AGREEMENT AND PLAN OF MERGER
AMONG
AMERICAN ELECTROMEDICS CORP.
A DELAWARE CORPORATION,
DDS ACQUISITION CORPORATION
A DELAWARE CORPORATION,
AND
DYNAMIC DENTAL SYSTEMS, INC.,
A DELAWARE CORPORATION,
XXXXX X. XXXXXX,
XXXXXXX X. XXXXXX, XX.
AND
XXXXX X. XXXXXXXXX
TABLE OF CONTENTS
PAGE
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ARTICLE I
ADOPTION OF AGREEMENT AND PLAN OF MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . . 1
1.2 Effective Date of the Merger . . . . . . . . . 2
1.3 Surviving Corporation; Articles of
Incorporation of Surviving Corporation . . . . . . 2
1.4 Merger Consideration; Conversion of DDS Common
Stock; Cancellation of Acquisition Corp. Common
Stock. . . . . . . . . . . . . . . . . . . . . . . 2
1.5 No Fractional Shares . . . . . . . . . . . . . 3
ARTICLE II
CLOSING
2.1 Closing Date . . . . . . . . . . . . . . . . . 3
2.2 Deliveries at the Closing . . . . . . . . . . 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND DDS
3.1 Due Incorporation . . . . . . . . . . . . . . 4
3.2 Due Approval And Authorization . . . . . . . . 4
3.3 Non-Contravention; Consents and Approvals . . 5
3.4 Capitalization . . . . . . . . . . . . . . . . 5
3.5 Financial Statements; Undisclosed Liabilities;
Other Documents . . . . . . . . . . . . . . . 6
3.6 No Material Adverse Effects or Changes . . . . 6
3.7 Tax Returns and Audits . . . . . . . . . . . . 7
3.8 Litigation . . . . . . . . . . . . . . . . . . 8
3.9 Compliance with Applicable Laws . . . . . . . 9
3.10 Contracts . . . . . . . . . . . . . . . . . . 9
3.11 Property . . . . . . . . . . . . . . . . . . 10
3.12 Product Warranty Claims . . . . . . . . . . . 10
3.13 Employees . . . . . . . . . . . . . . . . . . 11
3.14 Insurance . . . . . . . . . . . . . . . . . . 11
3.15 Inventories . . . . . . . . . . . . . . . . . 12
3.16 Accounts Receivable. . . . . . . . . . . . . 12
3.17 Intellectual Property . . . . . . . . . . . . 12
3.18 Environmental Matters . . . . . . . . . . . . 12
3.19 Books and Records . . . . . . . . . . . . . . 13
3.20 Status of the Stockholders . . . . . . . . . 13
3.21 Waiver of Appraisal Rights . . . . . . . . . 13
3.22 Related Party Transactions . . . . . . . . . 13
3.23 Fees of Brokers, Consultants and
Financial Advisors . . . . . . . . . . . . . 14
3.24 General Representation and Warranty . . . . . 14
3.25 Investment Due Diligence. . . . . . . . . . . 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUISITION CORP. AND AEC
4.1 Due Incorporation . . . . . . . . . . . . . . 14
4.2 Due Authorization . . . . . . . . . . . . . . 14
4.3 Non-Contravention; Consents and Approvals . . 15
4.4 Capitalization . . . . . . . . . . . . . . . . 16
4.5 Financial Statements; Undisclosed Liabilities;
Other Documents . . . . . . . . . . . . . . . 16
4.6 Securities Law Filings . . . . . . . . . . . . 17
4.7 No Material Adverse Effects or Changes . . . . 17
4.8 Insurance. . . . . . . . . . . . . . . . . . . 17
4.9 Labor Matters . . . . . . . . . . . . . . . . 17
4.10 Tax Returns and Audits. . . . . . . . . . . . 18
4.11 Litigation . . . . . . . . . . . . . . . . . 19
4.12 Compliance with Applicable Laws . . . . . . . 19
4.13 Contracts; No Defaults . . . . . . . . . . . 19
4.14 Environmental Matters . . . . . . . . . . . . 19
4.15 Fees of Brokers, Finders and
Investment Bankers . . . . . . . . . . . . . 20
4.16 General Representation and Warranty . . . . . 20
4.17 Investment Due Diligence. . . . . . . . . . . 20
ARTICLE V
COVENANTS
5.1 Implementing Agreement . . . . . . . . . . . . 20
5.2 Access to Information and Facilities;
Confidentiality . . . . . . . . . . . . . . . 20
5.3 Preservation of Business . . . . . . . . . . . 21
5.4 Consents and Approvals . . . . . . . . . . . . 23
5.5 Periodic Reports . . . . . . . . . . . . . . . 23
5.6 Publicity . . . . . . . . . . . . . . . . . . 24
5.7 No Negotiation. . . . . . . . . . . . . . . . 24
5.8 Blue Sky Approvals . . . . . . . . . . . . . . 24
5.9 Registration Rights . . . . . . . . . . . . . 24
5.10 Removal of Guaranties . . . . . . . . . . . . 26
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF ACQUISITION CORP. AND AEC
6.1 Warranties True as of Closing Date . . . . . . 27
6.2 Compliance With Agreements and Covenants . . . 27
6.3 Stockholders' Certificate . . . . . . . . . . 27
6.4 Secretary's Certificate . . . . . . . . . . . 27
6.5 Good Standing Certificates . . . . . . . . . . 27
6.6 Employment Agreement . . . . . . . . . . . . . 28
6.7 Escrow Agreement . . . . . . . . . . . . . . . 28
6.8 Opinion of Counsel . . . . . . . . . . . . . . 28
6.9 Approval of Merger . . . . . . . . . . . . . . 28
6.10 Consents and Approvals . . . . . . . . . . . 28
6.11 Resignations . . . . . . . . . . . . . . . . 28
6.12 Actions or Proceedings . . . . . . . . . . . 28
6.13 Other Closing Documents . . . . . . . . . . . 28
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS
7.1 Warranties True as of Closing Date . . . . . . 29
7.2 Compliance with Agreements and Covenants . . . 29
7.3 AEC Certificate . . . . . . . . . . . . . . . 29
7.4 Opinion of Counsel . . . . . . . . . . . . . . 29
7.5 Consents and Approvals . . . . . . . . . . . . 29
7.6 Actions or Proceedings . . . . . . . . . . . . 29
7.7 Funds Delivered at Closing and Other Closing
Documents. . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII
TERMINATION
8.1 Termination . . . . . . . . . . . . . . . . . 30
8.2 Effect of Termination and Abandonment . . . . 31
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Stockholders . . . . . 31
9.2 Indemnification by AEC . . . . . . . . . . . . 32
9.3 Procedure . . . . . . . . . . . . . . . . . . 33
9.4 Remedies . . . . . . . . . . . . . . . . . . . 33
ARTICLE X
MISCELLANEOUS
10.1 Expenses . . . . . . . . . . . . . . . . . . 34
10.2 Amendment . . . . . . . . . . . . . . . . . . 34
10.3 Notices . . . . . . . . . . . . . . . . . . . 34
10.4 Waivers . . . . . . . . . . . . . . . . . . . 35
10.5 Interpretation . . . . . . . . . . . . . . . 35
10.6 Applicable Law . . . . . . . . . . . . . . . 35
10.7 Assignment . . . . . . . . . . . . . . . . . 35
10.8 No Third Party Beneficiaries . . . . . . . . 35
10.9 Enforcement of the Agreement. . . . . . . . . 36
10.10 Severability . . . . . . . . . . . . . . . . 36
10.11 Remedies Cumulative . . . . . . . . . . . . 36
10.12 Entire Understanding . . . . . . . . . . . . 36
10.13 Waiver of Jury Trial . . . . . . . . . . . . 36
10.15 Counterparts . . . . . . . . . . . . . . . . 36
SCHEDULES
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NUMBER DESCRIPTION.
3.1 DDS Due Incorporation.
3.3 DDS Non-Contravention; Consents and Approvals.
3.4 DDS Capitalization.
3.6 DDS Material Changes.
3.7 DDS Tax Powers of Attorney.
3.9 DDS Permits.
3.10 DDS Contracts and Largest Customers.
3.11 DDS Personal property valued over $5,000.
3.12 Product Warranty Claims.
3.13 DDS Employees.
3.14 DDS Insurance.
3.16 DDS Accounts Receivable.
3.17 DDS Intellectual Property.
3.19 DDS Books and Records.
3.22 DDS Related Party Transactions.
4.4 AEC Capitalization.
4.7 Changes to AEC since January 31, 1998.
4.9 AEC Tax Returns.
4.10 AEC Tax Power of Attorney.
5.10 Stockholder Guaranties
EXHIBITS
A. Certificate of Merger
B. Escrow Agreement
C. Stockholder Representation Letter
D. Selling Stockholder Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 30,
1998 (the "Agreement"), among AMERICAN ELECTROMEDICS CORP., a
Delaware corporation ("AEC"), DDS ACQUISITION CORPORATION, a
Delaware corporation ("Acquisition Corp.") and DYNAMIC DENTAL
SYSTEMS, INC., a Delaware corporation ("DDS"), and XXXXX X.
XXXXXX, XXXXXXX X. XXXXXX, XX. and XXXXX X. XXXXXXXXX
(individually, a "Stockholder" and, collectively, the
"Stockholders").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Acquisition Corp. is a newly-formed wholly-
owned subsidiary of AEC;
WHEREAS, AEC desires to acquire all of the issued and
outstanding shares of common stock, no par value per share, of
DDS (the "DDS Common Stock"), through the merger (the "Merger")
of Acquisition Corp. with and into DDS, pursuant to the terms
hereinafter set forth;
WHEREAS, the respective Boards of Directors of AEC and
Acquisition Corp. deem it advisable and in the best interests of
AEC and Acquisition Corp. that Acquisition Corp. be merged with
and into DDS upon the terms and conditions hereinafter specified;
WHEREAS, the Board of Directors of DDS deems it
advisable and in the best interests of DDS that Acquisition Corp.
be merged with and into DDS upon the terms and conditions
hereinafter specified;
WHEREAS, the Stockholders, who in the aggregate are
the record and beneficial owners of all of the outstanding
capital stock of DDS, individually and collectively, find it
advisable and in their best interest that Acquisition Corp. be
merged with and into DDS upon the terms and conditions
hereinafter specified;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter contained, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
ADOPTION OF AGREEMENT AND PLAN OF MERGER
1.1 The Merger. At the Effective Time (as defined in
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Section 1.2 hereof), in accordance with this Agreement and the
-----------
relevant provisions of the Delaware General Corporation Law (the
"DGCL"), Acquisition Corp. shall be merged with and into DDS.
