AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
XXXXX & XXXXXXX, INC.
a Delaware corporation;
MINIMUM ACQUISITION SUB, INC.,
a Delaware corporation;
MAXM SYSTEMS CORPORATION,
a Delaware corporation;
___________________________
Dated as of December 10, 1996
___________________________
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TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . . . . . . 1
1.1 Merger of Merger Sub into the Company. . . . . . . . . . . . . 1
1.2 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing; Effective Time. . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers . 2
1.5 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . 2
1.6 Employee Stock Options and Warrants. . . . . . . . . . . . . . 4
1.7 Closing of the Company's Transfer Books. . . . . . . . . . . . 4
1.8 Exchange of Certificates . . . . . . . . . . . . . . . . . . . 4
1.9 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . 6
1.11 Accounting Treatment.. . . . . . . . . . . . . . . . . . . . . 6
1.12 Further Action . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . 7
2.1 Due Organization; Etc. . . . . . . . . . . . . . . . . . . . . 7
2.2 Articles of Incorporation and Bylaws; Records. . . . . . . . . 7
2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . 8
2.4 Financial Statements.. . . . . . . . . . . . . . . . . . . . . 9
2.5 Absence of Changes.. . . . . . . . . . . . . . . . . . . . . . 10
2.6 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Bank Accounts; Receivables.. . . . . . . . . . . . . . . . . . 12
2.8 Equipment; Leasehold.. . . . . . . . . . . . . . . . . . . . . 12
2.9 Proprietary Assets.. . . . . . . . . . . . . . . . . . . . . . 13
2.10 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.11 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.12 Compliance with Legal Requirements.. . . . . . . . . . . . . . 19
2.13 Governmental Authorizations. . . . . . . . . . . . . . . . . . 19
2.14 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.15 Employee and Labor Matters; Benefit Plans. . . . . . . . . . . 21
2.16 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 23
2.17 Sale of Products; Performance of Services. . . . . . . . . . . 24
2.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.19 Related Party Transactions.. . . . . . . . . . . . . . . . . . 24
2.20 Legal Proceedings; Orders. . . . . . . . . . . . . . . . . . . 25
2.21 Authority; Binding Nature of Agreement.. . . . . . . . . . . . 25
2.22 Non-Contravention; Consents. . . . . . . . . . . . . . . . . . 25
2.23 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB . . . 27
3.1 SEC Filings; Financial Statements. . . . . . . . . . . . . . . 27
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TABLE OF CONTENTS
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PAGE
3.2 Authority; Binding Nature of Agreement . . . . . . . . . . . . 27
3.3 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4. CERTAIN COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . 28
4.1 Access and Investigation . . . . . . . . . . . . . . . . . . . 28
4.2 Operation of the Company's Business. . . . . . . . . . . . . . 28
4.3 Notification; Updates to Disclosure Schedule . . . . . . . . . 30
4.4 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . . 31
5.1 Filings and Consents . . . . . . . . . . . . . . . . . . . . . 31
5.2 Information Statement. . . . . . . . . . . . . . . . . . . . . 31
5.3 Company Shareholders' Meeting. . . . . . . . . . . . . . . . . 32
5.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . 32
5.5 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . 32
5.6 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . 32
5.7 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Termination of Agreements. . . . . . . . . . . . . . . . . . . 33
5.9 FIRPTA Matters . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11 Termination of Employee Plans. . . . . . . . . . . . . . . . . 33
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB . 33
6.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 33
6.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . 34
6.3 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . 34
6.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Agreements and Documents . . . . . . . . . . . . . . . . . . . 34
6.6 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.8 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . . 36
6.9 No Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 36
6.10 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 Termination of Employee Plans. . . . . . . . . . . . . . . . . 36
6.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . 36
6.13 Rule 506 . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.14 Waiver of Dissenters Rights. . . . . . . . . . . . . . . . . . 37
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY . . . . . . 37
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PAGE
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . 37
7.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . 37
7.3 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Termination Procedures.. . . . . . . . . . . . . . . . . . . . 38
8.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 38
SECTION 9. INDEMNIFICATION, ETC . . . . . . . . . . . . . . . . . . . . . 39
9.1 Survival of Representations, Etc.. . . . . . . . . . . . . . . 39
9.2 Indemnification by Shareholders. . . . . . . . . . . . . . . . 39
9.3 Limitation of Parent Claims. . . . . . . . . . . . . . . . . . 40
9.4 Exclusive Remedy.. . . . . . . . . . . . . . . . . . . . . . . 40
9.5 No Contribution. . . . . . . . . . . . . . . . . . . . . . . . 41
9.6 Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.7 Defense of Third Party Claims. . . . . . . . . . . . . . . . . 41
9.8 Exercise of Remedies by Indemnitees Other Than Parent . . . . 41
SECTION 10. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 42
10.1 Indemnitors' Agent . . . . . . . . . . . . . . . . . . . . . . 42
10.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 42
10.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 43
10.7 Time of the Essence. . . . . . . . . . . . . . . . . . . . . . 43
10.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 44
10.11 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 44
10.12 Remedies Cumulative; Specific Performance . . . . . . . . . . 44
10.13 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.14 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.16 Parties in Interest . . . . . . . . . . . . . . . . . . . . . 45
10.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 45
10.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 45
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EXHIBITS
Exhibit A - Certain Definitions
Exhibit B - Shareholder Agreement
Exhibit C - Form of Amended and Restated Articles of Incorporation of
Surviving Corporation
Exhibit D - Directors and Officers of Surviving Corporation
Exhibit E - Escrow Agreement
Exhibit F - Current Shareholder List
Exhibit G - Bonuses to be paid during Pre-Closing Period
Exhibit H - Shareholder Investment Certifications
Exhibit I-1 - Affiliate Agreement
Exhibit I-2 - Persons to execute Affiliate Agreements
Exhibit J - Persons to sign Release
Exhibit K - Form of Release
Exhibit L - Registration Rights Agreement
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of December 10, 1996, by and among: XXXXX &
BABBAGE, INC., a Delaware corporation ("Parent"); MINIMUM ACQUISITION SUB,
INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"); and MAXM SYSTEMS CORPORATION, a Delaware corporation (the "Company").
Certain other capitalized terms used in this Agreement are defined in Exhibit
A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company in accordance with this Agreement and the
Delaware General Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. The Merger is intended to constitute a transaction which is taxable
to the Company's Shareholders. For accounting purposes, it is intended that
the Merger be treated as a "pooling of interests."
C. This Agreement has been adopted and approved by the respective
boards of directors of Parent, Merger Sub and the Company.
D. Contemporaneously with the execution and delivery of this
Agreement, certain shareholders holding voting capital stock in the Company
are executing and delivering to Parent a shareholder agreement (a
"Shareholder Agreement") of even date herewith substantially in the form of
Exhibit B.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as
defined in Section 1.3), Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall cease. The Company
will continue as the surviving corporation in the Merger (the "Surviving
Corporation").
1
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the Delaware General
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Xxxxxx Godward LLP at 10:00 a.m. on January 22, 1997, or at such
other time and date during the period from January 1, 1997 through February
28, 1997 as Parent may designate upon not less than five days' prior notice
to the Company (the "Scheduled Closing Time"). (The date on which the
Closing actually takes place is referred to in this Agreement as the "Closing
Date.") Contemporaneously with or as promptly as practicable after the
Closing, a properly executed agreement of merger shall be filed with the
Secretary of State of the State of Delaware in conformity with the
requirements of Sections 103 and 251 of the Delaware General Corporation Law.
The Merger shall become effective at the time such agreement of merger is
filed with and accepted by the Secretary of State of the State of Delaware
(the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the Articles of Incorporation of the Surviving Corporation shall
be amended and restated as of the Effective Time to conform to Exhibit C;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub
as in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified
on Exhibit D.
