibits or adversely
affects or, upon the consummation of the transactions contemplated
hereby, would prohibit or adversely affect: (i) the use of any or all
of the assets and property associated with, necessary to, or used or
employed in the business of the Company, or (ii) the conduct of such
business in the same manner as it has been conducted. Upon
consummation of the transactions contemplated by this Agreement, the
Company will continue to have all of the properties and rights
necessary to conduct its business in all respects in the same
manner and at the same production levels as such business has been
conducted by it prior to the Closing.
4.11 Intellectual Property. As used in this Agreement,
"Intellectual Property" shall mean (a) all computer software (including
without limitation, source code, data and related documentation), (b)
all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (c) all trademarks, service marks, trade dress,
logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all
goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (d) all copyrightable works, all
copyrights, and all applications, registrations, and renewals in
connection therewith, (e) all mask works and all applications,
registrations, and renewals in connection therewith, (f) all trade
secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof, in whatever form or medium.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
currently used in the operation of its business. With respect to
Intellectual Property previously incorporated by the Company into its
products, the Company owned or had the right to use pursuant to
license, sublicense, agreement or permission such Intellectual Property
at the time of its use by the Company. Except as set forth on Schedule
4.11(a), each item of Intellectual Property owned or used in
connection with the Company's business immediately prior to the
Closing will be owned or available for use by the Company on identical
terms and conditions immediately subsequent to the Closing. The
transactions contemplated in this Agreement will not require obtaining
the consent of any person to permit the continued use of the
Intellectual Property. The Company has taken all commercially
reasonable steps to maintain and protect each item of Intellectual
Property that it owns or uses.
(b) The Company, in operating its business, has not, to the
knowledge of the Company, interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and has not received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation. To the knowledge of the
Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Company relating to its business.
(c) Schedule 4.11(c) identifies each patent or registration,
which has been issued to the Company, each trademark and service xxxx
registered by the Company, and each copyright filed by the Company with
respect to any of its Intellectual Property relating to its
business, identifies each pending patent, trademark and service xxxx
application or application for registration which the Company has made
with respect to any of its Intellectual Property relating to the
Company's business, and identifies each license, agreement, or other
permission which the Company has granted to any third party with
respect to any of its Intellectual Property relating to the Company's
business. The Company has delivered to the Investor correct and complete
copies of all such patents, trademarks, service marks, copyrights,
registrations, applications, licenses, agreements, and permissions,
as amended to date, and has made available to the Investor correct
and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Schedule
4.11(c) also identifies each trade name or unregistered trademark used
by the Company or any of its affiliates in connection with the
Company's business. With respect to each item of Intellectual Property
required to be identified in Schedule 4.11(c), except as otherwise set
forth in Schedule 4.11(c):
(i) the Company possesses all right, title, and interest
in and to the item, free and clear of any security interest, lien,
encumbrance, license, or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to
the knowledge of the Company, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item; and
(iv) the Company has not agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Schedule 4.11(d) identifies each item of Intellectual
Property that any third party owns and that is used in connection with
the Company's business pursuant to license, sublicense, agreement, or
permission, other than license agreements for standard "shrink
wrapped, off the shelf" commercially available products used by the
Company. The Company has delivered to Investor correct and complete
copies of all such licenses, sublicenses, agreements, and permissions.
With respect to each item of Intellectual Property required to be
identified in Schedule 4.11(d);
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, and binding obligation of the
Company;
(ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, and binding, obligation of the Company
following the Closing;
(iii) neither the Company nor, to the knowledge of the
Company, any other party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default by the
Company or, to the knowledge of the Company, by any other person or
permit termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, to the knowledge of
the Company the representations and warranties set forth in subsections
(a) through (d) above are true and correct with respect to the
underlying license;
(vi) to the knowledge of the Company, the underlying
item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(vii) to the knowledge of the Company, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
is pending or, threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(viii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission; and
(ix) to the knowledge of the Company, the transaction
contemplated by this Agreement will not require obtaining the consent
of any person relating to the continued use of the Intellectual
Property by the Company or the Investor.
(e) To the knowledge of the Company, the continued operation
of the Company's business will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties.
(f) The Company has no knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing that
any competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any product or
process that is material to the Company's business.
4.12 Contracts. Schedule 4.12 lists and briefly describes all of
the following contracts, commitments, plans, agreements, instruments,
arrangements and understandings (written or oral), bids and proposals,
including all amendments and supplements thereto, to which the Company
is a party (whether or not legally bound thereby):
(a) Contracts or other understandings (whether oral or
written) for or regarding the employment of any officer or employee,
including, without limitation, terms, conditions and policies relating
to vacation and sick days, severance pay and incentive, sales
commissions and other bonuses which are not included in Schedule 4.16;
(b) Collective bargaining agreements and any other agreement
or contract with any labor union or other employees' association;
(c) Leases and agreements relating to real or personal
property;
(d) Bonus, pension, profit-sharing, retirement,
hospitalization, or insurance or similar plans or practices, formal or
informal which are not included in Schedule 4.15;
(e) Franchise, dealer, distribution, sales and agency
contracts and commitments;
(f) Contracts of sale and distribution agreements creating
any obligation of the Company to sell or distribute services or
products;
(g) Guarantees and indemnities, direct or indirect, current
or contingent of the obligations of customers or any other person or
entity;
(h) Contracts with suppliers, vendors, distributors, clients,
customers or others for the future performance of services or provision
of goods by or for the Company, and bids and proposals for such
contracts and in each case, in the event that the contract is for the
purchase of goods and services, involving an amount in excess of
$50,000 and in the event that the contract is for the provision of
goods or services by the Company, involving an amount in excess of
$250,000;
(i) Insurance policies;
(j) Advertising contracts and commitments;
(k) Bank accounts, lock box and similar depository
arrangements;
(l) License agreements (as licensor or licensee) which are not
included in Schedule 4.11;
(m) Loan or credit agreements with lenders, real estate
mortgages, indentures, pledges, conditional sale or title retention
agreements, equipment obligations and leases, and lease purchase
agreements;
(n) Contracts purporting to limit the freedom of the Company
or any of its employees to compete in any line of business or in any
geographic area;
(o) Agreements concerning a partnership or joint venture;
(p) Agreements concerning confidentiality or noncompetition;
(q) Agreements granting options or warrants to purchase
shares of the Company's common stock. With respect to the agreements
set forth in this subsection (q), Schedule 4.12 shall list the name of
the holder of the option or warrant, the number of shares of the
Company's common stock which such holder is entitled to purchase with
the option or warrant, and the exercise and vesting terms for each
option or warrant;
(r) Agreements relating to the issuance by the Company of
preferred stock; and
(s) Agreements relating to any and all outstanding
performance and bid bonds.
Except as set forth on Schedule 4.12, each contract, commitment,
plan, agreement, instrument, arrangement, understanding, bid and
proposal required to be listed in Schedule 4.12 is the valid and
binding obligation of the Company and, to the knowledge of the Company,
any other party thereto, enforceable in accordance with its respective
terms and conditions.
Except as set forth on Schedule 4.12, no contract required to be
set forth on Schedule 4.12 requires the consent of any other person,
in order to remain the binding obligation of such person, to the
acquisition of the Shares by the Investor, and to the extent that
such consent is required, such consent has been obtained and is in
full force and effect.
Except as set forth on Schedule 4.12, the Company is not a party
to any lease relating to personal property which cannot be terminated
by it, without penalty, on 30 days' notice.
Neither the Company nor, to the knowledge of the Company, any
other party thereto is in violation of or in default in respect of or
has failed in any material respect to perform any obligation
under or repudiated any provision of any such contract, commitment,
plan, agreement, instrument, arrangement, understanding, bid or
proposal, and nothing has occurred which with lapse of time or the
giving of notice or both would constitute a breach or default by the
Company, or, to the knowledge of the Company, any other party thereto
or which would cause acceleration of any obligation of the Company or,
to the knowledge of the Company, any other party thereto or the
creation thereunder of any lien, encumbrance or security interest in
or upon the properties or assets of the Company. The Investor has
been furnished with true copies of all items listed on Schedule
4.12 which are identified on Schedule 4.12 as having been so furnished.
Except as set forth on Schedule 4.12, there is no outstanding
power of attorney executed on behalf of the Company.
4.13 Litigation. Except as set forth on Schedule 4.13, there is
no action, suit, claim, demand, investigation or proceeding pending or,
to the knowledge of the Company, threatened against, relating to or
affecting the Company or its business or which would in any way affect
the transactions contemplated by this Agreement, and to the knowledge
of the Company there is no basis for any of the foregoing. No order,
writ, injunction or decree has been issued by or requested of any court
or governmental agency which might result in any adverse change in the
business, property or assets or in the condition, financial or
otherwise, of the Company or which might adversely affect the
transactions contemplated by this Agreement. The Company has not been
subject to any bankruptcy or other insolvency proceedings.
4.14 Insurance. The Company is and has been insured by insurers
unaffiliated with the Company, with respect to its properties and
businesses in such amounts and against such risks as are customary with
respect to properties and businesses comparable to those of the
Company. Schedule 4.14 hereto lists all insurance policies (including
title insurance) of the Company, showing (a) the issuer, (b) risk
insured, (c) expiration date, (d) annual premium, (e) dollar amount of
coverage and (f) dollar amount of deductible or retention. The
insurance coverage provided by such policies will not in any material
respect be affected by, and will not terminate or lapse by reason of,
the transactions contemplated by this Agreement. Except as set forth
on Schedule 4.14, at no time has the Company been denied any insurance
or indemnity bond coverage which it has requested or made any material
reduction in the scope or amount of, or paid a substantially
increased premium for, or substantially increased any deductible under,
any of its insurance coverage, and no insurance carrier has cancelled
or reduced any insurance coverage for the Company or given any notice
or other indication of its intention to do so.