DDS shall be the surviving corporation of the Merger and DDS
shall continue, and be deemed to continue, for all purposes after
the Merger, and the existence of Acquisition Corp. shall cease at
the Effective Time.
1.2 Effective Date of the Merger. Unless this
----------------------------
Agreement is terminated in accordance with its terms, the
consummation of the of the transactions contemplated by this
Agreement shall take place as soon as practicable after the
satisfaction or waiver of the conditions precedent to the
obligations of the parties set forth herein, or on such other
date as may be agreed by the parties. A Certificate of Merger,
substantially in the form annexed hereto as Exhibit A (the
"Certificate of Merger"), shall be executed in accordance with
Section 103 of the DGCL and delivered to the Secretary of State
of Delaware for filing (the time of such filing being the
"Effective Time" and the date of such filing being the "Effective
Date").
1.3 Surviving Corporation; Articles of Incorporation
------------------------------------------------
of Surviving Corporation. Following the Merger, DDS shall
-------------------------
continue to exist under, and be governed by, the laws of the
State of Delaware, and AEC will own all of the issued and
outstanding DDS Common Stock. The Certificate of Incorporation
and By-Laws of DDS, as in effect as of the Effective Time, shall
continue in full force and effect as the Certificate of
Incorporation and By-Laws of DDS.
1.4 Merger Consideration; Conversion of DDS Common
----------------------------------------------
Stock; Cancellation of Acquisition Corp. Common Stock. (a) At
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the Effective Time, by virtue of the Merger and without any
action on the part of Acquisition Corp., DDS or the Stockholders,
the Stockholders shall receive an aggregate of $225,000 and
750,000 shares of common stock, $.10 par value per share, of AEC
("AEC Common Stock"), all of which shall be the "Merger
Consideration" subject to adjustment as provided in this
Section 1.4 and subject to the Escrow Agreement, as described in
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Section 6.7 hereof. Each Stockholder shall be entitled to
-----------
receive Two Hundred Fifty Thousand (250,000) shares of AEC Common
Stock, and Seventy Five Thousand Dollars ($75,000) (the "Cash
Consideration"). Until surrendered in accordance with the
provisions of Section 1.5 hereof, each certificate of DDS Common
-----------
Stock shall represent, for all purposes, only the right to
receive the Merger Consideration or appraisal rights under
Section 1.8 hereof.
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(b) If between the date of this Agreement and the
Effective Time the outstanding shares of AEC Common Stock shall
have been changed into a different number of shares or a
different class by reason of a stock dividend, subdivision,
reclassification, recapitalization, split-up or combination, the
number of AEC shares constituting the Share Consideration shall
be appropriately adjusted.
(c) At the Effective Time, all shares of DDS Common
Stock which are owned by DDS as treasury stock shall be canceled
and retired and cease to exist.
(d) At the Effective Time, each share of Acquisition
Corp. Common Stock issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any
action on the part of AEC, be canceled and cease to exist.
1.5 No Fractional Shares. No certificates or scrip
--------------------
for fractional shares of AEC Common Stock will be issued. In
lieu of issuing any such fractional shares to which a Stockholder
would otherwise be entitled to receive, the Exchange Agent shall
round up or down to the nearest whole share of AEC Common Stock.
ARTICLE II
CLOSING
2.1 Closing Date. The closing of the Merger (the
------------
"Closing") shall take place at the offices of DDS, 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxxx, Xxxxxxx 00000, at 11:00 a.m., local
time, on that day on which the last of the conditions set forth
in Articles VI and VII shall have been satisfied or, if
permissible, waived (other than those conditions which by their
terms are to occur only at the Closing), or on and at such other
date, time and place as AEC, Acquisition Corp. and the
Stockholders may agree (the date of the Closing hereinafter being
referred to as the "Closing Date").
2.2 Deliveries at the Closing. At the Closing
-------------------------
Stockholders and/or DDS will deliver to AEC certificates
representing all then outstanding shares of DDS Common Stock, and
the various certificates, instruments and document referred to in
Article VI, and AEC and Acquisition Corp. will deliver to
----------
Stockholders and/or DDS certificates representing the Share
Considerations and funds representing the Cash Consideration, and
the various certificates, instruments and documents referred to
in Article VII.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND DDS
The Stockholders, jointly and severally, and DDS
hereby represent and warrant to AEC and Acquisition Corp. as
follows:
3.1 Due Incorporation. DDS is a corporation duly
-----------------
organized, validly existing and in good standing under the laws
of the State of Delaware, with all requisite power and authority
to own, lease and operate its properties and to carry on its
business as it is now being owned, leased, operated and
conducted. Each jurisdiction in which DDS is qualified to
transact business as a foreign corporation is listed on
Schedule 3.1 hereto. Except for the jurisdictions listed on
------------
Schedule 3.1 hereto, the nature of the properties owned, leased
------------
or operated by it and the business transacted by DDS do not
require it to qualify as a foreign corporation in any other
jurisdiction. DDS does not have (i) any record or beneficial
interest in any corporation, proprietorship, firm, partnership,
limited partnership, limited liability company, trust,
association or other entity, (ii) any direct or indirect
subsidiaries, either wholly or partially owned, (iii) any voting
or management interest in any corporation, proprietorship, firm,
partnership, limited partnership, limited liability company,
trust, association, individual or other entity (a "Person") or
own any security issued by any Person.
3.2 Due Approval And Authorization. (a) The
------------------------------
execution by the Stockholders of this Agreement or any other
paper or document or the doing by any one of them of any act in
connection with the Merger shall conclusively establish their
approval thereof and the approval and ratification by DDS of the
papers and documents so executed and the actions so taken.
(b) Each Stockholder to the extent of and in his
capacity as a stockholder of DDS has full power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by the Stockholders and the consummation by them
of the transactions contemplated hereby have been duly and
validly authorized. This Agreement constitutes the legal, valid
and binding obligation of the Stockholders enforceable against
the Stockholders in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or
other laws from time to time in effect which affect creditors'
rights generally and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
(c) DDS has full power and authority to enter into
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this
Agreement by DDS and the consummation of the transactions
contemplated hereby have been fully and validly authorized by all
requisite corporate action. This Agreement constitutes the
legal, valid and binding obligation of DDS enforceable against
DDS in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization or other laws from time to
time in effect which affect creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
3.3 Non-Contravention; Consents and Approvals.
-----------------------------------------
(a) Except to the extent set forth on Schedule 3.3, the
------------
execution and delivery of this Agreement by the Stockholders and
DDS does not, and the performance by the Stockholders and DDS of
their respective obligations hereunder and the consummation of
the transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, result in or
give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any lien upon any of the
assets or properties of DDS under, any of the terms, conditions
or provisions of (i) the Certificate of Incorporation or By-Laws
of DDS, or (ii) subject to obtaining the necessary approval of
this Agreement and the Merger by the Stockholders and the taking
of the actions described in paragraph (b) of this Section 3.3 (x)
any statute, law, rule, regulation or ordinance (together,
"Laws"), or any judgment, decree, order, writ, permit or license,
of any Governmental Entity (as defined in paragraph (b) below),
applicable to DDS or any of its assets or properties, or (y) any
contract, agreement or commitment to which DDS or a Stockholder
is a party or by which DDS or any of its assets or properties is
bound.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with any court, admini-
strative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"),
or any other Person, is required by DDS or the Stockholders in
connection with the execution and delivery of this Agreement or
the consummation by DDS and the Stockholders of the transactions
contemplated hereby, except for the filing of Certificate of
Merger with the Secretary of State of the State of Delaware in
accordance with the requirements of the DGCL.
3.4 Capitalization. The authorized capital stock of
--------------
DDS consists of 3,000 shares of Common Stock, no par value per
share, of which 3,000 shares are issued and outstanding and owned
beneficially and of record by the Stockholders in the amounts set
forth on Schedule 3.4 hereto. All of the issued and outstanding
------------
shares of DDS Common Stock are validly issued, fully paid and
nonassessable and the issuance thereof was not subject to
preemptive rights. At the Effective Time there will be no
outstanding DDS options, warrants or other rights to purchase or
convert into shares of DDS Common Stock.
3.5 Financial Statements; Undisclosed Liabilities;
---------------------------------------------
Other Documents. (a) For purposes of this Agreement, "DDS
----------------
Financial Statements" shall mean (x) the unaudited financial
statements of DDS as of December 31, 1997 and the fiscal year
then ended (including all notes thereto), consisting of the
balance sheet at such date and the related statements of income,
stockholders' equity and cash flows for the year then ended and
(y) the unaudited financial statements of DDS as of March 31,
1998 (including all notes thereto), consisting of the balance
sheet at such date and the results of operations for the three
months then ended (the "DDS Interim Financial Statements"). The
DDS Financial Statements have been prepared in accordance with
GAAP consistently applied, present fairly the financial position
of DDS as at the dates thereof and the results of operations,
stockholders' equity and cash flows of DDS for the periods
covered thereby, and are substantially in accordance with the
financial books and records of DDS, subject to normal year end
adjustments with respect to the Interim Financial Statements.
(b) DDS does not have any liabilities or obligations
of any nature, whether accrued, absolute, contingent or
otherwise, which individually or in the aggregate could be
reasonably expected to have a DDS Material Adverse Effect (as
defined below) except (i) as set forth on or reflected in the
balance sheet at March 31, 1998 (the "DDS Interim Balance Sheet")
included in the DDS Interim Financial Statements or
(ii) liabilities and obligations incurred since March 31, 1998 in
the ordinary and usual course of its business.
3.6 No Material Adverse Effects or Changes. A "DDS
--------------------------------------
Material Adverse Effect" shall mean an effect on or circumstances
involving the business, operations, assets, liabilities, results
of operations, cash flows or condition (financial or otherwise)
which is materially adverse to DDS, except as set forth on
Schedule 3.6. Since December 31, 1997, DDS has not (i) declared,
------------
set aside or paid any dividend or other distribution in respect
of its capital stock; (ii) made any direct or indirect
redemption, purchase or other acquisition of any shares of its
capital stock or made any payment to any of its stockholders (in
their capacity as stockholders); (iii) issued or sold any shares
of its capital stock or any options, warrants or other rights to
purchase any such shares or any securities convertible into or
exchangeable for such shares or taken any action to reclassify or
recapitalize or split up its capital stock; (iv) mortgaged,
pledged or subjected to any lien, lease, security interest,
encumbrance or other restriction, any of its material properties
or assets except in the ordinary and usual course of its business
and consistent with past practice; (v) entered into any
acquisition or merger agreement, license, commitment or other
material agreement, (vi) except in the ordinary and usual course
of its business and consistent with its past practices forgiven
or canceled any material debt or claim, waived any material
right; or (vii) adopted or amended any plan or arrangement (other
than amendments that are not material or that were made to comply
with laws or regulations) for the benefit of any director,
officer or employee or changed the compensation (including
bonuses) to be paid to any director, officer or employee, except
for changes made consistent with the prior practice of DDS.