1.5 CONVERSION OF SHARES. Subject to Sections 1.8(c) and 1.9, at the
Effective Time, by virtue of the Merger and without any further action on the
part of Parent, Merger Sub, the Company or any shareholder of the Company,
each outstanding preferred and common share of the Company (the "Company
Shares") will be converted into the voting common stock of the Parent (the
"Parent Common Stock") as follows:
(a) The board of directors of the Company will determine the
aggregate value of the common stock of the Parent (the "Parent Common Stock")
to be received in consideration of the Merger (the "Merger Shares") by
multiplying the aggregate number of the Merger Shares by the average closing
price on the Nasdaq National Market for the shares of the Parent Common Stock
for the 5 trading days ending two days prior to the Effective Time (the
"Parent Common Share Market Value"). The aggregate number of Merger Shares to
be issued at the Effective Time shall be (a) 1,189,654.50 if the guaranteed
amounts payable to Micromuse Plc pursuant to the agreement referenced in
Section 5.9(b) below are reduced to zero by December 30, 1996 or (b)
1,137,930 if such amounts are not reduced to zero by December 30, 1996, such
number of Merger Shares in both cases having taken into account the 3 for 2
stock split of the Parent Common Stock consummated on December 10, 1996.
2
(b) Each share of the Company's Class A preferred stock ("Class A
Preferred Stock"), par value $.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into a fraction of
a share of Parent Common Stock determined by dividing $3.305 plus dividends
accrued from December 31, 1996 to the Effective Time by the Parent Common
Share Market Value.
(c) Each share of the Company's Class B preferred stock ("Class B
Preferred Stock"), par value $.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into a fraction of
a share of Parent Common Stock determined by dividing $3.810 plus dividends
accrued from December 31, 1996 to the Effective Time by the Parent Common
Share Market Value.
(d) Each share of the Company's Class C preferred stock ("Class C
Preferred Stock"), par value $.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into a fraction of
a share of Parent Common Stock determined by dividing $5.077 plus dividends
accrued from December 31, 1996 to the Effective Time by the Parent Common
Share Market Value.
(e) Each share of the Company's common stock issued and
outstanding immediately prior to the Effective Time shall be converted into
such fraction of a share of Parent Common Stock as is equal to (x) the Merger
Shares reduced by the aggregate number of shares allocated pursuant to
subsections (b), (c) and (d) above, divided by (y) the number of the shares
of the Company's common stock outstanding immediately prior to the Effective
Time.
(f) A portion of the Merger Shares shall be delivered into escrow
and held as specified in Section 1.8 hereof.
(g) If any shares of the Company's voting capital stock (the
"Company Shares") outstanding immediately prior to the Closing Date are
unvested or are subject to a repurchase option, risk of forfeiture or other
condition under any applicable restricted stock purchase agreement or other
agreement with the Company, then the shares of Parent Common Stock issued in
exchange for such Company Shares will also be unvested and subject to the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may accordingly
be marked with appropriate legends.
(h) The number of shares of Parent Common Stock set forth in this
Section 1.5 take into account the 3 for 2 stock split of the Parent Common
Stock consummated on December 10, 1996. In the event the Parent at any time
or from time to time declares or pays any dividend on Parent Common Stock
payable in Parent Common Stock or in any right to acquire Parent Common
Stock, or shall effect a further subdivision of the outstanding shares of
Parent Common Stock into a greater number of shares of Parent Common Stock
(by stock dividends, combinations, splits, recapitalizations and the like),
or in the event the outstanding shares of Parent Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Parent Common Stock, then the aggregate number of Merger
Shares to be issued at the Effective Time shall be proportionately decreased
or increased, as appropriate.
3
1.6 EMPLOYEE STOCK OPTIONS AND WARRANTS. At the Effective Time, (a)
each stock option (a "Company Option") that is then vested and outstanding
under the Company's 1988 Stock Option Plan and 1990 Stock Option Plan (the
"Company Stock Plans"), may at the holder's option be exercised and (b) each
unvested Company Option that is then outstanding under the Company Stock
Plans which is entitled to acceleration shall be accelerated and may be
exercised at the holder's option, in each case in accordance with the terms
of, and to the extent permitted by, the relevant Company Stock Plan and the
stock option agreement by which such Company Option is evidenced. In
addition, each company warrant (a "Company Warrant") that is then outstanding
and entitled to be exercised may be exercised in accordance with and to the
extent permitted by the warrant agreement by which such Company warrant is
evidenced. All remaining outstanding unexercised vested and unvested Company
Options and Warrants shall be canceled in accordance with the Company Stock
Plans and relevant warrant agreements.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock
that were outstanding immediately prior to the Effective Time shall cease to
have any rights as shareholders of the Company, and the stock transfer books
of the Company shall be closed with respect to all shares of such capital
stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of the Company's capital stock shall be made on
such stock transfer books after the Effective Time. If, after the Effective
Time, a valid certificate previously representing any of such shares of the
Company's capital stock (a "Company Stock Certificate") is presented to the
Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) At or promptly after the Effective Time, Parent shall cause
its transfer agent to prepare two certificates for each holder of Company
Shares who, taking into account Section 1.8(c) below, will receive Merger
Shares, such certificates together representing the total number of shares of
Parent Common Stock issuable pursuant to the Merger in respect of Company
Shares held by such holder (the "Share Amount"), as follows: (a) one
certificate (the "Escrow Certificate") shall represent ten percent of such
holder's Share Amount (rounded up to the nearest whole number of shares of
Parent Stock), shall be in the name of First National Bank of Boston, as
escrow agent (the "Escrow Agent"), and shall be delivered to the Escrow Agent
as security for such holder's indemnity obligations under Section 9 hereof
and (b) one certificate (the "Balance Certificate") shall represent the
balance of such holder's Share Amount after deducting therefrom the shares of
Parent Common Stock being placed in escrow hereunder. At the Escrow Agent's
request, one certificate may be issued in the name of the Escrow Agent for
deposit in escrow in lieu of separate Escrow Certificates. At and after the
Effective Time, each holder shall be entitled to receive such holder's
Balance Certificate upon delivery to Parent of a certificate or certificates
representing the full number of Company Shares held by such holder
immediately prior to the Effective Time, together with a properly completed
transmittal letter. The Escrow Agent shall hold and administer the shares of
Parent Common Stock delivered to it hereunder in accordance with the terms of
an escrow agreement dated as of the Effective Date among Parent, the
Shareholder Representatives (as defined there) and the Escrow Agent (the
"Escrow Agreement"), such Escrow Agreement to be substantially in the form of
4
Exhibit E attached hereto. Until surrendered as contemplated by this Section
1.8, each Company Stock Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive upon such surrender a
certificate representing shares of Parent Common Stock (and cash in lieu of
any fractional share of Parent Common Stock) as contemplated by this Section
1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the
owner of such lost, stolen or destroyed Company Stock Certificate to provide
an appropriate affidavit and to deliver a bond (in such sum as Parent may
reasonably direct) as indemnity against any claim that may be made against
Parent or the Surviving Corporation with respect to such Company Stock
Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Company Stock Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of any fractional share shall be paid to any such
holder, until such holder surrenders such Company Stock Certificate in
accordance with this Section 1.8 (at which time such holder shall be entitled
to receive all such dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional
shares shall be issued, provided that fractional shares resulting from the
conversion of each class of shares held by holders of more than one class of
shares of the Company will be aggregated before determining whether a
fractional share remains. In lieu of such fractional shares, any holder of
capital stock of the Company who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock issuable to such holder) shall, upon surrender
of such holder's Company Stock Certificate(s), be paid in cash the dollar
amount (rounded to the nearest whole cent), without interest, determined by
multiplying such fraction by the Parent Common Share Market Price.