4.15 Employee Benefit Plans. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not constitute a violation of, or give rise
to any liability under, Title I of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA") or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"). Schedule 4.15
contains a complete and correct list of all "employee benefit plans"
as defined by Section 3(3) of ERISA, all specified fringe benefit plans
as defined in Section 6039D of the Code, and all other bonus, incentive
compensation, deferred compensation, profit sharing, stock option,
stock appreciation right, stock bonus, stock purchase, employee stock
ownership (including, without limitation, the Tiburon, Inc. Employee
Stock Ownership Plan), savings, severance, change in control,
supplemental unemployment, layoff, salary continuation, retirement,
pension, health, life insurance, disability, accident, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan,
including any Section 125 or so-called "cafeteria" plan, and any other
employee compensation or benefit plan, agreement, policy, practice,
commitment, contract, or understanding (whether qualified or
nonqualified, currently effective or terminated, written or unwritten),
and any trust, escrow or other agreement related thereto, that (i) is
maintained or contributed to by the Company or any other corporation or
trade or business controlled by, controlling, or under common control
with the Company (within the meaning of Section 414 of the Code or
Section 4001(a)(14) or 4001(b) of ERISA) (an "ERISA Affiliate") or has
been maintained or contributed to in the last six years by the Company
or any ERISA Affiliate, or with respect to which the Company or any
ERISA Affiliate has or may have any liability, and (ii) provides
benefits, or describes policies or procedures applicable to any
current or former director, officer, employee, or service provider of
the Company or any ERISA Affiliate, or the dependents of any thereof,
regardless of how (or whether) liabilities for the provision of
benefits are accrued or assets are acquired or dedicated with respect
to the funding thereof (collectively the "Employee Plans"). Schedule
4.15 identifies as such any Employee Plan that is
a "Defined Benefit Plan" (as defined in Section 414(l) of
the Code),
a plan intended to meet the requirements of Section 401(a) of
the Code,
a "Multiemployer Plan" (as defined in Section 3(37) of ERISA), or
a plan subject to Title IV of ERISA, other than a Multiemployer
Plan.
Also set forth in Schedule 4.15 is a complete and correct list of
all of the Company's ERISA Affiliates during the last six years. Except
as set forth on Schedule 2.14, no such plan, policy, practice,
agreement or arrangement has been previously maintained or contributed
to by the Company whose "date of termination" (within the meaning of
Section 4048 of ERISA) occurred after September 1, 1974.
To the extent necessary or appropriate for the proper operation and
administration of each of the Employee Plans, the participant and
beneficiary records of each plan accurately state the employment history
of each participant and beneficiary in connection with such plan and
accurately state the data from which there may be calculated the
benefits earned by and owed to each such person under such plan.
With respect to each of the Employee Plans, the Company has
delivered or has otherwise made available to Parent for inspection and
copying, a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and to the extent
applicable of: (i) the plan; (ii) any related trust agreement or other
funding instrument; (iii) the most recent determination letter, if
applicable; (iv) any summary plan description and other written
communications (or a description of any oral communications) by the
Company or its ERISA Affiliates to their employees concerning the
extent of the benefits provided under the Employee Plans; and (v) for
the three most recent years (A) the Form 5500 and attached schedules,
(B) audited financial statements, (C) actuarial valuation reports and
(D) attorney disclosures of "loss contingencies" in response to an
auditor's request for information.
Except as set forth in Schedule 4.15:
(a) None of the Employee Plans is a "multiemployer plan" as
that term is defined in Section 3(37) of ERISA or a "defined benefit
plan" as that term is defined in Section 3(35) of ERISA, no Employee
Plan provides retiree welfare benefits, and neither the Company nor
its ERISA Affiliates has any obligation to provide any retiree
welfare benefits except as required under Section 4980B of the Code or
part 6 of Title I of ERISA.
(b) Neither any of the Employee Plans, nor any trust created
thereunder nor any trustee or administrator thereof, has engaged in a
transaction in connection with which any of the Employee Plans, any such
trust, or any trustee or administrator thereof, or any party dealing
with the Employee Plans or any such trust, could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA, or a tax
imposed by Section 4975 of the Code.
(c) Full payment has been made of all amounts which the
Company is required to pay under the terms of each of the Employee Plans
pursuant to applicable law and GAAP, consistently applied, as a
contribution to the Employee Plans as of the last day of the most
recent fiscal year of each of the Employee Plans ended prior to the
date of this Agreement and no accumulated funding deficiency or liquidity
shortfall (as those terms are defined in Section 302 of ERISA and Section
412 of the Code) has been incurred with respect to any such Employee
Plan, whether or not waived. As to each of the Employee Plans to which
Section 4021(a) of the Code applies, the present value of the assets
of such plan equal or exceed the amount of all benefit liabilities
(determined on a plan termination basis using the actuarial assumptions
established by the PBGC as of the Closing Date) of such Employee Plan.
(d) All reports, returns and disclosures relating to the
Employee Plans required to be filed or distributed to participants have
been timely filed or distributed in all material respects in compliance
with applicable law.
(e) Except as set forth on Schedule 4.15, other than claims
in the ordinary course for benefits under the Employee Plans, there is
no action, suit, claim or proceeding pending or to the knowledge of the
Company threatened, nor does there exist any basis therefor, which would
result in the imposition of any liability on any Employee Plan or on the
Company with respect to any such plan.
(f) Except as set forth on Schedule 4.15, each of the
Employee Plans is intended to be and has been written to comply with
all applicable laws, including but not limited to the Code and ERISA
and has been interpreted, administered and operated in all material
respects in accordance with the written Employee Plan documents, the
respective summaries thereof provided to the employees of the Company
and is in operational compliance in all material respects with all
applicable laws and regulations.
(g) Except as set forth on Schedule 4.15, as to each of the
Employee Plans to which Section 401(a) of the Code applies, the plan
is "qualified" within the meaning of Section 401 of the Code, each
related trust is exempt from tax under Section 501(a) of the Code, and
an application for a favorable determination letter for such plan as
most recently amended (a copy of which application is appended to
Schedule 4.15 as an exhibit) has been made to the Internal Revenue
Service. To the knowledge of the Company, there are no factors which
would adversely affect the qualified status of any such Employee Plan.
(h) The Company has, at all times, complied, and currently
complies, in all material respects with the applicable continuation
requirements for its welfare benefit plans, including (1) Section 4980B
of the Code (as well as its predecessor provision, Section 162(k)
of the Code) and Sections 601 through 608, inclusive, of ERISA, which
provisions are hereinafter referred to collectively as "COBRA" and (2)
any applicable state statutes mandating health insurance continuation
coverage for employees.
(i) Except as set forth on Schedule 4.15, the consummation
of the transactions contemplated hereby will not create or accelerate
any right to receive benefits or the payment thereof under any Employee
Plan.
(j) Except as required under this Agreement or as set forth
on Schedule 4.15, during the period from June 30, 2000 through the date
hereof, there has not been (a) any acceleration, amendment or change of
the period of exercisability or vesting of any Company Stock Options
under the Option Plan (including any discretionary acceleration of the
exercise periods or vesting by the Board of Directors or any committee
thereof or any other persons administering an Option Plan) or
authorization of cash payments in exchange for any Company Stock Options
under such Option Plan, (b) any adoption or material amendment by the
Company or any of its subsidiaries of any Employee Plans, except as
required by law, or (c) any adoption of, or amendment to, or change in
employee participation or coverage under, any Employee Plans which would
increase materially the expense of maintaining such Employee Plans above
the level of the expense incurred in respect thereof for the fiscal year
ended on June 30, 2000. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (either alone or in conjunction with any other event) result in,
or cause the accelerated vesting or delivery of, or increase the
amount or value of, any payment or benefit to any employee of the
Company.
4.16 Personnel. Schedule 4.16 lists, to the extent not listed on
Schedule 4.15, all plans, contracts, agreements, programs and policies,
whether written or oral, relating to, and all information referred to
in, the following items: (a) all employment, savings, bonus, profit
sharing, percentage compensation, deferred compensation, severance pay,
pension, employee benefit, welfare and retirement plans, contracts and
agreements in each such case with directors, officers or employees, all
stock purchase and option plans, contracts and agreements, all
consulting agreements, and all labor union and collective bargaining
agreements, to which the Company is a party or is subject; (b) the names
and current salaries of all directors, officers, and division managers
of the Company; (c) the wage rates for non-salaried and non-executive
salaried employees of the Company by classification; (d) any increase
since June 30, 2000 in the compensation payable or to become payable
by the Company, or any bonus, percentage compensation, service award or
other similar benefit granted, made or accrued to the credit of, any
officer, director, employee, agent or consultant thereof except for such
as are payable to employees (other than officers and directors) pursuant
to (i) regular compensation reviews in accordance with past practice
(but not across the board general salary increases) or (ii) employment
agreements in effect on June 30, 2000; (e) all group insurance
programs in effect for employees of the Company; and (f) since June 30,
2000, any contribution to any profit sharing or other employee benefit
plan. The Company is not in default with respect to any of its
obligations listed above. Except as set forth in Schedule 4.16,
the Company is not and will not be, by reason of anything done in
connection with (or within a period of time measured from) the execution
of this Agreement or the consummation of the transactions contemplated
hereby, liable to any employees of the Company for any amount of
severance pay or for any other payments which are or become payable in
an increased amount by reason of the consummation of the transactions
contemplated hereby. Except as set forth on Schedule 4.16, no employee
of the Company has been paid compensation in any form or other amounts
in any form where the payment has been discretionary and not pursuant
to a binding legal obligation of the Company. To the knowledge of the
Company, no officer, director, agent, employee, consultant or contractor
of the Company is bound by any agreement that purports to limit the
ability of such person (i) to engage in or continue or perform any
conduct, activity, duties or practice relating to the business of the
Company or (ii) to assign to the Company or to any other person any
rights to any invention, improvement or discovery.