3.7 Tax Returns and Audits. "Taxes", as used in this
---------------------- -----
Agreement, means any federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including all
net income, gross income, sales and use, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property,
gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated,
stamp, custom duties, severance or withholding taxes or charges
imposed by any Governmental Entity, and includes any interest and
penalties (civil or criminal) on or additions to any such taxes
and any expenses incurred in connection with the determination,
settlement or litigation of any tax liability. "Tax Return", as
used in this Agreement, means a report, return or other
information required to be supplied to a Governmental Entity with
respect to Taxes, including where permitted or required, combined
or consolidated returns for any group or entities.
(a) Filing of Timely Tax Returns. DDS has duly filed
----------------------------
all Tax Returns required to be filed by it under applicable law
and will file all Tax Returns required to be filed by it at or
prior to the Effective Date under applicable law except where the
failure to so file would not have a DDS Material Adverse Effect.
All Tax Returns were in all material respects (and, as to Tax
Returns not filed as of the date hereof, will be) complete and
correct and filed on a timely basis. DDS has not requested any
extension of time within which to file any Tax Return, which Tax
Return has not since been filed.
(b) Payment of Taxes. DDS has, within the time and in
----------------
the manner prescribed by law, paid (and until the Effective Date
will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for those
contested in good faith and for which adequate reserves have been
taken.
(c) Tax Liens. There are no Tax liens upon the assets
---------
of DDS except liens for Taxes not yet due.
(d) Withholding Taxes. DDS has complied (and until
-----------------
the Effective Date will comply) in all respects with the
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting
requirements under Sections 1441 through 1464, 3401 through 3606,
and 6041 and 6049 of the Code, as well as similar provisions
under any other laws, and has, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required.
(e) Statute of Limitations. Neither the Stockholders
----------------------
nor DDS has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations
with respect to any Taxes or Tax Returns. The statute of
limitations for the assessment of all Taxes has expired for all
applicable Tax Returns of DDS or those Tax Returns have been
examined by the appropriate taxing authorities for all periods
through the date hereof, and no deficiency for any Taxes has been
proposed, asserted or assessed against DDS that has not been
resolved and paid in full.
(f) Audit, Administrative and Court Proceedings. No
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audits or other administrative proceedings or court proceedings
are presently pending or, to the knowledge of the Stockholders or
DDS, threatened with regard to any Taxes or Tax Returns of DDS.
Except as disclosed in Schedule 3.7, no power of attorney
------------
currently in force has been granted by the Stockholders or DDS
concerning any Tax matter. To the knowledge of the Stockholders
and DDS, no facts exist or have existed which would constitute
grounds for the assessment of Taxes on DDS with respect to
periods which have not been audited by the Internal Revenue
Service (the "IRS") or other taxing authorities.
(g) Code Section 341(f). DDS has not filed (and will
-------------------
not file prior to the Closing) a consent pursuant to Code Section
341(f) and has not agreed to have Code Section 341(f)(2) apply to
any disposition of a subsection (f) asset (as that term is
defined in Code Section 341(f)(4)) owned by DDS.
(h) Code Section 168. No property of DDS is property
----------------
that DDS or any party to this transaction is or will be required
to treat as being owned by another person pursuant to the
provisions of Code Section 168(f)(8) (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Code Section 168.
3.8 Litigation. There are no actions, suits,
----------
arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to DDS's
or the Stockholders' knowledge, threatened against or affecting
DDS or any of its officers or directors in their capacity as
such, or any of its property or business which could reasonably
be expected to have a DDS Material Adverse Effect. No event has
occurred or circumstance exists that may give rise or serve as a
basis for the commencement of any such proceeding. DDS is not
subject to any order, judgment, decree, injunction, stipulation
or consent order of or with any court or other Governmental
Entity, other than orders of general applicability.
3.9 Compliance with Applicable Laws. DDS holds all
-------------------------------
permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities which are required in the operation of
its business (the "DDS Permits"), except for those the failure of
which to hold would not have a DDS Material Adverse Effect. DDS
is in compliance with the terms of the DDS Permits, except where
the failure so to comply would not have a DDS Material Adverse
Effect. Schedule 3.9 is a complete and correct list of all DDS
------------
Permits. The entry into and consummation of this Agreement and
the Merger will not require any modification, re-application,
approval or other consent as to any DDS Permit. DDS is not in
violation of any law, ordinance or regulation of any Governmental
Entity, including environmental and labor laws and regulations,
except for possible violations which individually and in the
aggregate do not, and, insofar as reasonably can be foreseen by
DDS or the Stockholders, will not in the future have a DDS
Material Adverse Effect.
3.10 Contracts. (a) Except for the contracts,
---------
agreements, commitments, instruments, bids and proposals to which
DDS is a party listed on Schedule 3.10, DDS is not a party to or
-------------
otherwise bound by any written or oral (i) mortgage, indenture,
note, installment obligation or other instrument relating to the
borrowing of money, (ii) guarantee of any obligation (excluding
endorsements of instruments for collection in the ordinary course
of business of DDS), (iii) letter of credit, bond or other
indemnity, (iv) joint venture, partnership or other agreement
involving the sharing of profits and losses, (v) performance of
services or delivery of goods in an amount exceeding $5,000 or
which would not be completed within three (3) months, (vi)
agreement for the sale or lease by DDS to any person of any
material amount of its assets other than the retirement or other
disposition of assets no longer useful to DDS or the sale of
assets in the ordinary course of the operation of DDS, (vi)
agreement requiring the payment by DDS of more than $5,000 in any
12-month period for the purchase or lease of any machinery,
equipment or other capital assets, (viii) agreement providing for
the lease or sublease by DDS (as lessor, sublessor, lessee or
sublessee) of any real property, (ix) distributor, sales
representative, broker or agent agreement, (x) collective
bargaining agreement, employment or consulting agreement or
agreement providing for severance payments or other additional
rights or benefits (whether or not optional) in the event of the
sale of DDS, (xi) agreement requiring the payment by DDS to any
person of more than $5,000 in any 12-month period for the
purchase of goods or services, (xii) material warranties relating
to products distributed or services provided by DDS, (xiii)
license or sublicense agreement (whether as licensor, licensee,
sublicensor or sublicensee) with respect to any item of
Intellectual Property, as defined in Section 3.17, owned or
------------
licensed by DDS, and (xiv) agreement imposing non-competition,
confidentiality or exclusive dealing obligations on DDS.
(b) The Stockholders or DDS has delivered or made
available to AEC complete and correct copies of each written
agreement listed on Schedule 3.10 each as amended to date and a
-------------
summary of the terms of each oral agreement listed on
Schedule 3.10. Each agreement listed on Schedule 3.10 is a
------------- -------------
valid, binding and enforceable obligation of DDS and, to the
Stockholders' knowledge, the other party or parties thereto
(subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar Laws affecting
creditors' rights and remedies generally and subject as to
enforceability to general principles of equity, including
principles of commercial reasonableness, good faith and fair
dealing) and is in full force and effect. Except as set forth on
Schedule 3.10 (i) neither DDS nor, to the Stockholders'
-------------
knowledge, any other party thereto is in material breach of any
material term of any such agreement or has repudiated any
material term of any such agreement, (ii) no event, occurrence or
condition exists (including the transactions contemplated under
this Agreement) which, with the lapse of time or the giving of
notice or both, would become a default under any such agreement
by DDS or, to DDS's or the Stockholders' knowledge, any other
party thereto, and (iii) DDS has not released or waived any
material right under any contract. DDS is not required to give
any notice to any other person who is a party to an agreement
listed on Schedule 3.10 regarding this Agreement or the Merger.
-------------
(c) Schedule 3.10 sets forth a correct and complete
-------------
list of the ten largest customers of DDS in terms of net revenues
during the 1997 fiscal year and the first three months of fiscal
1998, showing the approximate total net revenue received in each
such period from each such customer. Except to the extent set
forth on Schedule 3.10, since December 31, 1997, there has not
-------------
been any adverse change in the business relationship between DDS
and any customer listed on such Schedule.
3.11 Property. Schedule 3.11 is a complete and
-------- -------------
correct list of all personal property of DDS (other than
inventory) not reflected on any other Schedule hereto and having
a book value exceeding $5,000. Except as set forth on
Schedule 3.11 DDS now has and on the Closing Date will have good
-------------
and marketable title to all personal property purported to be
owned by it, free and clear of all Liens. The material, tangible
assets of DDS taken as a whole, including all machinery and
equipment, are, in all material respects, in good condition and
repair, reasonable wear and tear excepted and have been well
maintained. DDS does not own, nor have any right to acquire, any
real property.
3.12 Product Warranty Claims. To Stockholders' and
-----------------------
DDS' best knowledge, there are no claims, whether undisputed or
disputed in whole or in part, existing, pending or anticipated or
otherwise known to DDS or the Stockholders under any warranty, or
guaranty, express or implied, on or otherwise issued in
connection with any product or device manufactured, made,
assembled or otherwise produced by DDS. Schedule 3.12 sets forth
-------------
DDS's warranty policy and warranty experience.
3.13 Employees. Schedule 3.13 contains a complete
--------- -------------
and correct list of (i) all full-time and part-time employees of
DDS, including their respective salaries, dates of hire,
positions and last salary adjustment and (ii) all bonus, deferred
compensation, severance or termination pay, insurance, medical,
dental, drug, profit sharing, pension, retirement, stock option,
stock purchase, hospitalization insurance or other material plans
or arrangements providing employee benefits to any current or
former director, officer, employee or consultant of DDS and all
relevant vacation policies. DDS is not a party to any union,
collective bargaining or similar agreement, and there are no
controversies pending or, to the Stockholder' knowledge,
threatened between DDS and any current or former employee or any
labor or other collective bargaining unit representing any
current or former employee of DDS that could reasonably be
expected to result in a material labor strike, dispute, slow-down
or work stoppage or otherwise have a DDS Material Adverse Effect.