(d) The shares of Parent Common Stock to be issued in the Merger
shall be characterized as "restricted securities" for purposes of Rule 144
under the Securities Act, and each certificate representing any of such
shares shall, until such time that the shares are not so restricted under the
Securities Act, bear a legend identical or similar in effect to the following
legend (together with any other legend or legends required by applicable
state securities laws or otherwise, if any):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR
UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT IS AVAILABLE."
(e) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable
to any holder or former holder
5
of capital stock of the Company pursuant to this Agreement such amounts as
Parent or the Surviving Corporation may be required to deduct or withhold
therefrom under the Code or under any provision of state, local or foreign
tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be liable
to any holder or former holder of capital stock of the Company for any shares
of Parent Common Stock (or dividends or distributions with respect thereto),
or for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the
Effective Time, are or may become entitled to appraisal rights pursuant to
Section 262 of the Delaware General Corporation Law shall not be converted
into or represent the right to receive Parent Common Stock in accordance with
Section 1.5 (or cash in lieu of fractional shares in accordance with Section
1.8(c)), and the holder or holders of such shares shall be entitled only to
such rights as may be granted to such holder or holders by Section 262 of the
Delaware General Corporation Law; PROVIDED, HOWEVER, that if the appraisal
right associated with such shares shall not be perfected, or if any such
shares shall lose their appraisal rights then, as of the later of the
Effective Time or the time of the failure to perfect such status or the loss
of such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) Parent Common Stock in accordance with
Section 1.5 (and cash in lieu of fractional shares in accordance with Section
1.8(c)).
(b) The Company shall give Parent (i) prompt written notice of any
notice received by the Company prior to the Effective Time of a shareholder's
intent to demand payment for such shareholder's Company Shares pursuant to
Section 262 of the Delaware General Corporation Law and of any other demand,
notice or instrument delivered to the Company prior to the Effective Time
pursuant to the Delaware General Corporation Law, and (ii) the opportunity
to participate in all negotiations and proceedings with respect to any such
demand, notice or instrument. The Company shall not make any payment or
settlement offer prior to the Effective Time with respect to any such demand
unless Parent shall have consented in writing to such payment or settlement
offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a transaction which is taxable to the Company's
shareholders.
1.11 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.12 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation or
Parent with full right, title and possession of and to all
6
rights and property of Merger Sub and the Company, the officers and directors
of the Surviving Corporation and Parent shall be fully authorized (in the
name of Merger Sub, in the name of the Company and otherwise) to take such
action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, to and for the benefit of the
Indemnitees, as follows:
2.1 DUE ORGANIZATION; ETC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its
assets in the manner in which its assets are currently owned and used; and
(iii) to perform its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1(b) of the Disclosure Schedule,
the Company has not conducted any business under or otherwise used, for any
purpose or in any jurisdiction, any fictitious name, assumed name, trade name
or other name, other than the name "MAXM Systems Corporation."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of
the Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Material
Adverse Effect on the Company. The Company is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1(c) of the
Disclosure Schedule.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets forth
(i) the names of the members of the Company's board of directors, (ii) the
names of the members of each committee of the Company's board of directors,
and (iii) the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any
Entity except those listed in Part 2.1(e)(i) of the Disclosure Schedule and,
except for the equity interests identified in Part 2.1(e)(i) of the
Disclosure Schedule, the Company has never owned, beneficially or otherwise,
any shares or other securities of, or any direct or indirect equity interest
in, any Entity. The Company has not agreed and is not obligated to make any
future investment in or capital contribution to any Entity. Except as
identified in Part 2.1(e)(i) of the Disclosure Schedule, the Company has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's
articles of incorporation and
7
bylaws, including all amendments thereto; (2) the stock records of the
Company; and (3) except as set forth in Part 2.2 of the Disclosure Schedule,
the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a
meeting) of the shareholders of the Company, the board of directors of the
Company and any minutes and other records of the committees of the board of
directors of the Company. There have been no formal meetings or other
proceedings of the shareholders of the Company or the board of directors of
the Company or any committee of the board of directors of the Company that
are not fully reflected in such minutes or other records. There has not been
any violation of any of the provisions of the Company's articles of
incorporation or bylaws, and the Company has not taken any action that is
inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of
the Company's board of directors. The books of account, stock records,
minute books and other records of the Company are accurate, up-to-date and
complete in all material respects, and have been maintained in accordance
with prudent business practices and all applicable Legal Requirements.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
12,000,000 shares of Common Stock (with $.01 par value), of which 1,301,646
shares have been issued and are outstanding as of the date of this Agreement;
(ii) 38,254,470 shares of Class A Preferred Stock (with $.01 par value), of
which 38,210,648 shares have been issued and are outstanding as of the date
of this Agreement; (iii) 5,180,000 shares of Class B Preferred Stock (with
$.01 par value), of which 5,000,000 shares have been issued and are
outstanding; and 4,250,000 shares of Class C Preferred Stock (with $.01 par
value), of which 4,171,846 shares have been issued and are outstanding.
Every ten outstanding shares of Class A Preferred Stock and Class B Preferred
Stock are convertible into one share of Company Common Stock. Each
outstanding share of Class C Preferred Stock is convertible into one share of
Company Common Stock. All of the outstanding shares of Company Common Stock,
Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock
have been duly authorized and validly issued, and are fully paid and
non-assessable, and none of the shares is subject to any repurchase option or
restriction on transfer, except for the repurchase option held by Xxxx X.
Xxxxx, III and restrictions on transfer imposed by virtue of applicable
federal and state securities laws.
(b) Under the Company Stock Plans, options to purchase 1,483,040
shares, which number includes 11,230 Class B warrants, are outstanding as of
the date of this Agreement. Part 2.3(b) of the Disclosure Schedule
accurately sets forth, with respect to each Company Option that is
outstanding as of the date of this Agreement: (i) the name of the holder of
such Company Option; (ii) the total number of shares of the Company's common
stock (the "Company Common Stock") that is subject to such Company Option and
the number of shares of Company Common Stock with respect to which such
Company Option is immediately exercisable; (iii) the term of such Company
Option; (iv) the vesting schedule for such Company Option; (v) the exercise
price per share of Company Common Stock purchasable under such Company
Option; and (vi) whether such Company Option is subject to acceleration on or
before the Effective Time. Except as set forth in Part 2.3(b) of the
Disclosure Schedule, there is no: (i) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable)
8
to acquire any shares of the capital stock or other securities of the
Company; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock
or other securities of the Company; (iii) Contract under which the Company
is or may become obligated to sell or otherwise issue any shares of its
capital stock or any other securities; or (iv) to the best of the knowledge
of the Company, condition or circumstance that may give rise to or provide a
basis for the assertion of a claim by any Person to the effect that such
Person is entitled to acquire or receive any shares of capital stock or other
securities of the Company.
(c) All outstanding shares of Company Common Stock, Class A
Preferred Stock, Class B Preferred Stock and Class C Preferred Stock and all
outstanding Company Options and Company Warrants, have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
(d) Except as set forth in Part 2.3(d) of the Disclosure Schedule,
the Company has never repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the Delaware General Corporation Law and all other
applicable Legal Requirements, and (ii) all requirements set forth in
applicable restricted stock purchase agreements and other applicable
Contracts.
(e) Except as set forth in Part 2.3(e) of the Disclosure Schedule,
the Company has not issued dividends, redeemed any stock or made any other
distribution, or carried out a stock split, recapitalization or stock
issuance of any kind since the Company's last audited financial statements.