Except as set forth on Schedule 4.16, there are no accrued
liabilities under any plans, programs, policies or practices maintained
by the Company on behalf of any of its employees which are not provided
for on the books of the Company and reflected in the March 31, 2001
Balance Sheet or which have not been fully (on an actuarial basis, or
plan termination basis, where appropriate) provided for by insurance
contracts, premiums on which are currently paid in full, or by
contributions to one or more trusts established to fund the plan,
program, policy or practice in question.
The qualifications of each employee of the Company for employment
under applicable immigration laws have been reviewed, a properly
completed Form I-9 is on file with respect to each such employee, and
the Company is in compliance with the Immigration Reform and Control Act
of 1986, as amended.
4.17 Governmental and Other Approvals. Except as set forth on
Schedule 4.17 hereto, all requisite consents, authorizations, licenses,
permits, orders, certificates and approvals of all governmental
authorities or other parties necessary for the Company to consummate the
transactions contemplated by this Agreement will be obtained as of the
Closing Date. Except as set forth on Schedule 4.17 hereto, the Company
has all consents, authorizations, licenses, permits, orders,
certificates, registrations or qualifications required under applicable
law or regulation, federal, state and local, necessary to the ownership
of all of its assets and to the operation of its business as
presently conducted. ("Consent"). The Company's business has been,
and is being, conducted in compliance with all applicable Consents,
laws, ordinances, orders or other rules or regulations. Each Consent is
valid and in full force and effect. To the Company's knowledge, no
event has occurred or circumstance exists that may constitute or result
directly or indirectly in a violation of any term or requirement of any
Consent or in the revocation, withdrawal, suspension, cancellation or
termination of, or modification to, any Consent. The Company has not
received any notice or communication regarding any violation or
potential violation of any Consent or regarding any actual or proposed
revocation, withdrawal, suspension, cancellation, termination of or
modification to any Consent. All applications required to have been
filed for the renewal of each Consent have been duly filed in a timely
basis. The Company does not have any expectation that, based upon the
operations of the Company to date, any customer, supplier or other
person will not maintain its relationship with the Company as previously
maintained and conducted after the date hereof and the Closing Date.
4.18 Accounts; Accounts Receivable. The Company's Costs and
Estimated Earnings in Excess of Xxxxxxxx ("Costs in Excess") and
Xxxxxxxx in Excess of Costs and Estimated Earnings ("Xxxxxxxx in
Excess") as reflected on the March 31, 2001 balance sheet have been
properly calculated in accordance with GAAP and in a manner that is
consistent with prior practices. To the Company's knowledge, (i) the
underlying assumptions related to the cost to complete projects under
contract as of such date are reasonable, and (ii) any estimates related
to the cost to complete projects under contract as of such date have
been prepared in a manner to properly reflect the total costs to
complete all such projects taken in the aggregate. The Investor
acknowledges that material changes may occur in the estimates related to
the cost to complete projects under contract and that materially
adverse changes in such estimates have frequently occurred in connection
with completed projects. All of the accounts receivable of the Company
arose in the ordinary course of business and represent accounts validly
due for goods sold or services rendered and are validly incurred
indebtedness on the part of those obligated thereon and are not subject
to counterclaim or set-off other than with respect to credits which
arose in the ordinary course of business.
4.19 Brokerage. The Company has not dealt directly or indirectly
with any broker or finder in connection with the transactions
contemplated herein.
4.20 Labor Relations. There is no unfair labor practice complaint
pending or, to the knowledge of the Company, threatened against the
Company nor any basis therefor. There is no proceeding pending or, to
the knowledge of the Company, threatened before the National Labor
Relations Board that arises out of or pertains to the business of the
Company nor any basis therefor. The Company has not experienced any
work stoppage or other labor difficulty or any unionization attempt
over the last five years except as set forth in Schedule 4.20. Except
as set forth on Schedule 4.20, there is no discrimination charge
(relating to sex, age, race, national origin, handicap or veteran
status) pending before any federal or state agency or authority nor
any basis therefor, and there is no labor strike or similar dispute or
labor arbitration proceeding pending or to the knowledge of the
Company threatened against or involving the Company nor any basis
therefor that arises out of or pertains to the business of the Company.
There is no outstanding demand for union representation of employees of
the Company. No representation question is pending before the National
Labor Relations Board involving any attempt to organize a bargaining
unit including any employees of the Company, and no labor grievance has
been filed within the past 12 months with the Company that arises out of
or pertains to its business. Except as set forth on Schedule 4.20, the
Company is not a party to any collective bargaining agreement and is not
currently negotiating a collective bargaining agreement with respect to
its employees.
4.21(a) Product Warranty. With the exception of breaches of
contracts or warranties that are correctable and normally encountered
in the ordinary course of business, each product and service
licensed, manufactured, sold, leased, or delivered to a customer of the
Company in connection with the Company's business has been provided in
conformity with all applicable contractual commitments and all express
and implied warranties, and the Company has no liability (and has no
knowledge of any basis) for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
for replacement or repair thereof or other damages in connection
therewith. Except as set forth on Schedule 4.21(a), no product or
service licensed, manufactured, sold, leased, or delivered in
connection with the Company's business is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard terms and
conditions of license, sale or lease. Schedule 4.21(a)sets forth the
standard terms and conditions of license, sale or lease, including
warranties, pursuant to which the Company licenses, sells or leases its
products.
(b) Product Liability. The Company presently has no liability
(and, to the knowledge of the Company, there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any liability)
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased,
or delivered in connection with the Company's business.
(c) Product Defects. There is no defect in the design, source
codes, production or manufacture of the software and/or other products
currently manufactured or sold by the Company not correctable and
normally encountered in the ordinary course of the Company's
business which would or could reasonably be expected to adversely affect
the safety, performance or quality of such products. There is no defect
in the design, source codes, production or manufacture of the software
and/or other products sold by the Company prior to the Closing Date not
correctable and normally encountered in the ordinary course of the
Company's business which would or could reasonably be expected to
adversely affect the safety, performance or quality of such products.
Except as set forth on Schedule 4.21, there are no warranties concerning
the products sold by the Company either currently or prior to the
Closing Date.
4.22 Corporate Name. Except as disclosed on Schedule 4.22, (a) no
other person or business has received from the Company the right to use,
nor is there any person or business using, any corporate name of the
Company, any tradename set forth in Schedule 4.11, or any variant
thereof, singly or in combination with any other term, and (b) no person
or business has attempted to restrain the Company from using any such
name or any variant thereof, singly or in combination with any other
term.
4.23 Prepayment of Liabilities. Except as disclosed on Schedule
4.23, the Company has no liability for borrowed money which cannot be
prepaid at any time without penalty.
4.24 Compliance With the Foreign Corrupt Practices Act and Export
Control and Anti- Boycott Laws
(a) The Company and, to the knowledge of the Company, its
directors, officers, employees, agents, contractors and other
representatives have not, to obtain or retain business, directly or
indirectly made any illegal contribution, gift, bribe, rebate, payoff,
influence, payment, kickback, or other payment to:
(i) any person who is an official, officer, agent,
employee or representative of any governmental body, or of any existing
or prospective customer (whether government-owned or
on-government-owned);
(ii) any political party or official thereof;
(iii) any candidate for political or political
party office; or
(iv) any other individual or entity.
(b) Except as set forth on Schedule 4.24, the Company has made
all payments to third parties by check mailed to such third parties'
principal place of business or by wire transfer to a bank located in the
same jurisdiction as such party's principal place of business.
(c) Each transaction is properly and accurately recorded on
the books and records of the Company, and each document on which
entries in the Company's books and records are based is complete and
accurate in all respects. The Company maintains a system of
internal accounting controls adequate to insure that the Company
maintains no off-the-books accounts and that the Company's assets are
used only in accordance with the Company's management directives.
(d) The Company has at all times been in compliance with all
statutes, regulations and other legal requirements relating to export
control and trade embargoes. No product sold or service provided by the
Company during the last five years has been, directly or indirectly,
sold to or performed on behalf of Cuba, Iraq, Iran, Libya, or North
Korea.
(e) The Company has not violated the anti-boycott
prohibitions contained in 50 U.S.C. Section 2401 et seq. or taken any
action which can be penalized under Section 999 of the Code. Except as
set forth in Schedule 4.24, during the last five years, the Company has
not been a party to, is not a beneficiary under, and has not performed
any service or sold any product under, any contract under which a product
has been sold to customers in Bahrain, Iraq, Jordan, Kuwait, Lebanon,
Libya, Oman, Quatar, Saudi Arabia, Sudan, Syria, United Arab Emirates, or
the Republic of Yemen.
4.25 Insider Interests. Except as disclosed on Schedule 4.25,
to the Company's knowledge no present or former officer or director or
"affiliate" or "associate" (as such terms are defined in Rule
405 under the Securities Act) of the Company has (a) any interest in
any property used in or pertaining to the business of the Company, (b)
any contract, commitment, arrangement or understanding with the Company
other than those listed on Schedule 4.16 or (c) any equity interest
(other than an investment in a publicly held corporation not exceeding
one percent (1%) of the outstanding capital stock of such corporation)
with any customer, competitor or supplier of the Company.
4.26 Disclosure. No representation or warranty made by the
Company in this Article IV, and no statement contained elsewhere in
this Agreement or in any schedule, exhibit, certificate, instrument or
agreement delivered or to be delivered by the Company to the Investor
contains or will contain any untrue statement of fact or omits or will
omit to state a material fact or any fact necessary to make the
statements contained herein or therein not materially misleading. All
material facts known to the Company relative to the business,
operations, properties, assets, liabilities (whether accrued, absolute,
contingent or otherwise), financial condition and prospects of the
Company have been disclosed to the Investor by the Company. Nothing in
any Schedule to this Agreement shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless such
Schedule identifies the exception with particularity and describes the
relevant facts in detail.