The Stockholders are not aware of any organizational effort
presently being made or threatened by or on behalf of any labor
union with respect to employees of DDS. DDS has paid or accrued
in full all wages, salaries, commissions, bonuses and other
compensation (including severance pay and vacation benefits) for
all services performed by its employees and former employees, and
has withheld such amounts as were required to be withheld
therefrom and has paid the withheld amounts to the proper tax and
other receiving officers within the time required under
applicable law. DDS does not have any benefit plan subject to the
reporting requirements of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Code and other applicable
Laws, nor has had such a plan since January 24, 1997.
3.14 Insurance. Schedule 3.14 contains a complete
--------- -------------
and correct schedule of coverage and list of all policies of
insurance owned by DDS under which DDS assets, properties,
operations or employees are insured (including amount of
coverage, type of insurance, amount of deductible, if any, the
policy number and expiration date), and all claims made under any
of such policies or prior policies since January 24, 1997. Since
January 24, 1997, DDS has given due and timely notice of any
claim and of any occurrence known to DDS which may be covered by
any of such policies or prior policies. All scheduled policies
are in full force and effect and are in amounts and coverage
sufficient for compliance by DDS with all applicable requirements
of Law and all agreements to which DDS is a party or subject and
customary in its industry. All premiums in connection with such
policies are fully paid to Stockholders' and DDS' best knowledge.
No event has occurred which, with notice or lapse of time, would
constitute a breach or default thereunder or permit termination,
modification or acceleration of any policy, and no party to any
policy has repudiated any provisions thereof.
3.15 Inventories. The amounts at which the
-----------
inventories are carried on the DDS Interim Balance Sheet and on
the books of DDS reflect the normal valuation policy of DDS in
accordance with GAAP. The amount of repair parts and supplies
maintained by DDS is consistent with its prior practices. The
reserves estimated for obsolescence as of the Closing Date will
be adequate to cover the diminution in value of inventories due
to obsolescence.
3.16 Accounts Receivable. Schedule 3.16 sets forth a
------------------- -------------
complete and correct list of the work-in-process and accounts
receivable of DDS as set forth on the DDS Interim Balance Sheet,
including the degree of completion for each project and the
amounts expended thereon. All accounts receivable which have
arisen subsequent to the DDS Interim Balance Sheet represent
sales or work performed in the ordinary course of business, are
current and collectible and, to the Stockholders' or DDS's
knowledge, the same will be collected in full (net of reserve for
bad debts) in the ordinary course of business and are not subject
to any claims, offsets, allowances or adjustments.
3.17 Intellectual Property. Schedule 3.17 is a
--------------------- -------------
complete and correct list of all of the trademarks, tradenames,
service marks, trade dress, and patents (including any
registrations of or pending applications for any of the
foregoing), know-how, databases, trade secrets and
confidentiality information (collectively, "Intellectual
Property") used by DDS in the conduct of its business. Except as
set forth on Schedule 3.17, all of such Intellectual Property is
owned by DDS free and clear of all liens, and is not subject to
any license, royalty or other agreement. None of such
Intellectual Property has been or is the subject of any pending
or, to the best of DDS's or the Stockholders' knowledge,
threatened litigation or claim of infringement. No license or
royalty agreement to which DDS is a party is in breach or default
by any party thereto except where such breach or default would
not have a DDS Material Adverse Effect or is the subject of any
notice of termination given or, to the Stockholders' or DDS's
knowledge, threatened. To DDS's or the Stockholders' knowledge,
DDS is not breaching or infringing any Intellectual Property of
third parties. The Intellectual Property is sufficient for the
conduct of the business of DDS as presently conducted.
3.18 Environmental Matters. The business and
---------------------
operations of DDS, including the transportation, treatment,
storage, handling, transfer, disposition, recycling or receipt of
materials, complies with all applicable environmental statutes,
regulations and decrees, whether federal, state or municipal (the
"Environmental Laws"). Neither the Stockholders nor DDS has
received any notices to the effect that the business carried on
by DDS or the operation of any equipment or facilities of DDS
(including the transportation, handling, treatment or storage of
hazardous materials thereon) is not in compliance with the
requirements of applicable Environmental Laws or is subject to
any remedial control or action or any investigation or evaluation
as to whether any remedial action is required to respond to a
release or threatened which forms part of or is adjacent to any
premises at which DDS's business is conducted. DDS has performed
its services for customers in material compliance with all
applicable Environmental Laws.
3.19 Books and Records. DDS has maintained and
-----------------
preserved complete and accurate books and records for its
material transactions. The minute books of DDS include complete
and correct minutes of all meetings of its directors committees
and stockholders. The DDS Certificate of Incorporation and By-
laws previously delivered to AEC are current and complete. At
the Closing Date, all of those books and records will be in the
possession of DDS. Schedule 3.19 sets forth a complete and
-------------
correct list of (i) all officers and directors of DDS and (ii)
the name and address of each bank, trust company or other
financial institution in which DDS has an account and the names
of all persons authorized to draw thereon as well as all powers
of attorney granted by DDS.
3.20 Status of the Stockholders. Each Stockholder
--------------------------
shall sign and deliver a Stockholder Representation Letter dated
as of the Closing Date with respect to the Stockholder's receipt
of certain information and financial reports of AEC, the extent
of his or his advisor's familiarity and understanding of the
terms of the Merger, the tax consequences of the Merger with
respect to the Stockholder and the risks involved, and his
awareness of the restrictions on the transferability of the Share
Consideration.
3.21 Waiver of Appraisal Rights. In connection with
--------------------------
the Merger, each Stockholder hereby waives any right or rights of
appraisal, under the DGCL or otherwise, of his shares of DDS
common stock and agrees not to seek any such appraisal rights.
3.22 Related Party Transactions. Schedule 3.22 sets
-------------------------- -------------
forth a complete and correct list of all transactions, loans,
claims, or agreements between or involving the Stockholders, DDS
and an officer, director, employee, consultant or Stockholder of
DDS (or an affiliate of any such person) since January 24, 1997
(excluding employment agreements included on another DDS Schedule
to this Agreement and benefits given to all employees of DDS).
All transactions and agreements listed on Schedule 3.22 were on
-------------
terms to DDS no less favorable than what DDS would have had with
unrelated third parties.
3.23 Fees of Brokers, Consultants and Financial
------------------------------------------
Advisors. Neither DDS, the Stockholders nor any officer,
---------
director, or employee of DDS, has employed any broker, finder,
consultant or investment banker or incurred any liability for any
brokerage or investment banking fees, commissions or finders'
fees in connection with the transactions contemplated by this
Agreement.
3.24 General Representation and Warranty. Neither
-----------------------------------
this Agreement nor any schedule attached hereto or other
documents and written information furnished by or on behalf of
DDS, the Stockholders, its attorneys, auditors or insurance
agents to AEC in connection with this Agreement contains any
untrue statement of material fact or omits to state any material
fact necessary to make the statements contained herein or therein
not misleading.
3.25 Investment Due Diligence. The Stockholders and
------------------------
DDS have undertaken all due diligence of AEC regarding the
business and corporate affairs of AEC which the Stockholders and
DDS believe is appropriate for this transaction. In evaluating
the suitability of the transaction contemplated by this
Agreement, the Stockholders and DDS have not relied upon any
representations or other information (whether verbal or written),
other than as contained in this Agreement or in any documents or
written responses to questions furnished to DDS or the
Stockholders by AEC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUISITION CORP. AND AEC
Acquisition Corp. and AEC, jointly and severally,
hereby represent and warrant to the Stockholders as follows:
4.1 Due Incorporation. Each of AEC and Acquisition
-----------------
Corp. is a corporation duly organized, validly existing and in
good standing under the laws of Delaware, and has all requisite
power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. AEC is
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the nature of the
properties owned, leased or operated by it and the business
transacted by it require such qualification, except where the
failure to be so qualified would not have an AEC Material Adverse
Effect (as defined in Section 4.7 herein).
-----------
4.2 Due Authorization. Each of AEC and Acquisition
-----------------
Corp. has full power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The
execution, delivery and performance by AEC of this Agreement will
be duly and validly approved by the Board of Directors of AEC,
and no other actions or proceedings on the part of AEC will be
necessary to authorize this Agreement. The execution, delivery
and performance by Acquisition Corp. of this Agreement will be
duly and validly approved by the Board of Directors and the sole
stockholder of Acquisition Corp., and no other actions or
proceedings on the part of Acquisition Corp. or its stockholder
are necessary to authorize this Agreement. Each of AEC and
Acquisition Corp. has duly and validly executed and delivered
this Agreement, subject to the above mentioned Board and
shareholder approvals. Subject to the above mentioned Board and
shareholder approvals, this Agreement constitutes the legal,
valid and binding obligations of each of AEC and Acquisition
Corp., enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or
other laws from time to time in effect which affect creditors'
rights generally and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 Non-Contravention; Consents and Approvals.
-----------------------------------------
(a) The execution and delivery of this Agreement by AEC and
Acquisition Corp. does not, and the performance by AEC and
Acquisition Corp. of their obligations hereunder and the
consummation of the transactions contemplated hereby will not,
conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default
under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any
lien upon any of the assets or properties of any of the AEC
Companies (as defined in Section 4.7 hereof) under, any of the
-----------
terms, conditions or provisions of (i) the charter documents or
bylaws of each of the AEC Companies, or (ii) subject to the
taking of the actions described in paragraph (b) of this Section,
(x) any statute, law, rule, regulation or ordinance, or any
judgment, decree, order, writ, permit or license, of any
Governmental Entity, or (y) any contract, agreement or commitment
to which any AEC Company is a party or by which any AEC Company
or any of their respective assets or properties is bound.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with any Governmental
Entity is required by AEC or Acquisition Corp. in connection with
the execution and delivery of this Agreement or the consummation
by each of AEC and Acquisition Corp. of the transactions
contemplated hereby and thereby, except for:
(i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with
the requirements of the DGCL; and
(ii) filings with various state securities "blue sky"
authorities.
4.4 Capitalization. The authorized capital stock of
--------------
AEC consists of 1,000,000 shares of Preferred Stock, $.01 par
value per share ("AEC Preferred Stock"), and 20,000,000 shares of
AEC Common Stock. On the date hereof, no shares of AEC Preferred
Stock are issued and outstanding and 5,663,036 shares of AEC
Common Stock are issued and outstanding. The authorized capital
stock of Acquisition Corp. consists of 1,000 shares of
Acquisition Corp. Common Stock, of which 1,000 shares are issued
and outstanding. All of the issued and outstanding shares of AEC
and Acquisition Corp. Common Stock are, and all shares of AEC
Common Stock constituting the Share Consideration portion of the
Merger Consideration to be issued to the Stockholders in the
Merger will be, validly issued, fully paid and nonassessable and
the issuances thereof were not and will not be subject to
preemptive rights. Schedule 4.4 sets forth a complete and
------------
correct list of all options, warrants or other rights to purchase
any shares of AEC capital stock or any securities convertible
into or exchangeable for such shares and all agreements or
current efforts to offer or sell any such capital stock.