(f) Attached hereto as Exhibit F is a true and correct list of the
names, addresses and number of shares owned by each of the holders of record
of every class and series of capital stock of the Company as of the most
recent practicable date.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the audited balance sheets of the Company as of September
30, 1995 and 1994, and the related audited income statements,
statements of shareholders' equity and statements of cash flows of the
Company for the years then ended, together with the notes thereto and
the unqualified report and opinion of Coopers & Xxxxxxx LLP relating
thereto; and
(ii) the unaudited balance sheet of the Company as of September
30, 1996 (the "Unaudited Interim Balance Sheet"), and the related
unaudited income statement of the Company for the twelve months then
ended.
9
(b) The Company Financial Statements are accurate and complete in
all material respects and present fairly the financial position of the
Company as of the respective dates thereof and the results of operations and
(in the case of the financial statements referred to in Section 2.4(a)(i))
cash flows of the Company for the periods covered thereby. The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered (except that the financial statements referred to in Section
2.4(a)(ii) do not contain footnotes and are subject to normal and recurring
year-end audit adjustments, which will not, individually or in the aggregate,
be material in magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since September 30, 1996:
(a) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations,
financial performance or prospects, and, to the best of the
Company's knowledge, no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on the
Company;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of
the Company's assets (whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any
shares of capital stock, and has not repurchased, redeemed or
otherwise reacquired any shares of capital stock or other
securities;
(d) the Company has not sold, issued or authorized the
issuance of (i) any capital stock or other security (except for
Company Common Stock issued upon the exercise of outstanding
Company Options), (ii) any option or right to acquire any capital
stock or any other security (except for Company Options described
in Part 2.3 of the Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other
security;
(e) the Company has not amended or waived any of its rights
under, or permitted the acceleration of vesting under, (i) any
provision of the Company Stock Plans, (ii) any provision of any
agreement evidencing any outstanding Company Option, or (iii) any
restricted stock purchase agreement;
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a
party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or
similar transaction;
(g) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
10
(h) the Company has not made any capital expenditure which,
when added to all other capital expenditures made on behalf of the
Company since September 30, 1996, exceeds $150,000;
(i) the Company has not (i) entered into or permitted any of
the assets owned or used by it to become bound by any Contract that
is or would constitute a Material Contract (as defined in Section
2.10(a)), or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any such Contract;
(j) the Company has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise
disposed of, or leased or licensed, any right or other asset to any
other Person, or (iii) waived or relinquished any right, except for
immaterial rights or other immaterial assets acquired, leased,
licensed or disposed of in the ordinary course of business and
consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account
receivable or other indebtedness;
(l) the Company has not made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any
Encumbrance, except for pledges of immaterial assets made in the
ordinary course of business and consistent with the Company's past
practices;
(m) the Company has not (i) lent money to any Person (other
than pursuant to routine travel advances made to employees in the
ordinary course of business), or (ii) incurred or guaranteed any
indebtedness for borrowed money;
(n) the Company has not (i) established or adopted any
Employee Benefit Plan, (ii) paid any bonus or made any
profit-sharing or similar payment to, or increased the amount of
the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
(o) the Company has not changed any of its methods of
accounting or accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal
Proceeding;
(r) the Company has not entered into any material transaction
or taken any other material action outside the ordinary course of
business or inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of
the actions referred to in clauses "(c)" through "(r)" above.
11
2.6 TITLE TO ASSETS
(a) The Company owns, and has good, valid and marketable title to,
all assets except for assets which are not individually or collectively
material purported to be owned by it, including: (i) all assets reflected
on the Unaudited Interim Balance Sheet; (ii) all assets referred to in
Parts 2.7(b) and 2.9 of the Disclosure Schedule and all of the Company's
rights under the Contracts identified in Part 2.10 of the Disclosure
Schedule; and (iii) all other assets reflected in the Company's books and
records as being owned by the Company. Except as set forth in Part 2.6(a) of
the Disclosure Schedule, all of said assets are owned by the Company free and
clear of any liens or other Encumbrances, except for (x) any lien for current
taxes not yet due and payable, and (y) minor liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets
that are material to the business of the Company and that are being leased or
licensed to the Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of
the Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate
and complete breakdown and aging of all accounts receivable, notes receivable
and other receivables of the Company as of September 30, 1996. Except as set
forth in Part 2.7(b) of the Disclosure Schedule, all existing accounts
receivable of the Company (including those accounts receivable reflected on
the Unaudited Interim Balance Sheet that have not yet been collected and
those accounts receivable that have arisen since September 30, 1996 and have
not yet been collected) (i) represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary
course of business, (ii) are current and will be collected in full when due,
without any counterclaim or set off (net of an allowance for doubtful
accounts not to exceed $389,000 in the aggregate).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets
owned by or leased to the Company are adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of the Company's business in the manner in
which such business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
12
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body,
(i) a brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company.
Part 2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of
less than $5,000 per license, per copy), and identifies the license agreement
under which such Proprietary Asset is being licensed to the Company. Except
as set forth in Part 2.9(a)(iv) of the Disclosure Schedule, the Company has
good, valid and marketable title to all of the Company Proprietary Assets
identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the Disclosure Schedule, free
and clear of all liens and other Encumbrances, and has a valid right to use
all Proprietary Assets identified in Part 2.9(a)(iii) of the Disclosure
Schedule. Except as set forth in Part 2.9(a)(v) of the Disclosure Schedule,
the Company is not obligated to make any payment to any Person for the use of
any Company Proprietary Asset. Except as set forth in Part 2.9(a)(vi) of the
Disclosure Schedule, the Company has not developed jointly with any other
Person any Company Proprietary Asset with respect to which such other Person
has any rights.
(b) The Company has taken all measures and precautions necessary
to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the
value of all Company Proprietary Assets. Except as set forth in Part 2.9(b)
of the Disclosure Schedule, the Company has not (other than pursuant to
license agreements identified in Part 2.10 of the Disclosure Schedule)
disclosed or delivered to any Person, or permitted the disclosure or delivery
to any Person of, (i) the source code, or any portion or aspect of the source
code, of any Company Proprietary Asset, or (ii) the object code, or any
portion or aspect of the object code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. The Company is
not infringing, misappropriating or making any unlawful use of, and the
Company has not at any time infringed, misappropriated or made any unlawful
use of, or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by
any other Person. To the best of the Company's knowledge, no other Person is
infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts
with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided with respect thereto by or on
behalf of the Company; and (ii) there has not been any claim by any customer
13
or other Person alleging that any Company Proprietary Asset (including each
version thereof that has ever been licensed or otherwise made available by
the Company to any Person) does not conform in all material respects with any
specification, documentation, performance standard, representation or
statement made or provided by or on behalf of the Company, and, to the best
of the Company's knowledge, there is no basis for any such claim. The
Company has established adequate reserves on the Unaudited Interim Balance
Sheet to cover all costs associated with any obligations that the Company may
have with respect to the correction or repair of programming errors or other
defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner
in which such business has been and is being conducted. Except as set forth
in Part 2.9(e) of the Disclosure Schedule, (i) the Company has not licensed
any of the Company Proprietary Assets to any Person on an exclusive basis,
and (ii) the Company has not entered into any covenant not to compete or
Contract limiting its ability to exploit fully any of its Proprietary Assets
or to transact business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule,
(i) all current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or
exclusions from the scope of its coverage) that is substantially identical to
the form of Invention and Non-Disclosure Agreement previously delivered to
Parent, and (ii) all current and former consultants and independent
contractors to the Company have executed and delivered to the Company an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Invention and
Non-Disclosure Agreement previously delivered to Parent.