4.27 No Material Change. Since June 30, 2000, except as
disclosed in any schedule or Financial Statements delivered by the
Company to the Investor prior to the execution of this Agreement and
incorporated herein, the Company has not (a) suffered any damage,
destruction or loss (whether or not covered by insurance) exceeding
$50,000 in the aggregate, (b) had any materially adverse change in its
condition (financial or other), operations, business, business outlook
or property (and no event has occurred that may result in such a
material adverse change) or (c) done anything which, if done between
the date hereof and the Closing Date, would violate any provision
of Section 8.5 hereof.
4.28 Conduct of Business. Except as set forth on Schedule 4.28,
or in any schedule or Financial Statements delivered by the Company to
the Investor prior to the execution of this Agreement and incorporated
herein, since June 30, 2000 the Company has not (i) incurred any
indebtedness for borrowed money; (ii) entered into any agreement
requiring the maintenance of a specified net worth; (iii) assumed,
guaranteed, endorsed or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other individual, firm or corporation; (iv) made any loans, advances or
capital contributions to, or investments in, any other individual, firm
or corporation; (v) mortgaged, pledged or otherwise subjected to any
lien any of its assets or property; (vi) made any tax election or
settled or compromised any federal, state, local or foreign income tax
liability; (vii) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past
practices, of liabilities reflected or reserved against in the June 30,
2000 balance sheets or incurred in the ordinary course of business
consistent with past practices since the date thereof, (viii) cancelled,
compromised, waived or released any right or claim outside the ordinary
course of business or involving in the aggregate more than $25,000 (ix)
increased the rate or terms (including, without limitation, any
acceleration of the right to receive payment) of compensation payable or
to become payable by the Company to, or made any other change in the
terms of employment of, or made any loan to, or entered into any other
transaction outside the ordinary course of business with, any of its
directors, officers or employees, (x) declared or paid any dividend,
declared payment, declared any split or made any other distribution
(whether in cash, stock, property or any combination thereof) in
respect of the Common Stock, or purchased, acquired or redeemed any
shares of the Common Stock, or (xi) issued any stock options or warrants
for the purchase of Common Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
Except as set forth on the disclosure letter delivered by the
Investor to the Company prior to the execution of this Agreement (the
"Investor Disclosure Letter"), the Investor hereby represents and
warrants to the Company as of the date hereof as follows. All
references to schedules in this Article V are intended as references to
Schedules of the Investor Disclosure Letter:
5.1 Corporate Organization. The Investor is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada with full power and authority (corporate and other) to
own, operate and lease its properties and to conduct its business in the
manner in which and in the places where such properties are owned or
operated or leased and such business is now conducted.
5.2 Authorization; Binding Effect. The Investor has full
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The Board of Directors
of the Investor has duly authorized the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
and no other corporate proceedings on the part of the Investor are
necessary to authorize the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby. This
Agreement constitutes and, when executed and delivered, each of the
other agreements to which the Investor is a party delivered or to be
delivered to the Company pursuant to this Agreement will constitute,
a valid and binding obligation of the Investor enforceable against the
Investor in accordance with its terms.
5.3 No Conflicts, etc. Neither the execution and delivery by the
Investor of this Agreement nor the consummation by the Investor of the
transactions contemplated hereby nor compliance by the Investor with any
of the provisions hereof will (a) conflict with or result in a breach of
any provision of the charter or by-laws of the Investor, (b) violate,
conflict with or result in a breach of any provision of, or, constitute
a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance
required by, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties of the Investor under,
or result in being declared void, voidable or without further binding
effect, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease,
contract, agreement or other instrument or commitment or obligation to
which the Investor is a party or by which it or any of its properties
may be bound or affected, (c) violate any order, writ, injunction,
decree, judgment, law, rule, regulation or ruling of any court or
governmental authority, federal, state, local or foreign, applicable to
the Investor or any Investor subsidiary or any of their respective
properties, the violation of which would be material to the Investor and
its subsidiaries, taken as a whole or (d) require any consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority except as disclosed on Schedule
5.3 hereto.
5.4 Brokerage. The Investor has not dealt directly or indirectly
with any broker or finder in connection with the transactions
contemplated herein and the Investor agrees to indemnify and hold the
Company harmless in connection with any claims for commissions
or other compensation made by any broker or finder claiming to have been
employed by or on behalf of the Investor in connection with the
transactions contemplated hereby.
5.5 Taxes.
(a) Except as disclosed on Schedule 5.5, the Investor has
filed all income, franchise, sales and other tax returns, declarations,
statements and reports of every nature, including any schedule or
attachment thereto and including any amendment thereof ("Investor Tax
Return") required to be filed by it accurately reflecting any and all
taxes owing to the United States or any other government or any
subdivision thereof, state or local, or any other taxing authority, and
has paid in full or made or will make adequate provision as part of its
current liabilities in the Financial Statements for the payment of all
taxes with respect to all tax periods ending on or before the Closing
Date (including penalties and interest) for which the Investor has or
may have liability, whether or not shown on any Investor Tax Return.
The Investor has delivered or made available to the Company copies
of, and Schedule 6.5 contains a complete and accurate list of, all
Investor Tax Returns filed by the Investor since December 31, 1999.
Except as disclosed on Schedule 5.5, there is no unassessed tax
deficiency proposed or to the knowledge of the Investor threatened
against the Investor. There are, and will hereafter be, no net tax
deficiencies (including penalties and interest) of any kind assessed
against or relating to the Investor with respect to any of the
taxable periods ending on or before the Closing Date. The Investor
is not currently the beneficiary of any extension of time within which to
file any Tax Return. Except as disclosed on Schedule 6.5, no claim has
ever been made to the Investor by any authority in a jurisdiction where
the Investor does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(b) There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state,
local or foreign tax return of the Investor for any period. The federal
income tax returns of the Investor were last audited by the Internal
Revenue Service for the fiscal year ended December 31, 1984. To
the Investor's knowledge, no state, local or foreign taxing authority
has ever audited any tax return or report filed therewith by the
Investor. Proper amounts have been withheld by the Investor from its
employees, independent contractors and other third parties in compliance
with the tax withholding provisions of all applicable federal, state,
local, foreign and other laws, and timely deposits have been made of all
payroll taxes due. Payment has been timely made by the Investor of all
estimated income taxes and other taxes of any kind due.
The Investor has not filed any consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. The Investor has not made any
payments, is not obligated to make any payments and will not be so
obligated by reason of the transactions contemplated hereby, and is not
a party to any agreement that under certain circumstances could obligate
it to make any payments, that will not be deductible under Section 280G
of the Code. The Investor has disclosed on its federal income tax
returns all positions taken therein that could give rise to an
underpayment of federal income tax to which Section 6662 of the Code
applies. The Investor is not a party to any tax allocation or
sharing agreement. The Investor has never been a member of an
Affiliated Group within the meaning set forth in Section 1504(a) of the
Code.
5.6 Environmental, Health and Safety Matters
Except as disclosed in Schedule 5.6:
(a) The Investor is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. The Investor has no basis to expect, nor
has it received, any actual or threatened order, notice, or other
communication from (i) any governmental authority or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any
Facility, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by the Investor, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(b) There are no pending or, to the knowledge of the
Investor, threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities
or arising under or pursuant to any Environmental Law, with respect to
or affecting any Facility.
(c) The Investor has no knowledge of or any basis to expect,
nor has it received, any citation, directive, inquiry, notice, order,
summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to any
Facility, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by the Investor have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
(d) The Investor has no Environmental, Health, and Safety
Liabilities with respect to any Facility or, to the knowledge of the
Investor, with respect to (i) any Facility, or (ii) any property
geologically or hydrologically adjoining any Facility.
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or to the Investor's knowledge, at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether
movable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of
the Facility or such adjoining property, or incorporated into any
structure therein or thereon. Neither the Investor nor, to the
knowledge of the Investor, any other person, has permitted or conducted,
or is aware of, any Hazardous Activity conducted with respect to any
Facility except in full compliance with all applicable Environmental
Laws.
(f) There has been no Release or, to the knowledge of the
Investor, Threat of Release, of any Hazardous Materials at or from any
Facility, or to the knowledge of the Investor any geologically or
hydrologically adjoining property, whether by the Investor or any other
person.
(g) The Investor has delivered to the Company true and
complete copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Investor pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance, by the Investor or any other person for whose
conduct it is or may be held responsible, with Environmental Laws.
5.7 No Registration Under Securities Act. The Investor
understands that the Preferred Shares to be purchased by it at the
Closing pursuant to the terms of this Agreement, and the Common Stock
into which the Preferred Shares are convertible, will not be registered
under the Securities Act of 1933 (the "Securities Act"), in reliance
upon exemptions contained in the Securities Act or interpretations
thereof, and cannot be offered for sale, sold or otherwise transferred
unless the Preferred Shares being acquired hereunder or the Common Stock
into which the Preferred Shares are convertible subsequently are so
registered or qualify for exemption from registration under the
Securities Act.
5.8 Acquisition for Investment. The Preferred Shares are being
acquired under this Agreement by the Investor in good faith solely for
its own account, for investment and not with a view toward distribution
within the meaning of the Securities Act. The Preferred Shares will not
be offered for sale, sold or otherwise transferred by the Investor
without either registration or exemption from registration under the
Securities Act.