4.5 Financial Statements; Undisclosed Liabilities;
----------------------------------------------
Other Documents. (a) For purposes of this Agreement, "AEC
----------------
Financial Statements" shall mean (x) the audited consolidated
financial statements of AEC as of July 31, 1997 and July 27, 1996
and for the fiscal years then ended (including all notes thereto)
and (y) the unaudited consolidated financial statements of AEC as
of January 31, 1998 and January 25, 1997 and for the six months
then ended consisting of the consolidated balance sheets at such
dates and the related consolidated statements of operations,
stockholders' equity and cash flows for the periods then ended
which are included in the AEC SEC Documents (as defined in
Section 4.6). The AEC Financial Statements have been prepared in
------------
accordance with GAAP consistently applied, present fairly the
financial position, of AEC as at the dates thereof and the
results of operations and cash flows of AEC for the periods
covered thereby (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments), and are
substantially in accordance with the financial books and records
of AEC.
(b) AEC does not have any liabilities or
obligations of any nature, whether accrued, contingent, absolute
or otherwise, which individually or in the aggregate could be
reasonably expected to have an AEC Material Adverse Effect (as
defined below) except (i) as set forth in the January 31, 1998
balance sheet (the "AEC Interim Balance Sheet") or (ii)
liabilities or obligations incurred since January 31, 1998 in the
ordinary and usual course of its business.
4.6 Securities Law Filings. AEC is a subject to the
----------------------
reporting requirements of Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and has filed all
required forms, reports and other documents with the U.S.
Securities and Exchange Commission (the "SEC") since July 28,
1996. AEC has heretofore delivered to the Stockholders and DDS
complete and correct copies of (i) its Annual Report on Form 10-
KSB for the year ended July 31, 1997, (ii) its Form 10-QSB for
the quarter ended January 31, 1998, and (iii) its current reports
on Form 8-K filed with the SEC for an event of November 26, 1997
and March 27, 1998 (together, the "AEC SEC Documents").
4.7 No Material Adverse Effects or Changes. Except
--------------------------------------
as listed on Schedule 4.7, or as disclosed in or reflected in the
------------
AEC Financial Statements included in the AEC SEC Documents, or as
contemplated by this Agreement, since January 31, 1998, neither
AEC nor any of its wholly-owned subsidiaries (AEC and such
subsidiaries sometimes collectively, the "AEC Companies") has
suffered any damage or destruction to any of its assets or
properties (whether or not covered by insurance) which is having
or could be expected to have an AEC Material Adverse Effect. An
"AEC Material Adverse Effect" shall mean an effect on or
circumstances involving the business, operations, assets,
liabilities, results of operations, cash flows or condition
(financial or otherwise) which is materially adverse to the AEC
Companies, taken as a whole.
4.8 Insurance. The AEC Companies are adequately
---------
insured with reputable insurers against all risks and in such
amounts normally insured against by companies of the same type
and in the same line of business as the AEC Companies.
4.9 Labor Matters. Each of the AEC Companies has
-------------
conducted and currently is conducting, its respective business in
full compliance with all laws relating to employment and
employment practices, terms and conditions of employment, wages
and hours and nondiscrimination in employment except where such
failure to be in compliance would not have an AEC Material
Adverse Effect. The relationship of the AEC Companies with their
respective employees is generally satisfactory, and there is, and
during the past three years there has been, no labor strike,
dispute, slow-down, work stoppage or other labor difficulty
pending or, to AEC's knowledge, threatened against or involving
the AEC Companies. None of the employees of the AEC Companies is
covered by any collective bargaining agreement, no collective
bargaining agreement is currently being negotiated by the AEC
Companies and to AEC's knowledge, no attempt is currently being
made or during the past three years has been made to organize any
employees of the AEC Companies to form or enter a labor union or
similar organization.
4.10 Tax Returns and Audits.
----------------------
(a) Filing of Timely Returns. AEC has duly filed all
------------------------
Tax Returns required to be filed by it under applicable law and
will file all Tax Returns required to be filed by it at or prior
to the Effective Date under applicable law except where the
failure to so file would not have an AEC Material Adverse Effect.
All Tax Returns were in all material respects (and, as to Tax
Returns not filed as of the date hereof, will be) complete and
correct and filed on a timely basis. AEC has not requested any
extension of time within which to file any Tax Return, which Tax
Return has not since been filed.
(b) Payment of Taxes. AEC has, within the time and in
----------------
the manner prescribed by law, paid (and until the Effective Date
will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for those
contested in good faith and for which adequate reserves have been
taken.
(c) Tax Liens. There are no Tax liens upon the assets
---------
of AEC except liens for Taxes not yet due.
(d) Withholding Taxes. AEC has complied (and until
-----------------
the Effective Date will comply) in all respects with the
provisions of the Code, relating to the payment and withholding
of Taxes, including, without limitation, the withholding and
reporting requirements under Sections 1441 through 1464, 3401
through 3606, and 6041 and 6049 of the Code, as well as similar
provisions under any other laws, and has, within the time and in
the manner prescribed by law, withheld from employee wages and
paid over to the proper governmental authorities all amounts
required.
(e) Statute of Limitations. AEC has not executed any
----------------------
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns. The statute of limitations for the
assessment of all Taxes has expired for all applicable Tax
Returns of AEC or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date
hereof, and no deficiency for any Taxes has been proposed,
asserted or assessed against AEC that has not been resolved and
paid in full.
(f) Audit, Administrative and Court Proceedings. No
-------------------------------------------
audits or other administrative proceedings or court proceedings
are presently pending or, to the knowledge of AEC, threatened
with regard to any Taxes or Tax Returns of AEC. Except as
disclosed in Schedule 4.10, no power of attorney currently in
-------------
force has been granted by AEC concerning any Tax matter. To the
knowledge of AEC, no facts exist or have existed which could
constitute grounds for the assessment of Taxes on AEC with
respect to periods which have not been audited by the Internal
Revenue Service (the "IRS") or other taxing authorities.
4.11 Litigation. There are no actions, suits,
----------
arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to AEC's
knowledge, threatened against or affecting any of the AEC
Companies or any of their respective officers or directors in
their capacity as such, or any of their respective properties or
businesses which could reasonably be expected to have an AEC
Material Adverse Effect. No AEC Company is subject to any order,
judgment, decree, injunction, stipulation or consent order of or
with any court or other Governmental Entity, other than orders of
general applicability. There are no claims, actions, suits,
proceedings, or investigations pending or, to AEC's knowledge,
threatened by or against any of the AEC Companies with respect to
this Agreement, or in connection with the transactions
contemplated hereby or thereby.
4.12 Compliance with Applicable Laws. Each of the AEC
-------------------------------
Companies holds all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities which are
required in the operation of its respective business (the "AEC
Permits") except for those the failure of which to hold would not
have an AEC Material Adverse Effect. The AEC Companies are in
compliance with the terms of the AEC Permits, except where the
failure so to comply would not have an AEC Material Adverse
Effect. None of the AEC Companies is in violation of any law,
ordinance or regulation of any Governmental Authority, including
environmental laws and regulations, except for possible
violations which individually and in the aggregate do not, and,
insofar as reasonably can be foreseen by AEC, will not in the
future have an AEC Material Adverse Effect.
4.13 Contracts; No Defaults. Neither any AEC Company,
----------------------
nor to AEC's knowledge any other party thereto is in breach or
violation of, or in default in the performance or observance of
any term or provision of, and no event has occurred or by reason
of this Agreement or the Merger would occur which, with notice or
lapse of time or both, could be reasonably expected to result in
a default under, any contract, agreement or commitment to which
any AEC Company is a party or by which any AEC Company or any of
its assets or properties is bound, except for breaches,
violations and defaults which are not having and could not be
reasonably expected to have an AEC Material Adverse Effect. None
of the AEC Companies is required to give any notice to any person
regarding this Agreement or the transactions contemplated hereby
or thereby.
4.14 Environmental Matters. The business and
---------------------
operations of AEC, including the transportation, treatment,
storage, handling, transfer, disposition, recycling or receipt of
materials, complies with all applicable environmental statutes,
regulations and decrees, whether federal, state or municipal (the
"Environmental Laws"). AEC has not received any notices to the
effect that the business carried on by AEC or the operation of
any equipment or facilities of AEC (including the transportation,
handling, treatment or storage of hazardous materials thereon) is
not in compliance with the requirements of applicable
Environmental Laws or is subject to any remedial control or
action or any investigation or evaluation as to whether any
remedial action is required to respond to a release or threatened
which forms part of or is adjacent to any premises at which AEC's
business is conducted. AEC has performed its services for
customers in material compliance with all applicable
Environmental Laws.
4.15 Fees of Brokers, Finders and Investment Bankers.
-----------------------------------------------
Neither AEC nor any officer, director, or employee of AEC has
employed any brokers, finder or investment banker or incurred any
liability for any brokerage or investment banking fees,
commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
4.16 General Representation and Warranty. Neither this
-----------------------------------
Agreement nor any schedule attached hereto or other documents and
written information furnished by or on behalf of AEC, its
attorneys, auditors or insurance agents to DDS in connection with
this Agreement contains any untrue statement of material fact or
omits to state any material fact necessary to make the statements
contained herein or therein not misleading.
4.17 Investment Due Diligence. AEC has undertaken all
------------------------
due diligence of DDS regarding the business and corporate affairs
of DDS which AEC believes is appropriate for this transaction.
In evaluating the suitability of the transaction contemplated by
this Agreement, AEC has not relied upon any representations or
other information (whether verbal or written), other than as
contained in this Agreement or in any documents or written
responses to questions furnished to AEC by DDS or the
Stockholders.
ARTICLE V
COVENANTS
5.1 Implementing Agreement. Subject to the terms and
----------------------
conditions hereof, each of the parties hereto shall use its best
efforts to take all action required of it to fulfill its
obligations under the terms of this Agreement and to facilitate
the consummation of the transactions contemplated hereby.