(g) Except as set forth in Part 2.9(g) of the Disclosure Schedule,
the Company has not entered into and is not bound by any Contract under which
any Person has the right to distribute or license, on a commercial basis, any
Company Proprietary Asset including source code, object code, or any
versions, modifications or derivative works of source code or object code in
any Company Proprietary Asset.
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of,
or the performance of services by, any employee, consultant or
independent contractor;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or
any Proprietary Asset;
(iii) each Company Contract imposing any restriction
on the Company's right or ability (A) to compete with any other
Person, (B) to acquire any product or other asset or any services
from any other Person, to sell any product or other asset to or
14
perform any services for any other Person or to transact business
or deal in any other manner with any other Person, or (C) develop
or distribute any technology;
(iv) each Company Contract creating or involving any
agency relationship, distribution arrangement or franchise
relationship;
(v) each Company Contract relating to the acquisition,
issuance or transfer of any securities;
(vi) each Company Contract relating to the creation of
any Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating
any guaranty, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;
(viii) each Company Contract creating or relating to
any partnership or joint venture or any sharing of revenues,
profits, losses, costs or liabilities;
(ix) each Company Contract relating to the purchase or
sale of any product or other asset by or to, or the performance of
any services by or for, any Related Party (as defined in Section
2.19);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into
outside the ordinary course of business or was inconsistent with
the Company's past practices;
(xii) any other Company Contract that has a term of more
than 60 days and that may not be terminated by the Company (without
penalty) within 60 days after the delivery of a termination notice
by the Company; and
(xiii) any other Company Contract that contemplates or
involves (A) the payment or delivery of cash or other consideration
in an amount or having a value in excess of $25,000 in the
aggregate, or (B) the performance of services having a value in
excess of $25,000 in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete
copies of all written Contracts identified in Part 2.10 of the Disclosure
Schedule, including all amendments thereto. Part 2.10 of the Disclosure
Schedule provides an accurate description of the terms of each Company
Contract that is not in written form. Each Contract identified in Part 2.10
of the Disclosure Schedule is valid and in full force and effect, and, to the
best of the Company's
15
knowledge, is enforceable by the Company in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) the Company has not violated or breached, or
committed any default under, any Company Contract, and, to the best
of the Company's knowledge, no other Person has violated or
breached, or committed any default under, any Company Contract;
(ii) to the best of the Company's knowledge, no event has
occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or could reasonably be
expected to, (A) result in a violation or breach of any of the
provisions of any Company Contract, (B) give any Person the right
to declare a default or exercise any remedy under any Company
Contract, (C) give any Person the right to accelerate the maturity
or performance of any Company Contract, or (D) give any Person the
right to cancel, terminate or modify any Company Contract;
(iii) since December 31, 1993, the Company has not
received any notice or other communication regarding any actual or
possible violation or breach of, or default under, any Company
Contract which, to the best of the Company's knowledge, has not
been resolved to the satisfaction of all parties, except to the
extent such violations, breaches or defects are not material,
either individually or in the aggregate; and
(iv) the Company has not waived any of its material
rights under any Company Contract.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Company Contract to renegotiate, any amount paid or payable to
the Company under any Company Contract or any other material term or
provision of any Company Contract.
(e) The Contracts identified in Part 2.10 of the Disclosure
Schedule constitute all of the Contracts necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted, either individually or collectively with other Contracts.
(f) Part 2.10 of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer,
award, written proposal, term sheet or similar document has been submitted or
received by the Company since January 1, 1996 and which may still be accepted.
(g) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
16
(h) Except as set forth in Part 2.10(h) of the Disclosure Schedule:
(i) the Company has not had any determination of
noncompliance, entered into any consent order or undertaken any
internal investigation relating directly or indirectly to any
Government Contract or Government Bid;
(ii) the Company has complied in all material respects
with all Legal Requirements with respect to all Government
Contracts and Government Bids;
(iii) the Company has not, in obtaining or performing
any Government Contract, violated (A) the Truth in Negotiations Act
of 1962, as amended, (B) the Service Contract Act of 1963, as
amended, (C) the Contract Disputes Act of 1978, as amended, (D) the
Office of Federal Procurement Policy Act, as amended, (E) the
Federal Acquisition Regulations (the "FAR") or any applicable
agency supplement thereto, (F) the Cost Accounting Standards, (G)
the Defense Industrial Security Manual (DOD 5220.22-M), (H) the
Defense Industrial Security Regulation (DOD 5220.22-R) or any
related security regulations, or (I) any other applicable
procurement law or regulation or other Legal Requirement;
(iv) all facts set forth in or acknowledged by the
Company in any certification, representation or disclosure
statement submitted by the Company with respect to any Government
Contract or Government Bid were current, accurate and complete as
of the date of submission;
(v) neither the Company nor any of its employees has
been debarred or suspended from doing business with any
Governmental Body, and, to the best of the Company's knowledge, no
circumstances exist that would warrant the institution of debarment
or suspension proceedings against the Company or any employee of
the Company;
(vi) no negative determinations of responsibility have
been issued against the Company in connection with any Government
Contract or Government Bid;
(vii) no direct or indirect costs incurred by the
Company have been questioned or disallowed as a result of a finding
or determination of any kind by any Governmental Body;
(viii) no Governmental Body, and no prime contractor
or higher-tier subcontractor of any Governmental Body, has withheld
or set off, or threatened to withhold or set off, any material
amount due to the Company under any Government Contract;
(ix) to the best of the Company's knowledge, there are
not and have not been any irregularities, misstatements or
omissions relating to any Government Contract or Government Bid
that have led to or could reasonably be expected to lead to (A) any
administrative, civil, criminal or other investigation, Legal
Proceeding or indictment
17
involving the Company or any of its employees, (B) the questioning or
disallowance of any costs submitted for payment by the Company, (C) the
recoupment of any payments previously made to the Company, (D) a finding
or claim of fraud, defective pricing, mischarging or improper payments on
the part of the Company, or (E) the assessment of any penalties or
damages of any kind against the Company;
(x) there is not and has not been any (A) outstanding
claim against the Company by, or dispute involving the Company
with, any prime contractor, subcontractor, vendor or other Person
arising under or relating to the award or performance of any
Government Contract, (B) fact known by the Company upon which any
such claim could reasonably be expected to be based or which may
give rise to any such dispute, (C) final decision of any
Governmental Body against the Company;
(xi) the Company is not undergoing and has not undergone
any audit, and the Company has no knowledge of any basis for any
impending audit, arising under or relating to any Government
Contract (other than normal routine audits conducted in the
ordinary course of business);
(xii) the Company has not entered into any financing
arrangement or assignment of proceeds with respect to the
performance of any Government Contract;
(xiii) no payment has been made by the Company or by
any Person acting on the Company's behalf to any Person (other than
to any bona fide employee or agent (as defined in subpart 3.4 of
the FAR) of the Company) which is or was contingent upon the award
of any Government Contract or which would otherwise be in violation
of any applicable procurement law or regulation or any other Legal
Requirement;
(xiv) the Company has complied with all applicable
regulations and other Legal Requirements and with all applicable
contractual requirements relating to the placement of legends or
restrictive markings on material technical data, computer software
and other Proprietary Assets;
(xv) in each case in which the Company has delivered or
otherwise provided any technical data, computer software or Company
Proprietary Asset to any Governmental Body in connection with any
Government Contract, the Company has marked such technical data,
computer software or Company Proprietary Asset with all markings
and legends (including any "restricted rights" legend and any
"government purpose license rights" legend) necessary (under the
FAR or other applicable Legal Requirements) to ensure that no
Governmental Body or other Person is able to acquire any unlimited
rights with respect to such technical data, computer software or
Company Proprietary Asset;
(xvi) the Company has not made any disclosure to any
Governmental Body pursuant to any voluntary disclosure agreement;
18
(xvii) the Company is not and will not be required to
make any filing with or give any notice to, or to obtain any
Consent from, any Governmental Body under or in connection with any
Government Contract or Government Bid as a result of or by virtue
of (A) the execution, delivery of performance of this Agreement or
any of the other agreements referred to in this Agreement, or (B)
the consummation of the Merger or any of the other transactions
contemplated by this Agreement.