5.9 Accredited Investor. The Investor is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act.
ARTICLE VI
CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING
The obligations of the Investor under Section 1 of this Agreement
are subject to the fulfillment on or before the Closing Date of each of
the following conditions, any of which may be waived in writing by the
Investor:
6.1 Representations and Warranties True. The representations and
warranties of the Company contained in this Agreement shall be true and
correct as of the date hereof and shall be deemed to have been made
again at and as of the time of the Closing and shall then be true and
correct, except as a result of (i) actions taken by any person or entity
as expressly permitted hereby or (ii) any matters which in the aggregate
have not had and will not have a material adverse effect on the
business, properties, assets, results of operations, condition
(financial or otherwise) or prospects of the Corporation or the value
of or title to the Preferred Shares that the Investor has agreed to
purchase pursuant hereto, and at the Closing the Company shall have
delivered to the Investor a certificate to that effect signed by the
President and the Chief Financial Officer of the Company.
6.2 Company's Performance. Each of the obligations of the Company
to be performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed by the Closing Date and at
the Closing the Company shall have delivered to the Investor a
certificate to that effect signed by the President and the Controller
of the Company.
6.3 Opinion of Counsel to the Company. The Investor shall have
been furnished with the opinions of Ober, Kaler, Xxxxxx & Xxxxxxx and
Xxxxxxx & Xxxxxx, counsel to the Company ("Counsel to the Company"),
dated the Closing Date, in the form attached hereto as Exhibit 6.3.
6.4 Absence of Litigation. No order, decree or ruling of any
court shall have been entered and no action or proceeding before any
court or governmental or regulatory authority or body shall have been
instituted or threatened by any governmental or regulatory authority
challenging the transactions contemplated hereby.
6.5 Certificates. The Company shall have furnished the Investor
with such certificates to evidence compliance with the conditions set
forth in this Article IV or otherwise facilitating the consummation of
the transactions contemplated hereby as may be requested by the
Investor.
6.6 Balance Sheet. The Company shall have timely delivered to the
Investor the Balance Sheet as of March 31, 2001.
6.7 Waivers of Claims Against the Company. The Investor shall
have received from each Seller, as that term is defined in the Common
Stock Purchase Agreement of even date herewith, and from each person who
is currently serving as a director or officer of the Company, a waiver,
in form and substance acceptable to the Investor, of any and all
claims against the Company, whether in connection with this Agreement
and the transactions contemplated hereby or otherwise, other than (i)
claims for liabilities reflected in the balance sheet as of March 31,
2001, or incurred in the ordinary course of business subsequent thereto,
and (ii) claims for indemnification.
6.8 Consent of Investor's Lenders. The Investor shall have
received consent to the consummation of the transactions contemplated
in this Agreement, including without limitation the financing thereof,
from its lender, LaSalle Bank National Association (or any replacement
or supplemental financing source).
6.9 Evidence of Non-Competition and Confidentiality. The Investor
shall have received non-disclosure agreements from all managers and
other key employees of the Company.
6.10 No Material Adverse Change. The Company shall have suffered no
material adverse change in its business or condition, financial or
otherwise, from that previously disclosed to the Investor.
6.11 Due Diligence. The Investor shall have completed its due
diligence review to the reasonable satisfaction of both Investor and
its counsel.
6.12 Management Contracts. The Company shall have entered into an
agreement with Xxxxx Xxxxxxx and an agreement with Xxxxxx Xxxxx
substantially in the forms as set forth in Exhibit 6.12 hereto.
6.13 Appointment of Directors. Xxxxxx X. Xxxxxxx and Xxxxxxx
Xxxxxx ("CompuDyne Nominees") shall have been nominated by the Company
to serve as Directors of the Company as of the Closing Date and the
CompuDyne Nominees shall have been elected to serve as Directors of the
Company.
6.14 Amendment to By-laws and Articles of Incorporation. The
Company shall have adopted the amendment to the Company's Articles of
Incorporation and By-laws described in Section 8.11 hereof and Exhibit
8.11 attached hereto, and Messrs. Xxxxxxx and Xxxxxxx shall have
been appointed to the Company's Executive Committee as contemplated in
Section 8.9 hereof.
6.15 Execution of Agreements Regarding Merger. The Sellers,
as defined in the Common Stock Purchase Agreement, shall have executed
an agreement ("Stockholders Agreement") in substantially the form as set
forth in Exhibit 4.15 hereto, by which each such Seller agrees to vote
all of each such Seller's shares of the Company's Capital Stock in favor
of the Merger, as described in the Merger Agreement, as both such terms
are defined in Section 1.2 of the Common Stock Purchase Agreement.
6.16 [Intentionally omitted]
6.17 Consent of Holders of Preferred Stock, Warrants and
Options. The Company shall have obtained all required consents of the
holders of the Company's preferred stock and any warrants and options to
purchase the Company's Common Stock necessary to (i) permit the
amendment to the Articles of Incorporation and By-laws substantially in
the form as set forth at Exhibit 8.11 hereto, (ii) upon the consummation
of the Merger, allow for the modification of the rights of the various
holders of (A) options and warrants to purchase the Company's Common
Stock and (B) the 6.0% Preferred Stock as contemplated in Section 2.6 of
the Merger Agreement.
6.18 Redemption of 6.5% Preferred Stock. The Company shall
have redeemed all of the issued and outstanding shares of its 6.5%
Cumulative Convertible Preferred Stock.
6.19 Conditions to Common Stock Purchase Agreement. Any and all
of the conditions to the obligation of the Investor to consummate the
transactions contemplated in the Common Stock Purchase Agreement shall
have been satisfied.
ARTICLE VII
CONDITIONS OF COMPANY'S OBLIGATIONS AT CLOSING
The obligation of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on
or prior to the Closing Date, of each of the following conditions, each
of which may be waived by the Company as provided herein, except as
otherwise provided by law:
7.1 Representations and Warranties True. The representations and
warranties of the Investor contained in this Agreement shall be true and
correct in all material respects as of the date hereof and shall be
deemed to have been made again at and as of the Closing Date and shall
then be true and correct in all material respects (except as otherwise
contemplated by this Agreement), and at the Closing the Investor shall
have delivered to the Company a certificate to that effect signed by
any two duly authorized officers.
7.2 The Investor's Performance. Each of the obligations of the
Investor to be performed by it on or before the Closing pursuant to the
terms hereof shall have been duly performed and complied with by the
Closing and at the Closing the Investor shall have delivered to the
Company a certificate to that effect signed by any two duly authorized
officers.
7.3 Opinion of the Investor's Counsel. The Company shall have been
furnished with the opinion of Xxxxx Xxxxxx & Xxxxxx, LLP, counsel to the
Investor, dated the Closing Date, in the form attached hereto as Exhibit
7.3.
7.4 Certificates. The Investor shall have furnished the Company
with such certificates of its officers and others to evidence compliance
with the conditions set forth in this Article VII as may be reasonably
requested by the Company.
7.5 Absence of Litigation. No order, decree or ruling of any
court shall have been entered and no action or proceeding before any
court or governmental or regulatory authority or body shall have been
instituted by any governmental or regulatory authority challenging the
consummation of the transactions contemplated hereby.
7.6 Closing on Purchase of Common Stock. The Investor and
Company shall have satisfied all of the conditions necessary to permit
the closing of the purchase by the Investor of the Company's Common
Stock pursuant to the terms of the Common Stock Purchase Agreement
simultaneously with the Closing of the transaction contemplated by this
Agreement.
7.7 Tender Offer. The Investor shall have accepted for
payment the shares of the Company's Common Stock tendered to the
Investor as contemplated in Section 7.14 of the Common Stock Purchase
Agreement and made provision for payment for those shares in accordance
with the requirements applicable to the tender offer.
ARTICLE VIII
COVENANTS
8.1 Access to Properties and Records. Between the date of
this Agreement and the Closing Date, the Company will provide the
Investor and its accountants, counsel and other authorized
representatives reasonable access to any and all premises,
properties, contracts, commitments, books, records and other information
(including, without limitation, tax returns filed and those in
preparation and litigation and correspondence files) of the
Company and will cause its officers and their independent certified
public accountants and counsel to furnish to the Investor and
its authorized representatives any and all financial, technical and
operating data, including monthly financial statements accompanied by the
certification of the Company's Chief Financial Officer, and
other information pertaining to the business of the Company as the
Investor shall from time to time request.
8.2 Furnishing Information. The Company will furnish to the
Investor and the Investor will furnish to the Company, promptly after
the execution and delivery hereof, all the information concerning any
party or the transactions contemplated hereby requested by the Investor
or the Company, as the case may be, for inclusion in any statement or
application made or to be made by the Investor or the Company to any
governmental body in connection with the transactions contemplated by
this Agreement. Following the execution of this Agreement, Investor
shall make all such filings as required by the federal securities laws,
including information as may be required in Item 5 of the Form 8-K
Current Report with the Securities and Exchange Commission. At all
times at or before the Closing, the Company and the Investor will not
issue or make any reports, statements or releases generally to the
employees, customers, suppliers or other persons to whom the
Company sells goods or provides services or with whom the Company
otherwise has significant business relationships with respect to this
Agreement or the transactions contemplated hereby without the consent of
the others.
8.3 Supplements to Schedules. From time to time prior to the
Closing Date, the parties hereto each will promptly supplement or amend
any Schedules delivered pursuant to this Agreement (a) if any matter
hereafter arises which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Schedule or (b) if it becomes necessary to correct any information in
any such Schedule which has become inaccurate. A supplement or
amendment to any such Schedule shall not be effective to modify any
supplemented or amended Schedule for purposes of the indemnification
provisions of Section 11.3, and no such supplement or amendment shall be
considered in determining satisfaction of the conditions set forth in
Article VI or VII of this Agreement.