5.2 Access to Information and Facilities;
-------------------------------------
Confidentiality. (a) From and after the date of this Agreement,
---------------
DDS and the Stockholders shall give AEC and Acquisition Corp. and
their representatives access during normal business hours and
upon reasonable notice to all of the facilities, properties,
books, contracts, commitments and records of DDS and shall make
the officers and employees of DDS available to AEC and
Acquisition Corp. and their representatives as AEC or Acquisition
Corp. or their representatives shall from time to time reasonably
request. AEC and Acquisition Corp. and their representatives
will be furnished with any and all information concerning DDS
which AEC or Acquisition Corp. or their representatives
reasonably request. The obligations set forth in this
Section 5.2 shall also apply to AEC and Acquisition Corp.,
-----------
mutatis mutandis. The investigation by and knowledge of DDS or
AEC and the furnishing of information to each other shall not
affect the right of such party to rely on the representations,
warranties, covenants and agreements of the other party hereto.
(b) Each of the Stockholders and DDS, on one hand, and
AEC and Acquisition Corp., on the other hand, agrees for itself,
and its respective representatives, to keep confidential all
information furnished to it pursuant to this Section 5.2, except
for information which is public or which is disclosed other than
by a person subject to this Section 5.2(b).
--------------
5.3 Preservation of Business. (a) From the date of
------------------------
this Agreement until the Closing Date, DDS shall operate only in
the ordinary and usual course of business consistent with past
practice, and shall use reasonable commercial efforts to (i)
preserve intact its business organization, (ii) preserve the
goodwill and advantageous relationships with customers,
suppliers, independent contractors, employees and other persons
material to the operation of its business, and (iii) not permit
any action or omission which would cause any of the
representations or warranties contained herein to become
materially inaccurate or any of the covenants to be breached in
any material respect.
(b) DDS and the Stockholders further covenant that
prior to the Closing Date DDS shall not without the prior written
consent of AEC (which shall not be unreasonably withheld):
(i) take any action, incur any obligation or enter
into or authorize any contract or transaction other than in the
ordinary course of business;
(ii) issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting or
options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any
shares of its capital stock or any other securities, or amend any
of their terms of any such securities;
(iii) split, combine, or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any of its securities;
(iv) make any changes in its accounting systems,
policies, principles or practices except as may be required by
law or GAAP;
(v) make any amendments to its Articles of
Incorporation or By-Laws or call or hold any meeting of
stockholders except as required under this Agreement;
(vi) make any material Tax election or settle or
compromise any material federal, state, local or foreign income
Tax liability, or waive or extend the statute of limitations in
respect of any such Taxes; or
(vii) terminate, or modify, amend or otherwise alter or
change in any material respect, any of the terms or provisions of
any material Contract.
(viii) voluntarily sell, transfer, surrender, abandon
or dispose of any of its assets or property rights (tangible or
intangible), other than non-material dispositions in the ordinary
course of business consistent with past practices, which could
not have a DDS Material Adverse Effect;
(ix) grant or make any mortgage or pledge or subject
itself or any of its properties or assets to any lien, charge or
encumbrance of any kind, except liens for taxes not currently due
or liens not exceeding $25,000 in the aggregate;
(x) create, incur or assume any liability or any
indebtedness, except in the ordinary course of business
consistent with past practices, but in no event in an aggregate
amount exceeding $50,000 more than is shown on DDS's March 31,
1998 Interim Finance Statements or cancel any debts or waive any
claims or rights in an aggregate amount in excess of $20,000;
(xi) make or commit to any capital expenditures in
excess of $25,000 in the aggregate;
(xii) grant any increase in the compensation payable
or to become payable to directors, officers or employees in
excess of $10,000 in the aggregate;
(xiii) enter into any written or oral agreement, lease
(whether capitalized or otherwise), arrangement or commitment to
which DDS is a party or by which it or any of the assets it owns,
leases or utilizes is bound which is expected to result in the
receipt or payment of $20,000 or more by DDS or by which is
material to the financial position, results of operations or
prospects of DDS or to the ability of DDS to consummate the
transactions contemplated hereby;
(xiv) take or omit to take any action which would
render any of DDS's representations or warranties materially
untrue or misleading or which would breach any of its covenants;
(xv) write off the value of any inventory or accounts
receivable or increase the reserve for collectable receivables or
obsolete, damaged or otherwise unsalable inventory, except as
required by GAAP or by law, or discount, factor, sell or
otherwise transfer any account receivable;
(xvi) take any action which could have a DDS Material
Adverse Effect on employee, customer or supplier relations or
hinder DDS in consummating the transactions contemplated hereby,
or reduce or downsize its operations;
(xvii) make any contract, agreement or understanding
pursuant to which DDS guarantees the indebtedness, liabilities or
obligations of others, directly or indirectly, in any manner,
including agreements to purchase such indebtedness, liabilities
or obligations, or to supply funds or in any manner to invest in
others, or to otherwise assure the holder of such indebtedness,
liabilities or obligations against loss;
(c) The Stockholders and DDS will promptly notify AEC
in writing upon becoming aware of any fact or condition which
would constitute a breach or non-compliance of this covenant.
5.4 Consents and Approvals. Subject to the terms and
----------------------
conditions provided herein, each of the parties hereto shall use
reasonable commercial efforts to obtain all consents, approvals,
certificates and other documents required in connection with the
performance by it of this Agreement and the consummation of the
transactions contemplated hereby. As soon as practicable after
the date hereof, each of the parties hereto shall make all
filings, applications, statements and reports to all Governmental
Entities and other Persons which are required to be made prior to
the Closing Date pursuant to any applicable law or contract in
connection with this Agreement and the transactions contemplated
hereby.
5.5 Periodic Reports. Until the Effective Time, AEC
----------------
will, subject to the requirements of applicable laws, furnish to
DDS all filings to be made with the SEC and will solicit comments
with respect thereto, in each case at least two business days (or
as soon prior thereto as is practicable) prior to the time of
such filings and the time of such mailings of reports which refer
to DDS or this Agreement.
5.6 Publicity. Prior to issuing any public
---------
announcement or statement with respect to the transactions
contemplated hereby and prior to making any filing with any
federal or state governmental or regulatory agency with respect
thereto, AEC on one hand, and the Stockholders and DDS on the
other hand, will, subject to their respective legal obligations,
consult with each other and will allow each other to review the
contents of any such public announcement or statement and any
such filing. Subject to the preceding sentence, AEC on one hand,
and the Stockholders and DDS on the other hand, each agree to
furnish to the other copies of all other public announcements
they may make concerning their respective business and operations
promptly after such public announcements are made.
5.7 No Negotiation. The Stockholders agree that
--------------
neither they nor DDS shall, after the date hereof and prior to
the Effective Time, (A) seek, directly or through agents,
representatives or affiliates (as defined in the Exchange Act),
or permit any of DDS's officers or directors to seek (whether in
their capacities as officers or directors or in their individual
capacities) any person or persons (other than AEC) to acquire or
purchase all or substantially all of its assets or to purchase or
exchange for any of its capital stock, or DDS to acquire or
purchase in one or more related transactions the capital stock or
related assets of persons (other than AEC or its affiliates) or
to effect a consolidation or merger (other than the Merger) or
other business combination or recapitalization, or to enter into
any discussions or agreements with respect to any of the
foregoing transactions ("Acquisition Transactions"), and shall
cease any such discussions held with third parties (other than
AEC) as of the date hereof; or (B) make inquiry as to, or solicit
the invitation of, discussions with respect to any Acquisition
Transaction (other than the Merger). The Stockholders shall not
seek (other than in connection with the Merger) any sale or other
transfer of their shares of DDS Common Stock or grant to any
other individual or entity any option or right to purchase such
shares of DDS Common Stock. Notwithstanding anything in this
Agreement to the contrary, if the Effective Time shall not have
occurred on or before June 30, 1998, the restrictions under this
Section 5.7, at the option of DDS, shall terminate upon notice
from DDS to AEC.
5.8 Blue Sky Approvals. AEC and either the
------------------
Stockholders or DDS shall obtain all necessary state securities
law or "blue sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Merger.
5.9 Registration Rights. (a) Registration. AEC will
------------------- ------------
use its best efforts, within sixty (60) days from the Effective
Date, to file a registration statement (the "Registration
Statement") on Form SB-2 or such other applicable form under the
Securities Act with the Securities and Exchange Commission (the
"Commission") to register the AEC Shares constituting the Share
Consideration (the "Registered Shares"), for sale and use its
best efforts to cause the Registration Statement to be declared
effective within such six (6) months and to maintain the
Registration Statement under the Securities Act from its
effective date until the earlier of (A) one (1) year after the
Effective Date or (B) all Registered Shares included therein have
been sold. AEC may include the Registered Shares in a
registration statement being filed by AEC with respect to other
securities of AEC. AEC shall give written notice to each
Stockholder at least twenty (20) days prior to filing the
Registration Statement asking such Stockholder how many of his
shares of AEC Common Stock he wants to include in the
Registration Statement. If a Stockholder fails to timely advise
AEC in writing of the number of shares of AEC Common Stock he
wants to include in the Registration Statement, he shall have no
further rights to have his shares of AEC Common Stock included
therein. The obligation of AEC under this provision shall be
limited to one Registration Statement which becomes effective
under the Securities Act.
(b) Registration Procedures. (i) AEC shall pay all
-----------------------
expenses of the Registration Statement filed pursuant to this
Section, including, without limitation, all registration, filing
and qualification fees, printing expenses, fees and disbursements
of counsel for AEC, accounting fees incidental to or required by
such registration; provided, however, that each Stockholder shall
-------- -------
pay all underwriting discounts and commissions applicable to his
Registered Shares and fees and disbursements of his own attorney.
AEC shall furnish the Stockholders such number of copies of a
prospectus, including a preliminary prospectus, to the
Registration Statement as such Stockholders may reasonably
request and, provided further, that each Stockholder shall have
-------- -------
the right to sell his Registered Shares in the market through his
own broker.
(ii) In connection with any Registration Statement
filed pursuant to this Section, AEC shall file any post-effective
amendment or amendments to the Registration Statement which may
be required under the Securities Act during the period reasonably
required to effect the distribution contemplated thereby. A form
of selling stockholders agreement, which is substantially the
form of agreement to be entered into by each Stockholder, is
annexed as Exhibit D.
(iii) Each Stockholder who desires to include his
shares of AEC Common Stock in the Registration Statement must
enter into a Selling Stockholders Agreement with AEC regarding
the relative rights and duties of the Selling Stockholders and
AEC, including customary indemnification provisions. A form of
Selling Stockholders Agreement, which is substantially the form
of agreement to be entered into by each Stockholder, is annexed
as Exhibit D.