2.11 LIABILITIES. The Company has no material accrued, contingent or
other liabilities of any nature, either matured or unmatured (whether or not
required to be reflected in financial statements in accordance with generally
accepted accounting principles, and whether due or to become due), except
for: (a) liabilities identified as such in the "liabilities" column of the
Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries
that have been incurred by the Company since September 30, 1996 in the
ordinary course of business and consistent with the Company's past practices;
(c) liabilities under the Company Contracts identified in Part 2.10 of the
Disclosure Schedule, to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Company Contracts; and (d) the liabilities identified in Part 2.11 of the
Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since December 31, 1993 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Company.
Except as set forth in Part 2.12 of the Disclosure Schedule, since December
31, 1993, the Company has not received any notice or other communication from
any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and
the Company has delivered to Parent accurate and complete copies of all
Governmental Authorizations identified in Part 2.13 of the Disclosure
Schedule. The Governmental Authorizations identified in Part 2.13 of the
Disclosure Schedule are valid and in full force and effect, and collectively
constitute all Governmental Authorizations necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted. The Company is, and at all times since December 31, 1993 has
been, in substantial compliance with the terms and requirements of the
respective Governmental Authorizations identified in Part 2.13 of the
Disclosure Schedule. Since December 31, 1993, the Company has not received
any notice or other communication from any Governmental Body regarding (a)
any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification
of any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending
on or before the Closing Date (the "Company Returns") (i) have been or will
be filed on or before the applicable due date
19
(including any extensions of such due date), and (ii) have been, or will be
when filed, accurately and completely prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on the
Company Returns to be due on or before the Closing Date have been or will be
paid on or before the Closing Date.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles.
The Company will establish, in the ordinary course of business and consistent
with its past practices, reserves adequate for the payment of all Taxes for
the period from September 30, 1996 through the Closing Date, and the Company
will disclose the dollar amount of such reserves to Parent on or prior to the
Closing Date.
(c) Except as set forth in Part 2.14(c) of the Disclosure
Schedule, there have been no examinations or audits of any Company Return.
The Company has delivered to Parent accurate and complete copies of all audit
reports and similar documents (to which the Company has access) relating to
the Company Returns. Except as set forth in Part 2.14(c) of the Disclosure
Schedule, no extension or waiver of the limitation period applicable to any
of the Company Returns has been granted (by the Company or any other Person),
and no such extension or waiver has been requested from the Company.
(d) Except as set forth in Part 2.14(d) of the Disclosure
Schedule, no claim or Proceeding is pending or has been threatened against or
with respect to the Company in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax
and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by the Company with respect to any
Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Company and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of the
Company except liens for current Taxes not yet due and payable. The Company
has not entered into or become bound by any agreement or consent pursuant to
Section 341(f) of the Code. The Company has not been, and the Company will
not be, required to include any adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or
any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to
the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code. The Company is not, and has never been, a party to or bound
by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract.
(f) Except as set forth in Part 2.14(f) of the Disclosure
Schedule, since December 31, 1990, (i) no Governmental Body has asserted any
claim or otherwise made any allegation that the Company has failed or may
have failed to pay any sales tax, use tax or similar
20
Tax, and (ii) the Company has not engaged in any discussions or negotiations
with any Governmental Body, and has not sent any written communication to or
received any written communication from any Governmental Body, in connection
with any possible failure on the part of the Company to pay any sales tax,
use tax or similar Tax.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life
or other insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program or agreement (collectively, the "Plans")
sponsored, maintained, contributed to or required to be contributed to by the
Company for the benefit of any employee of the Company ("Employee"), except
for Plans which would not require the Company to make payments or provide
benefits having a value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and, to
the best of the Company's knowledge, has not at any time in the six year
period before the Closing maintained, sponsored or contributed to, any
employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether
or not excluded from coverage under specific Titles or Merger Subtitles of
ERISA) for the benefit of Employees or former Employees which are described
in Part 2.15(c) of the Disclosure Schedule (the "Welfare Plans"), none of
which is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two
years;
(iii) an accurate and complete copy of the most recent summary plan
description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or
other funding agreement (including all amendments thereto) and
accurate and complete copies the most recent financial statements
thereof;
21
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements,
investment management agreements, subscription and participation
agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent determination
letter received from the Internal Revenue Service with respect to such Plan
(if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) The Company is not required to be, and, to the best of the
Company's knowledge, has never been required to be, treated as a single
employer with any other Person under Section 4001(b)(1) of ERISA or Section
414(b), (c), (m) or (o) of the Code. The Company has never been a member of
an "affiliated service group" within the meaning of Section 414(m) of the
Code. To the best of the Company's knowledge, the Company has never made a
complete or partial withdrawal from a multiemployer plan, as such term is
defined in Section 3(37) of ERISA, resulting in "withdrawal liability," as
such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable
law) in a manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether
or not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated
by applicable law, including coverage provided pursuant to Section 4980B of
the Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees' beneficiaries)).
(h) To the best of the Company's knowledge, with respect to each
of the Welfare Plans constituting a group health plan within the meaning of
Section 4980B(g)(2) of the Code, the provisions of Section 4980B of the Code
("COBRA") have been complied with in all material respects.
(i) To the best of the Company's knowledge, each of the Plans has
been operated and administered in all material respects in accordance with
applicable Legal Requirements, including but not limited to ERISA and the
Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and the Company is not aware of any reason why any such
determination letter should be revoked.
22
(k) Except as set forth in Part 2.15(k) of the Disclosure
Schedule, neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any
bonus, golden parachute or severance payment) to any current or former
Employee or director of the Company (whether or not under any Plan), or
materially increase the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to
bonus, deferred compensation or commission arrangements), their dates of
employment and their positions. The Company is not a party to any collective
bargaining contract or other Contract with a labor union involving any of its
Employees. All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date
of return to full service.
(n) To the best of the Company's knowledge, the Company is in
compliance in all material respects with all applicable Legal Requirements
and Contracts relating to employment, employment practices, wages, bonuses
and terms and conditions of employment, including employee compensation
matters.
(o) Except as set forth in Part 2.15(o) of the Disclosure
Schedule, the Company has good labor relations, and the Company has no reason
to believe that (i) the consummation of the Merger or any of the other
transactions contemplated by this Agreement will have a material adverse
effect on the Company's labor relations, or (ii) any of the Company's
employees intends to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes the possession by the Company of all permits and other Governmental
Authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof. The Company has not received any
notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that
the Company is not in compliance with any Environmental Law, and, to the best
of the Company's knowledge, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future. To the best of the Company's knowledge, no current or prior owner of
any property leased or controlled by the Company has received any notice or
other communication (in writing or otherwise), whether from a Government
Body, citizens group, employee or otherwise, that alleges that such current
or prior owner or the Company is not in compliance with any Environmental
Law. All Governmental Authorizations currently held by the Company pursuant
to Environmental Laws are identified in Part 2.16 of the Disclosure Schedule.
(For purposes of this Section 2.16: (i) "Environmental Law" means any
federal, state,
23
local or foreign Legal Requirement relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance
that is now or hereafter regulated by any Environmental Law or that is
otherwise a danger to health, reproduction or the environment.)