8.4 Further Assurances. Consistent with the terms and
conditions hereof, each party hereto agrees to use his, her or its best
efforts to execute and deliver such instruments and take, or cause to be
taken, such other action as is necessary or appropriate in order to
satisfy the conditions set forth in Articles VI and VII hereof and to
carry out this Agreement and the transactions contemplated hereby as
promptly as practicable and to obtain in a timely manner all waivers,
consents and approvals of, and to make all filings with and
notifications to, any third parties as are necessary in order to
consummate the transactions contemplated by this Agreement.
8.5 Conduct of Business of the Company Prior to the Effective
Date. The Company agrees that from the date hereof until the Closing
Date and except as otherwise consented to or approved by an authorized
officer of the Investor in writing or as required by this Agreement:
(a) The business, operations, activities and practices of the
Company shall be conducted only in the ordinary course and consistent
with past practice and prudent business practice and in full compliance
with applicable law;
(b) No change shall be made in the charter or by-laws of the
Company, except as required for the issuance of the Preferred Shares;
(c) No change shall be made in the number of shares of
authorized or issued capital stock of the Company, with the exception
of the issuance of the Preferred Shares, nor shall any option, warrant,
call, right, commitment or agreement of any character be granted or
made by the Company relating to its authorized or issued capital stock;
nor shall the Company issue, grant or sell any securities or obligations
convertible into shares of capital stock of the Company;
(d) Neither the Company nor any of its officers, directors or
agents will, directly or indirectly, through any representative or
otherwise, solicit or entertain offers from, negotiate with or in any
manner encourage, discuss, accept, or consider any proposal of any other
person relating to the acquisition of the Company's Common Stock,
assets or business, in whole or in part, whether directly or indirectly,
through purchase, merger, consolidation, or otherwise (other than sales
of inventory in the normal course)(any such transaction referred
to hereinafter as an "Acquisition"); provided however, that the
Company's Board of Directors may, to the extent reasonably necessary in
the exercise of its fiduciary duties, entertain bona fide offers
relating to an Acquisition (where bona fide offers include only offers
of Acquisition for a stated amount with respect to which the
potential acquirer has demonstrated financial capacity to consummate the
offer). The Company will immediately notify the Investor regarding any
contact between the Company or its representatives and any other person
regarding any such offer or proposal or any related inquiry;
(e) the Company will not (i) incur any indebtedness for
borrowed money other than the current line of credit with Civic Bank;
(ii) enter into any agreement requiring the maintenance of a specified
net worth other than under the current line of credit with Civic
Bank; (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other individual, firm or corporation; (iv) make any
loans, advances or capital contributions to, or investments in, any
other individual, firm or corporation; (v) mortgage, pledge or
otherwise subject to any lien any of its assets or property; (vi) make
any tax election or settle or compromise any federal, state, local or
foreign income tax liability; (vii) pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business, consistent
with past practices, of liabilities reflected or reserved against in the
March 31, 2001 balance sheet or incurred in the ordinary course of
business consistent with past practices since the date thereof, (viii)
cancel, compromise, waive or release any right or claim outside the
ordinary course of business or involving in the aggregate more than
$25,000, (ix) increase the rate or terms (including, without
limitation, any acceleration of the right to receive payment) of
compensation payable or to become payable by the Company to, or make
any other change in the terms of employment of, or make any loan to, or
enter into any other transaction outside the ordinary course of business
with, any of its directors, officers or employees, or (x) declare or pay
any dividend or declare payment or make any other distribution (whether
in cash, stock, property or any combination thereof) in respect of
the Common Stock, or purchase, acquire or redeem any shares of the
Common Stock;
(f) the Company will use its best efforts to preserve its
business organization intact, to keep available to itself the present
services of its employees, and to preserve for itself the goodwill of
its suppliers, customers and others with whom business relationships
exist;
(g) the Company will not make or amend or cancel any
contracts of the nature required to be disclosed in writing pursuant to
Article IV hereof other than in the ordinary course of business,
consistent with past practice;
(h) the Company will notify the Investor as soon as
practicable after the receipt of any notice that it has not performed
all the current and past obligations involving $25,000 or more to be
performed by it under any contract, agreement, commitment or instrument
to which it is a party;
(i) the Company will not take, agree to take, or knowingly
permit to be taken any action or do or knowingly permit to be done
anything in the conduct of its business, or otherwise, which would be
contrary to or in breach of any of the terms or provisions of this
Agreement, or (except as otherwise contemplated by this Agreement
including by this Section 8.5) which would cause any of the
representations or warranties of the Company contained herein to be or
become untrue or which would require any amendment or supplement to any
Schedule; and
8.6 Consents. Each of the parties will use his, her or its best
efforts to obtain all permits, approvals, authorizations and consents
of all governmental authorities and other third parties necessary or
desirable (a) for the consummation of the transactions contemplated
hereby and (b) for the continuing conduct after the Closing of the
business of the Company as conducted by such entities in the ordinary
course of business and consistent with past practices.
8.7 Filings. As promptly as practicable after the date
hereof, the Investor and the Company will file all documents and
notifications with governmental or regulatory bodies which in the
opinion of the Investor are necessary or appropriate for the
consummation of the transactions contemplated hereby.
8.8 Election of Directors. The Company shall nominate Xxxxxx X.
Xxxxxxx and Xxxxxxx Xxxxxx to serve as Directors of the Company as of
the Closing Date ("CompuDyne Nominees").
8.9 Committee Appointments. The Company shall form an Executive
Committee to continue for the shorter of eighteen months or until such
time as the Investor waives its rights under the Stockholders Agreements
contemplated in Section 6.15 hereof and will appoint Xxxxx X. Xxxxxxx
and Xxxxxx X. Xxxxxxx as the only members of such committee. The
Company shall further authorize the Executive Committee to create an
Operations Consultant position to review and monitor the Company's
operations, the specific duties of which are to be defined by the
Executive Committee. The creation of, and delegation of duties to, the
Executive Committee shall be as set forth in an amendment to the
Company's By-laws in form and substance as set forth in Exhibit 8.9
attached hereto.
8.10 Cooperation. The Company and the Investor shall take all
commercially reasonable actions in a timely manner necessary or
convenient in order to effect the satisfaction of the conditions to the
obligations of the Investor contained in Article VI hereof and the
conditions to the obligations of the Company contained in Article VII
hereof.
8.11 Amendment of Articles of Incorporation and Bylaws. The
Company agrees to take any and all steps necessary to cause the
Company's Articles of Incorporation and Bylaws to be amended such that,
as amended, the Articles of Incorporation and Bylaws will be
substantially in the form attached hereto as Exhibits 8.11 and 8.9,
respectively.
8.12 Board Membership. For so long as the Investor holds any
Preferred Stock of the Company, the Investor shall be entitled to one
seat on the Company's Board of Directors which seat shall be filled at
the Investor's discretion. For so long as the Investor occupies seats
on the Company's Board of Directors pursuant to Section 7.8 of the
Common Stock Purchase Agreement of even date herewith, nothing in this
Section 8.12 shall give the Investor the right to an additional seat on
the Company's Board of Directors.
ARTICLE IX
CONTINUING COVENANTS
A. Affirmative Covenants.
The Company covenants and agrees that so long as Investor owns any
of the Preferred Shares or so long as the Investor owns 625,000 shares
of the issued and outstanding Common Stock, the Company shall comply
with each of the following actions:
9.1 Payment of Dividends. The Company shall make or cause to be
made all payments of dividends as they shall become due under the terms
of the Preferred Shares as set forth in the Company's Second Amended and
Restated Articles of Incorporation.
9.2 Reporting Requirements. The Company shall deliver or cause to
be delivered to the Investor (i) within ninety (90) days of the end of
the Company's fiscal year and each subsequent year thereafter the
Company's consolidated financial statements including a balance sheet as
of the close of such fiscal year and statements of income, shareholders'
equity and cash flow for the year then ended, prepared in conformity
with GAAP, applied on a basis consistent with that of the preceding year
or containing disclosure of the effect on financial position or results
of operations of any change in the application of accounting principles
during the year, and reviewed by a firm of independent certified public
accountants selected by the Company and satisfactory to the Investor,
(ii) within thirty (30) days after the filing thereof, execution copies
of the Company's federal and state tax returns; (iii) within thirty (30)
days after the end of each month, internally prepared financial
statements for the Company, including a balance sheet as of the end of
each such month and statements of income for such month and for the
portion of the Company's fiscal year to date then ended, prepared in
conformity with GAAP, applied on a basis consistent with that of the
preceding period, and certified by the chief financial officer as being
accurate and fairly presenting the financial position of the Company,
(iv) within ten (10) days of the Company's receipt thereof,
copies of any and all auditor's management reports, (v) promptly upon
the preparation thereof by the Company, copies of any business
projections or business plans relating to the Company and (vi)
promptly upon the Investor's written request, such other information
about the financial condition and operations of the Company as the
Investor may reasonably request from time to time.
9.3 Insurance and Endorsements. The Company shall keep its
properties insured against fire and other hazards (so-called "All Risk"
coverage), in amounts and with companies satisfactory to the Investor to
the same extent and covering such risks as is customary in the same or
a similar business; maintain public liability coverage, including
without limitation, products liability coverage, against claims for
personal injuries or death; and maintain all worker's compensation,
employment or similar insurance as may be required by applicable law.
All insurance shall contain such terms, be in such form, and be for such
periods reasonably satisfactory to the Investor, and be written by such
carriers duly licensed by the appropriate states where any Collateral is
located and reasonably satisfactory to the Investor.
9.4 Maintain Rights and Facilities. The Company shall maintain and
preserve its corporate existence and all its rights, franchises and
qualifications adequate for the conduct of its business and the
ownership of its properties, comply with all valid and applicable
statutes, rules and regulations, and maintain its properties in good
repair, working order and operating condition.