(iv) AEC shall not be required to include in any
Registration Statement any Registered Shares if in the opinion of
counsel to AEC, registration of the Registered Shares proposed
to be included is not required under the Securities Act if such
Registered Shares may then be publicly sold in accordance with
Section 4(1) thereof and Rule 144 thereunder. To better assure
the availability of sales under Rule 144, AEC shall at all times
while any Stockholder holds Share Consideration, remain in full
compliance with all reporting requirements referenced in Rule
144(c).
(c) State Securities Laws. In connection with the
---------------------
offering of any Registered Common Stock pursuant to this Section,
AEC shall use its best efforts without charge to the Stockholders
to qualify or register the Registered Shares under the securities
or "blue sky" laws of such jurisdictions as may be reasonably
requested by the Stockholders.
(d) The Stockholders shall sell Registered Shares at a
rate no faster than the percentages set forth below of total
Registered Shares which they receive as the Merger Consideration
prior to the dates set forth below:
% OF REGISTERED SHARES
WHICH MAY BE SOLD LIMITATION DATE
----------------------- ---------------
Up to 5% July 15, 1998
Up to 10% July 31, 1998
Up to 15% August 31, 1998
Up to 20% September 30, 1998
Up to 25% October 31, 1998
Up to 30% November 30, 1998
Up to 35% December 31, 1998
Up to 50% January 31, 1999
Up to 65% February 28, 1999
Up to 80% March 31, 1999
Up to 95% April 30, 1999
Up to 100% May 31, 1999
5.10 Removal of Guaranties. From and after the date of
---------------------
this Agreement, AEC shall use its best efforts to obtain as soon
as possible after the Closing the cancellation and release of
each and every personal guaranty of a Stockholder which
guarantees any payment or other obligation of the DDS as
indicated on Schedule 5.10 (a "Stockholder Guaranty"). In
-------------
addition, AEC agrees to defend, indemnify and hold harmless all
Stockholders, and their heirs, representatives, successors, and
assigns, from and against any and all loss, liability, and
expense (including, but not limited to, reasonable costs of
investigation and defense and reasonable fees and expenses of
attorneys and legal assistants) arising from or in connection
with any such Stockholder Guaranty, unless such loss, liability,
or expense is due to the willful or grossly negligent act or
failure to act of the applicable Stockholder seeking
indemnification.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF ACQUISITION CORP. AND AEC
The obligations of Acquisition Corp. and AEC to
consummate the Merger are subject to the fulfillment at or before
the Closing of each of the following conditions:
6.1 Warranties True as of Closing Date. Each of the
----------------------------------
representations and warranties of the Stockholders and DDS
contained herein shall be true and correct in all material
respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date, without
giving effect to any notification pursuant to
Section 5.3(c) hereof.
--------------
6.2 Compliance With Agreements and Covenants. The
----------------------------------------
Stockholders and DDS shall have performed and complied with in
all material respects all of their covenants, obligations and
agreements contained in this Agreement to be performed and
complied with by the Stockholders and DDS on or prior to the
Closing Date, without giving effect to any notification pursuant
to Section 5.3(c) hereof.
--------------
6.3 Stockholders' Certificate. The Stockholders and
-------------------------
the Chief Executive Officer of DDS shall have delivered to AEC a
certificate, dated the Closing Date certifying that each of the
conditions specified in Section 6.1 and Section 6.2 hereof are
----------- -----------
satisfied in all respects.
6.4 Secretary's Certificate. DDS will have delivered
-----------------------
to AEC a certificate of the duly authorized Secretary of DDS,
dated the Closing Date, certifying resolutions of DDS Board of
Directors and Stockholders authorizing the execution, delivery
and performance of this Agreement and the Merger.
6.5 Good Standing Certificates. DDS will have
--------------------------
delivered to AEC at the Closing certificate of good standing and
tax status from the State of Delaware and Georgia, as to DDS,
which Certificates shall be dated a date not more than five (5)
business days prior to the Closing Date.
6.6 Employment Agreement. The Stockholders will have
--------------------
delivered to AEC a fully executed employment agreement between
DDS and Xxxxx X. Xxxxxx, in form satisfactory to AEC.
6.7 Escrow Agreement. The Stockholders will have
----------------
delivered to AEC the Escrow Agreement executed by the Escrow
Agent and a person acceptable to the parties hereto, as the agent
of the Stockholders, as provided for in Section 1.4(a) hereof.
--------------
The Escrow Agreement shall be substantially in the form of
Exhibit B attached hereto.
---------
6.8 Opinion of Counsel. DDS will have delivered to
------------------
AEC a legal opinion of Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP in
form and substance reasonably satisfactory to AEC and its
counsel.
6.9 Approval of Merger. The execution, delivery and
------------------
performance of this Agreement and the Merger contemplated hereby
have been duly authorized by all requisite corporate action.
6.10 Consents and Approvals. AEC shall have received
----------------------
written evidence satisfactory to it that all consents and
approvals required for the consummation of the transactions
contemplated hereby have been obtained, and all required filings
have been made, except where the failure to obtain any such
consent or approval or to make any such filing would not have an
DDS Material Adverse Effect or an AEC Material Adverse Effect.
6.11 Resignations. Such officers and directors of DDS
------------
as requested by AEC shall have delivered letters of resignation
of their positions with DDS.
6.12 Actions or Proceedings. No preliminary or
----------------------
permanent injunction or other order by any federal or state court
preventing consummation of the Merger shall have been issued and
shall be continuing in effect, and the Merger and the other
transactions contemplated hereby shall not be prohibited under
any applicable federal or state law or regulation.
6.13 Other Closing Documents. AEC shall have received
-----------------------
from the Stockholders the certificates for their shares of DDS
Common Stock, duly endorsed, the executed Certificate of Merger
and such other agreements and instruments as AEC shall reasonably
request, in each case in form and substance reasonably
satisfactory to AEC.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS
The obligations of the Stockholders to consummate the
Merger are subject to the satisfaction or waiver by AEC of the
following conditions precedent on or before the Closing Date:
7.1 Warranties True as of Closing Date. Each of the
----------------------------------
representations and warranties of Acquisition Corp. and AEC
contained herein shall be true and correct in all material
respects on and as of the Closing Date with the same force and
effect as though made by Acquisition Corp. and AEC on and as of
the Closing Date, without giving effect to any notification
pursuant to Section 5.3(c) hereof.
--------------
7.2 Compliance with Agreements and Covenants.
----------------------------------------
Acquisition Corp. and AEC shall have performed and complied with
in all material respects all of their covenants, obligations and
agreements contained in this Agreement, to be performed and
complied with by them on or prior to the Closing Date, without
giving effect to any notification pursuant to Section 5.3(c)
--------------
hereof.
7.3 AEC Certificate. AEC shall have delivered to DDS
---------------
a certificate, dated the Closing Date, from its Chief Executive
Officer certifying that each of the conditions specified in
Section 7.1 and Section 7.2 hereof are satisfied in all respects.
----------- -----------
7.4 Opinion of Counsel. AEC shall have delivered to
------------------
DDS a legal opinion of Xxxx & Priest LLP in form and substance
reasonably satisfactory to DDS.
7.5 Consents and Approvals. DDS shall have received
----------------------
written evidence satisfactory to it that all consents and
approvals required for the consummation of the transactions
contemplated hereby have been obtained, and all required filings
have been made, except where the failure to obtain any such
consent or approval or to make any such filing would not have an
DDS Material Adverse Effect or an AEC Material Adverse Effect.
7.6 Actions or Proceedings. No preliminary or
----------------------
permanent injunction or other order by any federal or state court
preventing consummation of the Merger shall have been issued and
shall be continuing in effect, and the Merger and the other
transactions contemplated hereby shall not be prohibited under
any applicable federal or state law or regulation.
7.7 Funds Delivered at Closing and Other Closin
--------------------------------------------
Documents. The Stockholders and DDS shall have received the
---------
Share Consideration and the Cash Consideration except to the
extent a portion of which is held under the Escrow Agreement as
provided in Section 1.4 hereof, the Escrow Agreement and such
other agreements and instruments as the Stockholders and DDS
shall reasonably request, in each case in form and substance
reasonably satisfactory to the Stockholders.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and
-----------
the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval by the Stockholders:
(a) by mutual written consent of the Board of
Directors of AEC and the Stockholders;
(b) by either AEC or the Stockholders, by written
notice to the other, if (i) the Effective Time shall not have
occurred on or before July 31, 1998, or (ii) any court of
competent jurisdiction in the United States or any state shall
have issued an order, judgment or decree (other than a temporary
restraining order) restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment or decree shall
have become final and non-appealable; provided, however, that the
right to terminate this Agreement (X) under clause (i) shall not
be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date or
(Y) under clause (ii) shall not be available to any party unless
such party shall have used all reasonable efforts to remove such
order, judgment or decree;
(c) by AEC, by written notice to the Stockholders, if:
(i) there shall have been any breach of any
representation, warranty, covenant or agreement of the
Stockholders or DDS hereunder which, if not remedied
prior to the Closing Date, would have an DDS Material
Adverse Effect and such breach shall not have been
remedied, or the Stockholders and DDS shall not have
provided AEC with reasonable assurance that such breach
will be remedied prior to the Closing Date, within five
(5) business days after receipt by the Stockholders of
notice in writing from AEC, specifying the nature of
such breach and requesting that it be remedied; or
(ii) the Stockholders shall withdraw or modify in
any manner adverse to AEC its approval or
recommendation of this Agreement or the Merger.
(d) by the Stockholders, by written notice to AEC, if:
(i) there shall have been any breach of any
representation, warranty, covenant or agreement of AEC
hereunder which, if not remedied prior to the Closing
Date, would have an AEC Material Adverse Effect and
such breach shall not have been remedied or AEC shall
not have provided the Stockholders with reasonable
assurance that such breach will be remedied prior to
the Closing Date, within five (5) business days after
receipt by AEC of notice in writing from the
Stockholders, specifying the nature of such breach and
requesting that it be remedied; or
(ii) the Board of Directors of AEC shall withdraw
or modify in any manner adverse to the Stockholders its
approval or recommendation of this Agreement or the
Merger.
8.2 Effect of Termination and Abandonment. In the
-------------------------------------
event of termination of this Agreement and abandonment of the
Merger pursuant to this Article VIII, this Agreement shall
------------
forthwith become void and no party hereto (or any of its
directors, officers or stockholders) shall have any liability or
further obligation to any other party to this Agreement, except
that nothing herein will relieve any party from liability for any
breach of any of its representations or warranties under this
Agreement or its failure to comply with one of its covenants,
agreements or obligations under this Agreement, except if the
termination is by reason of a breach by either the Stockholders
or DDS of its covenants under Section 5.7 hereof, the
-----------
Stockholders shall pay to AEC a non-refundable fee equal to
$200,000 as exclusive remedy.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Stockholders.