2.17 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) The Company will not incur or otherwise become subject to any
material liability arising from (i) any product, system, program, Proprietary
Asset or other asset designed, developed, manufactured, assembled, sold,
supplied, installed, repaired, licensed or made available by the Company on
or prior to the Closing Date, or (ii) any consulting services, installation
services, programming services, repair services, maintenance services,
training services, support services or other services performed by the
Company on or prior to the Closing Date.
(b) Except as set forth in Part 2.17(b) of the Disclosure
Schedule, no customer or other Person has, at any time since December 31,
1993, asserted or threatened to assert any claim against the Company (other
than claims that have been resolved satisfactorily at no material cost to the
Company) under or based upon (i) any warranty provided by or on behalf of the
Company, or (ii) any services performed by the Company.
2.18 INSURANCE. Part 2.18 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and the Company
has delivered to Parent accurate and complete copies of the insurance
policies identified on Part 2.18 of the Disclosure Schedule. Each of the
insurance policies identified in Part 2.18 of the Disclosure Schedule is in
full force and effect. Since December 31, 1992, the Company has not received
any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy, or (c)
material adjustment in the amount of the premiums payable with respect to any
insurance policy.
2.19 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.19 of
the Disclosure Schedule: (a) no Related Party has, and no Related Party has
at any time since December 31, 1993 had, any direct or indirect interest in
any material asset used in or otherwise relating to the business of the
Company; (b) no Related Party is, or has at any time since December 31, 1993
been, indebted to the Company; (c) since December 31, 1993, no Related Party
has entered into, or has had any direct or indirect financial interest in,
any material Contract, transaction or business dealing involving the Company;
(d) no Related Party is competing, or has at any time since December 31, 1993
competed, directly or indirectly, with the Company; and (e) no Related Party
has any claim or right against the Company (other than rights under company
Options and rights to receive compensation for services performed as an
employee of the
24
Company). (For purposes of the Section 2.19 each of the following shall be
deemed to be a "Related Party": (i) each individual who is, or who has at
any time since December 31, 1993 been, an officer of the Company; (ii) each
member of the immediate family of each of the individuals referred to in
clause "(i)" above; and (iii) any trust or other Entity (other than the
Company) in which any one of the individuals referred to in clauses "(i)" and
"(ii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary
or equity interest.)
2.20 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.20 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the Company's
knowledge) no Person has threatened to commence any Legal Proceeding: (i)
that involves the Company or any of the assets owned or used by the Company
or any Person whose liability the Company has or may have retained or
assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best of the Company's
knowledge, except as set forth in Part 2.20(a) of the Disclosure Schedule, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.20(b) of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by or has ever been
pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the best of the Company's knowledge, no officer or other
employee of the Company is subject to any order, writ, injunction, judgment
or decree that prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to the Company's
business.
2.21 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement; and the execution, delivery and
performance by the Company of this Agreement have been duly authorized by all
necessary action on the part of the Company and its board of directors. This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.22 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.22 of
the Disclosure Schedule, neither (1) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
25
(a) contravene, conflict with or result in a violation
of (i) any of the provisions of the Company's articles of
incorporation or bylaws, or (ii) any resolution adopted by the
Company's shareholders, the Company's board of directors or any
committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the right to
challenge any of the transactions contemplated by this Agreement or
to exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation
of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is held by the Company
or that otherwise relates to the Company's business or to any of
the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation
or breach of, or result in a default under, any provision of any
Company Contract that is or would constitute a Material Contract,
or give any Person the right to (i) declare a default or exercise
any remedy under any such Company Contract, (ii) accelerate the
maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or
other Encumbrance upon or with respect to any asset owned or used
by the Company (except for minor liens that will not, in any case
or in the aggregate, materially detract from the value of the
assets subject thereto or materially impair the operations of the
Company).
Except as set forth in Part 2.22 of the Disclosure Schedule and by the
Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, the Company is not and
will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any
of the other transactions contemplated by this Agreement.
2.23 FULL DISCLOSURE.
(a) This Agreement (including the Disclosure Schedule) does not,
and the closing certificate to be delivered by the Company upon the day of
the Closing (the "Closing Certificate") will not, (i) contain any
representation, warranty or information that is false or misleading with
respect to any material fact, or (ii) omit to state any material fact or
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
26
(b) The information supplied by the Company for inclusion in the
Information Statement (as defined in Section 5.2) will not, as of the date of
the Information Statement or as of the date of the Company Shareholders'
Meeting (as defined in Section 5.3), (i) contain any statement that is
inaccurate or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make such information (in the
light of the circumstances under which it is provided) not false or
misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant
to the Company as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement
(on a form other than Form S-8) and definitive proxy statement filed by
Parent with the SEC between September 30, 1995 and the date of this Agreement
(the "Parent SEC Documents"). As of the time it was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing): (i) each of the Parent SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); (ii) none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (iii) since the date of the
Parent's last Quarterly Report on Form 10-Q, no event has occurred which
would have a material adverse effect on Parent's business, condition, assets,
liability, operations, financial performance or prospects.
(b) The consolidated financial statements contained in the Parent
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered, except as may be
indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iii) fairly present the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of Parent and its
subsidiaries for the periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance
by Parent and Merger Sub of this Agreement (including the contemplated
issuance of Parent Common Stock in the Merger in accordance with this
Agreement) have been duly authorized by all necessary action on the part of
Parent and Merger Sub and their respective boards of directors. No vote of
Parent's
27
stockholders is needed to approve the Merger. This Agreement constitutes the
legal, valid and binding obligation of Parent and Merger Sub, enforceable
against them in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
3.3 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common Stock
to be issued in the Merger will, when issued in accordance with the
provisions of this Agreement, be validly issued, fully paid and nonassessable.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and
Parent's Representatives with reasonable access to the Company's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company; and (b) provide Parent and Parent's Representatives with copies of
such existing books, records, Tax Returns, work papers and other documents
and information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as Parent may
reasonably request.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business
and operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact
its current business organization, keep available the services of its
current officers and employees and maintain its relations and good will
with all suppliers, customers, landlords, creditors, employees and other
Persons having business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
identified in Part 2.18 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly (but
in no event less frequently than weekly) to Parent concerning the status
of the Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of
capital stock, and shall not repurchase, redeem or otherwise reacquire
any shares of capital stock or other securities or purchase or acquire
for cash any of its options or warrants;
28
(f) the Company shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option or right to
acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security
(except that the Company shall be permitted to issue Company Common
Stock to employees upon the exercise of outstanding Company Options and
to issue shares of Company Common Stock upon the conversion of shares of
Class A Preferred Stock, Class B Preferred Stock or Class C Preferred
Stock);
(g) the Company shall not amend or waive any of its rights under,
or, except as described in Part 4.2(g) of the Disclosure Schedule,
permit the acceleration of vesting under, (i) any provision of the
Company Stock Plans, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any provision of any restricted
stock purchase agreement;
(h) the Company shall not amend or permit the adoption of any
amendment to the Company's articles of incorporation or bylaws, or
effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction (except that the Company may
issue shares of Company Common Stock upon the conversion of shares of
Class A Preferred Stock, Class B Preferred Stock and Class C Preferred
Stock);
(i) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for
the purchase of items requiring capital expenditures of no more than
$1000;
(k) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or
would constitute a Material Contract, or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any such
Contract;
(l) the Company shall not except in the ordinary course of
business (i) acquire, lease or license any right or other asset from any
other Person, (ii) sell or otherwise dispose of, or lease or license,
any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or
disposed of by the Company pursuant to Contracts that are not Material
Contracts;
(m) the Company shall not (i) lend money to any Person (except
that the Company may make routine travel advances to employees in the
ordinary course of business and may, consistent with its past practices,
allow employees to acquire Company Common Stock in exchange for
promissory notes upon exercise of Company Options), or (ii) incur or
guarantee any indebtedness for borrowed money (except that the Company
may make routine borrowings in the ordinary course of business under its
line of credit with Silicon Valley Bank);
29
(n) except for the period after the Closing and as set forth in
Exhibit G, the Company shall not (i) establish, adopt or amend any
Employee Benefit Plan, (ii) pay any bonus or make any profit-sharing
payment, cash incentive payment or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hire any new employee;
(o) the Company shall not change any of its methods of accounting
or accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the
actions described in clauses "(e)" through "(q)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Parent gives its prior written consent
to the taking of such action by the Company, which consent will not be
unreasonably withheld (it being understood that Parent's withholding of
consent to any action will not be deemed unreasonable if Parent determines in
good faith that the taking of such action would not be in the best interests
of Parent or would not be in the best interests of the Company).