9.5 Tax and Other Liens. The Company shall comply with all
statutes and government regulations, licenses and permits, including
the Employee Retirement Security Act of 1974, all as may be amended
from time to time, and pay all taxes, assessments, governmental
charges or levies, or claims for labor, supplies, rent and other
obligations made against it or its property which, if unpaid, might
become a lien or charge against the Company or its properties, except
liabilities being contested in good faith and against which, if
requested by the Investor, the Company shall set up reserves in amounts
and in form satisfactory to the Investor. The Company shall give
immediate notice to the Investor of any charge or lien levied
or filed against the Company or its properties.
9.6 Place of Business. The Company shall maintain its chief
executive office at 00000 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx, 00000,
unless the Company shall have given the Investor thirty (30) days prior
written notice of any change in such places of business. The Company
shall keep its properties in working order and condition, ordinary wear
and tear excepted, and from time to time make all prudent, needful or
proper repairs, replacements, extensions, additional betterments and
improvements thereto, so that the business carried on by the Company
may be efficiently conducted at all times in accordance with sound
business management.
9.7 Books and Records; Inspections. The Company shall keep proper,
complete and accurate books of record and account. The Investor shall
have the right to visit and inspect the properties, books and records of
the Company (and to make extra copies and take extracts therefrom), to
discuss the Company's affairs, finances and accounts with, and be
advised of same by, its directors, officers, employees, consultants and
independent accountants at such reasonable times and intervals, subject
to reasonable prior notice to the Company, as the Investor may desire.
9.8 Litigation. The Company shall promptly advise the Investor of
the commencement or threat of any litigation, including arbitration
proceedings and any proceedings before any governmental agency, which
is instituted against the Company and is reasonably likely to have a
materially adverse effect upon the condition, financial, operating
or otherwise, of the Company.
9.9 Notice of Certain Events. The Company shall give prompt
written notice to the Investor of the occurrence of any of the following:
(a) the Company's commencement or consent in any manner to
any proceeding or arrangement for its liquidation in whole or in part or
to any other proceeding or arrangement whereby any of its assets are
subject generally to the payment of its liabilities or whereby any
receiver, trustee, liquidator or the like is appointed for it or any
substantial part of its assets (including without limitation, the filing
by the Company of a petition for appointment as a debtor-in- possession
under Title 11 of the United States Bankruptcy Code);
(b) the Company's commencement of any other procedure for the
relief of financially distressed or insolvent debtors, or such procedure
having been commenced against it, whether voluntarily or involuntarily;
(c) the Company's commencement of any procedure for its
dissolution, or a procedure therefore having been commenced against it;
(d) if (but without in any way constituting the Investor's
acquiescence to the same): (i) the Company changes its name or identity
in any manner, or (ii) any of the books and records of the Company are
transferred to a location other than as set forth in the first paragraph
of this Agreement;
(e) any event known to the Company causing material loss or
depreciation in value of the Intellectual Property or any other accounts
and the amount of such loss or depreciation;
(f) any circumstance or event known to the Company by virtue
of which or in connection with which the Company has incurred or may
incur any liability, expense or responsibility, except in the ordinary
course of business, under any Environmental Law, the Employee Retirement
Security Act of 1974, or any tax or revenue law or regulation, including
any request for information from any federal, state or local
governmental authority, instrumentality or agency that indicates such
entity is investigating the Company's potential responsibility for a
violation of such laws or regulations;
(g) any other matter known to the Company which has resulted
or is reasonably likely to result in a material adverse change in the
financial condition or operations of the Company;
(h) any action, suit or claim pending or which the Company
reasonably expects to be asserted against the Company, before any court
or administrative agency; and
(i) any changes in the accounting procedures or policies of
the Company or the incurrence of any special charges.
B. Negative Covenants.
The Company covenants and agrees that from the date hereof until
the earlier of 18 months here from or the waiver by the Investor of its
rights under the Stockholders Agreements, the Company shall not:
9.11 Encumbrances. Incur or permit to exist any lien,
mortgage, charge or other encumbrance against any of the property of the
Company, whether now owned or hereafter acquired, except: (a) liens
required or expressly permitted by this Agreement; or (b) pledges or
deposits in connection with or to secure worker's compensation,
unemployment or liability insurance.
9.12 Limitation on Indebtedness. Create, incur or guarantee
any indebtedness or obligation for borrowed money (including without
limitation, any reimbursement obligations for any letter of credit
issued by any financial institution) from, or issue or sell any of its
obligations to any lender other than the Investor, except for trade
debt incurred in the ordinary course of business.
9.13 Contingent Liabilities. Assume, guarantee, endorse or
otherwise become liable upon the obligations of any person, firm or
corporation, or enter into any purchase or option agreement or other
arrangement having substantially the same effect as such a guarantee,
except (i) by the endorsement of negotiable Instruments for deposit or
collection or similar transactions in the ordinary course of business,
and (ii) in connection with bid, payment, and performance bonds obtained
in the ordinary course of business.
9.14 Consolidation, Merger or Corporate Changes. (a) Merge
into or consolidate with or into any corporation or other entity, (b)
sell, lease, transfer or otherwise dispose of any of its properties,
including without limitation Intellectual Property and source codes,
which are essential to the conduct of its business or operations, (c)
make any material change in its corporate structure or identity,
including any amendment to the Bylaws of the Company, without the
Investor's consent or (d) enter into any agreement to do any of the
foregoing.
9.15 Loans, Advances, Investments. Make or permit to exist any
loans or advances to, or purchase any stock, other securities or
evidences of indebtedness of, or make or permit to exist any investment
(including without limitation, the acquisition of stock of a
corporation) or acquire any assets or any other interest whatsoever in,
any shareholder, affiliate or other related entity (including without
limitation, any partnership, joint venture, joint stock corporation or
parent or subsidiary corporation) or any other person or entity.
9.16 Issuance or Acquisition of Stock of the Company: Dividends.
Without the consent of the Investor, which consent can be withheld for
any reason or no reason at the Investor's discretion, issue any capital
stock of the Company (including any issuance in connection with a
stock split or pursuant to any stock option or warrant, but excluding
any capital stock issued upon the exercise of rights under the Company's
outstanding preferred stock, warrants and stock options described in
Section 4.2 and Schedule 4.2, or required to be issued under the
Company's employee stock ownership plan); purchase, acquire, redeem or
retire (except as required under the terms of the Company's outstanding
preferred stock described in Section 4.2 and the Company's employee
stock ownership plan), or make any commitment to purchase, acquire,
redeem or retire, any of the capital stock of the Company, whether now
or hereafter outstanding; purchase or otherwise acquire the stock or
assets of any other company; declare or pay any dividend, issue any
stock options or warrants, declare any splits or make any distribution
to any of its shareholders, whether in the form of cash or through the
issuance of stock, except for scheduled dividends on outstanding shares
of Preferred Stock.
9.17 Prohibited Transfers. Transfer, in any manner, either
directly or indirectly, any cash, property, or other assets to any
parent or any of its affiliates or subsidiaries, other than sales made
in the ordinary course of business and for fair consideration on terms
no less favorable than if such sale had been an arms-length transaction
between the Company or such subsidiary or affiliate and an unaffiliated
entity.
9.18 Loans to Officers, Directors and/or Shareholders. Make
any loans or non-salary advances or make any transfers, in any manner,
of any cash, property or other assets to or on behalf of any of its
officers, directors or shareholders.
9.19 Contracts. Enter into any contract that individually
reflects consideration in excess of Two Million Five Hundred Thousand
Dollars ($2,500,000) without obtaining the consent of the Investor,
which consent will not be unreasonably withheld.
9.20 Third Party Financing. Without the consent of the
Investor, which consent can be withheld for any reason or no reason at
the Investor's discretion, enter into any agreement to obtain financing
from any party.
9.21 Capital Expenditures. Without the consent of the
Investor, which consent can be withheld for any reason or no reason at
the Investor's discretion, make any capital expenditures individually in
excess of Twenty Five Thousand Dollars ($25,000) or in the aggregate
during any calendar year in excess of Seventy Five Thousand Dollars
($75,000).
9.22 Nature of Business. Without the consent of the Investor,
which consent can be withheld for any reason or no reason at the
Investor's discretion, make any material change to the nature of the
Company's business or the means of operating the Company's business.
ARTICLE X
TERMINATION
10.1 Termination of the Agreement. This Agreement may be
terminated at any time prior to the Closing Date:
(a) by the mutual consent of the Investor and the
Company; or
(b) by the Investor if any of the conditions set forth
in Article IV hereof shall have become impossible to fulfill for reasons
beyond the control of the Investor, and shall not have been waived by
the Investor; or
(c) by the Company, if any of the conditions set forth
in Article V hereof shall have become impossible to fulfill for reasons
beyond the control of the Company, and shall not have been waived by the
Company; or
(d) by the Investor, if there shall have been a material
misrepresentation or breach of warranty in the representations and
warranties of the Company set forth in this Agreement; or
(e) by the Investor, if a material breach of any
provision of this Agreement has been committed by the Company and shall
not have been waived by the Investor; or
(f) by the Company, if a material breach of any
provision of this Agreement has been committed by the Investor and shall
not have been waived by the Company; or
(g) by the Investor, if the Closing has not occurred on
or before May 31, 2001, or such later date as the Company and the
Investor may agree upon, unless the Investor is in material breach of
this Agreement; or
(h) by the Company, if the Closing has not occurred on
or before May 31, 2001 or such later date as the Company and the
Investor may agree upon, unless the Company is in material breach of
this Agreement.