-----------------------------------
(a) In consideration of the receipt of the Merger
Consideration, the Stockholders and DDS shall indemnify and hold
harmless AEC from and against any claims, demands, debts, suits,
actions, obligations, proceedings, losses, damages, liabilities,
deficiencies, costs and expenses (including without limitation,
all reasonable legal and other professional fees and
disbursements, interest, penalties and amounts paid in
settlement) (collectively, "Claims") arising out of, based upon
or by reason of (A) any breach of any representation or warranty
of the Stockholders or DDS contained in this Agreement or in any
Schedule or certificate delivered pursuant to this Agreement or
(B) any breach or non-fulfillment of, or failure to perform, any
of the covenants, agreements or understandings of DDS or the
Stockholders which are contained in or made pursuant to this
Agreement.
(b) Notwithstanding anything to the contrary herein,
any claim by AEC against the Stockholders under this Section 9.1
-----------
shall be payable by the Stockholders only to the extent that
AEC's damages (the "Damages") shall exceed in the aggregate
$25,000 (the "Threshold Amount"). Subject to the limitation
contained in the last sentence of this Section 9.1(b), at such
time as the aggregate amount of AEC Damages exceed the Threshold
Amount, the Stockholders shall be jointly and severally liable on
a dollar-for-dollar basis for the full amount of all AEC Damages,
including the Threshold Amount. Any payments to be made by the
Stockholders under this Section 9.1 shall be first from the Cash
-----------
Consideration and then from the Share Consideration held under
the Escrow Agreement, and shall be pro-rata based upon their
respective ownership of DDS Common stock as of immediately prior
to the Effective Time. Notwithstanding anything in this Section
9.1 to the contrary, in no event shall the aggregate liability of
the Stockholders under this Section 9.1 exceed the aggregate of
-----------
the value of the portion of the Share Consideration then held
under the Escrow Agreement (which shares shall be valued at the
Average Closing Price per share for the five (5) trading days
immediately prior to the payment date) and the then amount of
Cash Consideration held under the Escrow Agreement.
9.2 Indemnification by AEC.
----------------------
(a) AEC shall indemnify and hold harmless the
Stockholders (under this Section 9.2, the "Indemnified
-----------
Stockholders") from and against any claims, demands, debts,
suits, actions, obligations, proceedings, losses, damages,
liabilities, deficiencies, costs and expenses (including without
limitation, all reasonable legal and other professional fees and
disbursements, interest, penalties and amounts paid in
settlement) (collectively, "Claims") arising out of, based upon
or by reason of (A) any breach by AEC of any representation or
warranty by AEC contained in this Agreement or (B) any breach or
non-fulfillment of, or failure to perform, any of the covenants,
agreements or undertakings of AEC which are contained in or made
pursuant to this Agreement. It is acknowledged that the person
who is acting as the agent of the Indemnified Stockholders
pursuant to the Escrow Agreement shall also act as agent on
behalf of the Indemnified Stockholders pursuant to this
Section 9.2 (the "Stockholders' Agent").
-----------
(b) Notwithstanding anything to the contrary herein,
any claim by the Indemnified Stockholders against AEC under this
Section 9.2 shall be payable by AEC only to the extent that the
-----------
Indemnified Stockholders' damages ("Damages") shall exceed the
Threshold Amount. At such time as the aggregate amount of the
Indemnified Stockholders Damages exceed the Threshold Amount, AEC
shall thereafter be liable on a dollar-for-dollar basis for the
full amount of all Indemnified Stockholders Damages, including
the Threshold Amount. AEC may make payments of amounts payable
under this Section 9.2 in U.S. currency and/or shares of AEC
Common Stock, which shares be valued at the Average Closing Price
per share for the five trading days immediately prior to the
payment date, as provided in the Escrow Agreement. In no event
shall the aggregate liability of AEC under this Section 9.2
exceed $350,000.
9.3 Procedure. (a) Any Claim brought by AEC or the
---------
Stockholders under this ARTICLE IX must be in writing, specifying
the nature of the Claim and the estimated amount of damages, and
be received by the party against whom indemnification is being
sought within one year after the Effective Date (the "Indemnity
Termination Date").
(b) In the event that subsequent to the Effective
Time, and prior to the Indemnity Termination Date, AEC receives
written notice of the assertion of a claim or the commencement of
any action or proceeding by any person who is not a party to this
Agreement (including any Governmental Entity) (a "Third Party
Claim"), against AEC, the Stockholders, DDS or one of their
affiliates against which AEC may be entitled to indemnification
hereunder, AEC shall give written notice of the Third Party Claim
to the Stockholders' Agent. AEC shall have the right to conduct
the defense of the Third Party Claim, and the cost of such
defense shall be part of AEC Damages. If an offer is made to
settle a Third Party Claim and AEC desires to accept such offer,
AEC shall give written notice of the offer of settlement to the
Stockholders' Agent who shall have fifteen (15) days from receipt
thereof to accept or reject the offer, which rejection must be on
a reasonable basis. The failure of the Stockholders Agent to
respond to a desired offer of settlement shall be deemed
acceptance thereof.
9.4 Remedies. Each of AEC and Acquisition Corp, on
--------
one hand, and the Stockholders and DDS (until the Effective Time)
and the Stockholders (after the Effective Time), on the other
hand, shall not be liable or responsible in any manner whatsoever
to the other, whether for indemnification or otherwise, with
respect to any matter arising out of the representations,
warranties or covenants of this Agreement or any Schedule hereto
or any certificate delivered in connection herewith except for
(i) equitable relief, (ii) pursuant to remedies expressly
provided for elsewhere in this Agreement and (iii) indemnity as
expressly provided in this ARTICLE IX, all of which provide the
exclusive remedy of the parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Each party hereto shall bear its own
--------
expenses with respect to the transactions contemplated hereby.
10.2 Amendment. This Agreement may not be amended,
---------
modified or supplemented except by a writing executed by
Acquisition Corp., AEC, DDS and the Stockholders.
10.3 Notices. Any notice, request, instruction or
-------
other document to be given hereunder by a party hereto shall be
in writing and shall be deemed to have been given, (a) when
received if given in person, (b) on the date of transmission if
sent by telex, facsimile or other wire transmission (with receipt
confirmed) or (c) three business days after being deposited in
the U.S. mail, certified or registered mail, postage prepaid:
(a) If to DDS or the Stockholders:
Dynamic Dental Systems, Inc.
000 Xxxxx Xxxxxx, XX
Xxxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, President
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP
Suite 2800, SunTrust Plaza
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Facsimile No.: 000-000-0000
(b) If to AEC or Acquisition Corp.:
American Electromedics Corp.
00 Xxxxxxxx Xxxxx, Xxxxx 00
Xxxxxxx, Xxx Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, President
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx & Priest LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may
designate for itself by notice given as herein provided.
10.4 Waivers. The failure of a party hereto at any
-------
time or times to require performance of any provision hereof
shall in no manner affect its right at a later time to enforce
the same. No waiver by a party of any condition or of any breach
of any term, covenant, representation or warranty contained in
this Agreement shall be effective unless in writing, and no
waiver in any one or more instances shall be deemed to be a
further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or breach of
any other term, covenant, representation or warranty.
10.5 Interpretation. The headings preceding the text
--------------
of Articles and Sections included in this Agreement and the
headings to Schedules attached to this Agreement are for
convenience only and shall not be deemed part of this Agreement
or be given any effect in interpreting this Agreement. The use
of the masculine, feminine or neuter gender herein shall not
limit any provision of this Agreement. The use of the terms
"including" or "include" shall in all cases herein mean
"including, without limitation" or "include, without limitation,"
respectively. Underscored references to Articles, Sections,
Paragraphs, Subsections, Subparagraphs, Schedules or Exhibits
shall refer to those portions of this Agreement. Prior drafts of
this Agreement shall not be considered in interpreting the rights
and obligations of the parties hereunder.
10.6 Applicable Law. This Agreement shall be governed
--------------
by and construed and enforced in accordance with the internal
laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
10.7 Assignment. This Agreement shall be binding upon
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and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no
assignment of any rights or obligations shall be made by any
party without the prior written consent of all the other parties
hereto.
10.8 No Third Party Beneficiaries. This Agreement is
----------------------------
solely for the benefit of the parties hereto and, to the extent
provided herein, and their respective directors, officers,
employees, agents and representatives, and no provision of this
Agreement shall be deemed to confer upon other third parties any
remedy, claim, liability, reimbursement, cause of action or other
right.
10.9 Enforcement of the Agreement. The parties hereto
----------------------------
agree that irreparable damage would result in the event that any
provision of this Agreement is not performed in accordance with
specific terms or is otherwise breached. It is accordingly
agreed that the parties hereto will be entitled to equitable
relief including an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and
provisions hereof.
10.10 Severability. If any provision of this Agreement
------------
shall be held invalid, illegal or unenforceable, the validity,
legality or enforceability of the other provisions hereof shall
not be affected thereby, and there shall be deemed substituted
for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
10.11 Remedies Cumulative. The remedies provided in
-------------------
this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available
by law, in equity or otherwise.
10.12 Entire Understanding. This Agreement sets forth
--------------------
the entire agreement and understanding of the parties hereto, and
supersedes, all prior agreements, arrangements and understandings
(written or oral) among the parties hereto with respect to the
subject matter herein.
10.13 Waiver of Jury Trial. Each party hereto waives
--------------------
the right to a trial by jury in any dispute in connection with
the transactions contemplated by this Agreement, and agrees to
take any and all action necessary or appropriate to effect such
waiver.
10.14 Governing Law. All matters concerning the
-------------
validity and interpretation and performance under this Agreement
shall be governed by the laws of the State of Delaware without
regard to the conflicts of law principals thereof.
10.15 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on the date first above
written.
AMERICAN ELECTROMEDICS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxxx, Chairman
DDS ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxxx, President
DYNAMIC DENTAL SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------
Xxxxx X. Xxxxxx, President
/s/ Xxxxx X. Xxxxx
-----------------------------
XXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx, Xx.
-----------------------------
XXXXXXX X. XXXXXX, XX.
/s/ Xxxxx X. Xxxxxxxxx
-----------------------------
XXXXX X. XXXXXXXXX