10.2 Effect of Termination. Each party's right of termination
under Section 10.1 is in addition to any other rights it may have under
this Agreement or otherwise, and the exercise of such right of
termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 10.1, all obligations of the parties
under this Agreement will terminate, provided, however, that if this
Agreement is terminated because of a breach of this Agreement by the
non-terminating party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied
as a result of the other party's failure to comply with its obligations
under this Agreement, the terminating party's right to pursue all legal
remedies will survive such termination unimpaired.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise indicated in this
Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
11.2 Survival of Representations and Warranties. The
respective representations and warranties, obligations, covenants and
agreements of the parties contained herein or in any schedule or
certificate delivered pursuant hereto shall survive the Closing and
continue in full force and effect, regardless of any knowledge or reason
to know which any party may have had with respect to any
misrepresentation or breach of warranty or covenant at the time of
the Closing. The representations and warranties of the Investor shall
expire on the date two years after the Closing Date. The representations
and warranties of the Company shall expire on the date two years after
the Closing Date, except that (a) the representations and warranties
contained in Section 2.7 shall expire with the applicability of the
respective statutes of limitations (as extended by agreement or
otherwise), and (b) the representations and warranties contained in
Section 2.8 shall not expire.
11.3 Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Investor from and against any and all loss, costs, damages and
expenses (including court costs and attorneys' fees and expenses) which
the Investor may sustain resulting from, arising out of, relating to
or caused by (i) any breach by the Company of any covenant or other
agreement of the Company contained herein and to be performed on or
before the Closing, or (ii) any breach of any representation or warranty
made by the Company herein or in any certificate delivered pursuant to
this Agreement For purposes of this Section 11.3(a), the Investor's
loss, costs, damages and expenses (A) shall be 15.2% of the
aggregate amount of the loss, costs, damages and expenses resulting from
the Company's breach, (B) shall be deemed to be zero except to the
extent, if any, that the cumulative amount of the loss, costs, damages
and expenses resulting from the Company's breaches exceed $500,000, and
(C) shall be deemed to be zero to the extent that the Investor has been
indemnified with respect to the same loss, cost, damage or expense
pursuant to the Common Stock Purchase Agreement.
(b) The Investor agrees to indemnify and hold harmless
the Company from and against any and all loss, costs, damages and
expenses (including court costs and attorneys' fees and expenses) which
the Company may sustain resulting from, arising out of, relating to
or caused by (i) any breach by the Investor of any covenant or other
agreement of the Investor contained herein or (ii) any breach of any
representation or warranty made by the Investor herein or in any
certificate delivered pursuant to this Agreement.
No party shall be deemed to waive any claim for
indemnification hereunder by reason of its knowledge or reason to know,
prior to the occurrence of the Closing, of any such non-compliance,
non-performance, inaccuracy or breach.
(c) If an indemnified party under this Section 11.3
receives notice of the assertion by a person who is not a party to this
Agreement of any claim or of the commencement by any such person of any
action or proceeding which may give rise to an obligation of another
party to this Agreement to indemnify such indemnified party (a "Third
Party Claim"), such indemnified party shall give such other party
reasonably prompt written notice thereof but in any event not later than
60 days after becoming aware of such Third Party Claim. Such notice
shall describe the Third Party Claim in reasonable detail, and shall
indicate the estimated amount, if practicable, of the indemnifiable
loss that has been or may be sustained by such indemnified party. Such
other party may elect to assume the defense of any Third Party Claim, at
such indemnifying party's own expense and by such indemnifying party's
own counsel and such indemnified party shall cooperate in good faith
in such defense and such indemnifying party shall fully inform and
consult with such indemnified party. If such indemnifying party has
assumed the defense of a Third Party Claim, the indemnified party
shall agree to any settlement of such Third Party Claim recommended
by the indemnifying party which settlement by its terms discharges the
indemnified party from any liability with respect to such Third Party
Claim.
(d) Notwithstanding any other provisions herein to the
contrary, in the event that any charge, complaint, claim, demand, or
notice is made against or served upon the Company which if true would
constitute a breach of the representation made in Section 4.11(b), (i)
the Company shall be responsible for any and all costs of defending
against such charge, complaint, claim, demand, or notice (including
court costs and attorneys' fees and expenses) in the event that a
judgment or other finding of fault is entered against the Company by a
court, arbitrator or other tribunal or the matter is settled without the
Investor's prior written consent; and (ii) the Investor shall be
responsible for any and all costs of defending against such charge,
complaint, claim, demand, or notice (including court costs and
attorneys' fees and expenses) in the event that a judgment or other
finding of fault is not entered against the Company by a court,
arbitrator or other tribunal or the parties settle the matter with the
prior written consent of the Investor.
(e) The indemnities provided for in this Section 11.3
shall expire eighteen months after the Closing Date (unless an
indemnification obligation hereunder arises from a breach of a
representation or warranty contained herein, in which case such
indemnification obligation shall expire concurrently with the expiration
of the survival period of such representation or warranty). No claim
for indemnification hereunder shall be effective unless it is asserted
in writing prior to the expiration of the related indemnity.
(f) The indemnity provisions in this Agreement, the
Common Stock Purchase Agreement of even date herewith and the Merger
Agreement are intended by the parties to provide a single, integrated
source of indemnity. Accordingly, the provisions in subsection (a)
hereof and in Sections 11.3(b) and 11.3(c) of the Common Stock
Purchase Agreement with respect to the amount of cumulative losses,
costs, damages and expenses, being deemed to be zero except to the
extent that they exceed $500,000 on a cumulative basis, and the
definition of "Unindemnified Common Stock Purchase Agreement Loss"
contained in the Merger Agreement, shall be applied by taking into
account the losses, cost, damages, and expense, and the $500,000
threshold only once, such that (i) the Investor may seek
indemnification in accordance with each such agreement with respect
to any such losses in a cumulative amount in excess of $500,000
regardless of whether it seeks such indemnification pursuant to the
provisions of this Agreement or the Preferred Stock Purchase Agreement,
or through a reduction in the consideration payable by the Investor
pursuant to the Merger Agreement, or any combination thereof, and (ii)
the Investor may recover only once for any such losses.
(g) In determining whether or not the Company shall have
breached a representation or warranty made herein for the purpose solely
of determining all losses, costs, damages and expenses for which the
Investor shall be entitled to indemnification pursuant to this Section
11.3, all representations and warranties shall be deemed to have been
made without respect to the materiality thereof and all representations
and warranties set forth in Section 4.7, 4.11(d), 4.11(e) and 4.12 shall
be deemed to have been made without respect to the knowledge of the
Company.
11.4 Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
11.5 Notices. All notices, consents, waivers, and other
communications required or permitted by this Agreement shall be in
writing and shall be deemed given to a party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight
courier service (costs prepaid); (b) sent by facsimile with confirmation
of transmission by the transmitting equipment; or (c) received or
rejected by the addressee, if sent by certified mail, return receipt
requested; in each case to the following addresses or facsimile numbers
and marked to the attention of the person (by name or title) designated
below (or to such other address, facsimile number or person as a party
may designate by notice to the other parties):
If to the Investor, to:
CompuDyne Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: President
Telephone: 000-000-0000
Telecopy: 000-000-0000
Copy to:
Xxxxx Xxxxxx & Xxxxxx, LLP
185 Asylum Street
CityPlace - 00xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esquire
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Company, to:
Tiburon , Inc.
00000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000)000-0000
Telecopy: (000)000-0000
Copy to:
Ober, Kaler, Xxxxxx & Xxxxxxx
Xxxxx Xxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telephone: (000)000-0000
Telecopy: (000)000-0000
or such other address as shall be furnished in writing by any party
to each of the other parties hereto.
11.6 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party (including by way of a change
in control of any such party) without the prior written consent of the
others, except that the Investor may assign all its rights and interests
but not its obligations hereunder to a wholly-owned subsidiary of the
Investor, provided that such subsidiary agrees in writing to be bound by
all of the terms, conditions and provisions contained herein. No
assignment of this Agreement or any rights hereunder shall relieve any
party hereto of its obligations hereunder, all of which shall remain
recourse to the assigning party.
11.7 Complete Agreement. This Agreement, including the
schedules, exhibits and other writings referred to herein or delivered
pursuant hereto, contains the entire understanding of the parties with
respect to this Agreement and the transactions contemplated hereby and
supersedes all prior arrangements or understandings with respect
thereto. There are no restrictions, agreements, promises, warranties,
covenants or undertakings other than those expressly set forth herein.
11.8 Amendments and Waivers. The parties hereto may, by
written agreement, modify, amend or supplement any term or provision of
this Agreement. Any written instrument or agreement referred to in this
paragraph shall be validly and sufficiently authorized for the purposes
of this Agreement if signed on behalf of the Investor by a person
authorized to sign such amendment or waiver and on behalf of the Company
if signed on behalf of the Company by a person authorized to sign such
amendment or waiver.
11.9 Time of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the
essence.
11.10 Counterparts. This Agreement and the related agreements
referred to herein may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.11 Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or benefits or
remedies under or by reason of this Agreement on any persons other than
the parties to it and their respective successors and assigns; nor is
anything in this Agreement intended to modify or discharge the
obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any other third persons any
right of subrogation or action against any party to this Agreement.
11.12 Accounting Terms. All accounting terms used herein which
are not expressly defined in this Agreement shall have the meanings
given to them in accordance with GAAP.
11.13 Governing Law. This Agreement shall be governed by the
laws of the Commonwealth of Virginia (regardless of the laws that might
be applicable under principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect
and performance.
11.14 Knowledge Qualifiers. Knowledge of the Company or the
Investor shall be deemed, for purposes of Articles IV and V of this
Agreement, to include the knowledge (including matters such person, in
the exercise of his responsibilities, had a duty to inquire about) of
officers, directors, and other representatives of the Company set forth
on Schedule 11.14 hereof , and of the officers and directors of Investor
on the date hereof and on any other date, including the Closing Date, on
which a representation or warranty is given hereunder.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have executed this 7.5% Cumulative
Convertible Preferred Stock Purchase Agreement as of the date first
above written.
COMPUDYNE CORPORATION TIBURON, INC.
By:__________________ By:___________________
Title:_______________ Title:________________