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of:
(i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or constitutes
an inaccuracy in or breach of any representation or warranty made
by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that
would cause or constitute an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement if
(A) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the
date of this Agreement;
(iii) any breach of any covenant or obligation of the
Company; and
30
(iv) any event, condition, fact or circumstance that
would make the timely satisfaction of any of the conditions set
forth in Section 6 or Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then the Company shall promptly deliver to Parent an
update to the Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and
warranties made by the Company in this Agreement, or (ii) determining whether
any of the conditions set forth in Section 6 has been satisfied.
4.4 NO NEGOTIATION. During the Pre-Closing Period, the Company shall
not, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal
or offer from any Person (other than Parent) relating to a possible
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into
any agreement with, or provide any non-public information to, any Person
(other than Parent) relating to or in connection with a possible
Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition
Transaction.
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given
by such party in connection with the Merger and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain all Consents (if any) required to be obtained (pursuant to
any applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Merger and the other transactions contemplated by this
Agreement. The Company shall (upon request) promptly deliver to Parent a
copy of each such filing made, each such notice given and each such Consent
obtained by the Company during the Pre-Closing Period.
5.2 INFORMATION STATEMENT. As promptly as practicable after the
execution of this Agreement, the Company and Parent shall jointly prepare an
Information Statement relating to
31
the approval of the Merger by the Company's shareholders (the "Information
Statement"). The Company shall provide and include in the Information
Statement such information relating to the Company and its shareholders as
may be required pursuant to Rule 502 under the Securities Act. The
Information Statement shall include the recommendation of the board of
directors of the Company in favor of the Merger.
5.3 COMPANY SHAREHOLDERS' MEETING. The Company shall, in accordance
with its articles of incorporation and bylaws and the applicable requirements
of the Delaware General Corporation Law, call and hold a special meeting of
its shareholders as promptly as practicable for the purpose of permitting
them to consider and to vote upon and approve the Merger and this Agreement
(the "Company Shareholders' Meeting"). The Company shall cause a copy of the
Information Statement to be delivered to each shareholder of the Company who
is entitled to vote at the Company Shareholders' Meeting. As promptly as
practicable after the delivery of copies of the Information Statement to all
shareholders entitled to vote at the Company Shareholders' Meeting, the
Company shall use its best efforts (i) to solicit from each of such
shareholders a proxy in favor of the approval of the Merger and this
Agreement, (ii) to cause each of such shareholders to identify in writing a
person reasonably acceptable to Parent as his or her "purchaser
representatives" (as defined in Rule 501 under the Securities Act) in
connection with evaluating the merits and risks of investing in Parent Common
Stock, and (iii) to cause each of such shareholders to execute and deliver to
Parent a Shareholder Investment Certification in the form of Exhibit H.
Without limiting the generality or the effect of anything contained in the
Shareholder Agreements being executed and delivered to Parent by certain
Company shareholders contemporaneously with the execution and delivery of
this Agreement, each such shareholder shall cause all shares of the capital
stock of the Company that are owned, beneficially or of record, by such
shareholder on the record date for the Company Shareholders' meeting to be
voted in favor of the Merger and this Agreement at such meeting.
5.4 PUBLIC ANNOUNCEMENTS.
(a) During the Pre-Closing Period, the Company shall not (and the
Company shall not permit any of its Representatives to) issue any press
release or make any public statement regarding this Agreement or the Merger,
or regarding any of the other transactions contemplated by this Agreement,
without Parent's prior written consent.
(b) During the Pre-Closing Period, Parent will consult with the
Company prior to issuing any press release or making any public statement
regarding the Merger (unless Parent reasonably determines that Parent is
required, by virtue of any applicable Legal Requirement, to issue any such
press release or make any such public statement under the circumstances that
make it infeasible or impractical to consult with the Company).
5.5 POOLING OF INTERESTS. During the Pre-Closing Period, no party to
this Agreement shall take any action that could reasonably be expected to
have an adverse effect on the ability of Parent to account for the Merger as
a "pooling of interests."
5.6 AFFILIATE AGREEMENTS. The Company shall use all commercially
reasonable efforts to cause each other Person identified on Exhibit I-2 (and
any other Person that could
32
reasonably be deemed to be an "affiliate" of the Company for purposes of the
Securities Act), to execute and deliver to Parent, as promptly as practicable
after the execution of this Agreement, an Affiliate Agreement in the form of
Exhibit I-1.
5.7 BEST EFFORTS. During the Pre-Closing Period, (a) the Company shall
use its best efforts to cause the conditions set forth in Section 6 to be
satisfied on a timely basis, and (b) Parent and Merger Sub shall use their
best efforts to cause the conditions set forth in Section 7 to be satisfied
on a timely basis.
5.8 TERMINATION OF AGREEMENTS. Prior to the Closing:
(a) the Company shall obtain waivers of the right of redemption in
respect of the Class A, B and C Preferred Stock by the holders thereof
in the event of a reorganization of the Company as contemplated herein,
from all of the holders thereof.
(b) the Company shall use all commercially reasonable efforts to
cause Micromuse Plc to enter into an agreement with the Company,
reasonably satisfactory in form and content to Parent (and conditioned
and effective upon the Closing), terminating all of the rights of
Micromuse Plc under the Value Added Reseller Agreement dated as of April
28, 1996 between the Company and Micromuse Plc.
5.9 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasure Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 -
0(x)(0) xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.10 RELEASE. At the Closing, each of the shareholders listed in
Exhibit J shall execute and deliver to the Company a Release in the form of
Exhibit K.
5.11 TERMINATION OF EMPLOYEE PLANS. At the Closing, the Company shall
terminate the Company Stock Plans, and shall ensure that no employee or
former employee of the Company has any rights under any of such Plans and
that any liabilities of the Company under such Plans (including any such
liabilities relating to services performed prior to the Closing) are fully
extinguished at no cost to the Company.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company in this Agreement and in each of the other
agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement shall
33
have been accurate in all respects as of the date of this Agreement, and
shall be accurate in all material respects as of the Scheduled Closing Time
as if made at the Scheduled Closing Time (without giving effect to any update
to the Disclosure Schedule other than the Special Disclosure Schedule
Amendment, and without giving effect to any "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
with which the Company is required to comply or required to perform at or
prior to the Closing shall have been complied with and performed in all
respects.
6.3 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote of (a) at least a majority of the
shares of Company Common Stock and Class A, Class B and Class C Preferred
Stock entitled to vote with respect thereto (which preferred stock is
entitled to cast the number of votes each to the number of whole shares of
the Company Common Stock into which the shares of preferred stock are
convertible), voting together with the Company Common Stock as a single
class; (b) at least a majority of the shares of Class A, Class B and Class C
Preferred Stock entitled to vote with respect thereto, voting together as a
single class; and (c) at least a majority of the shares of Class C Preferred
Stock entitled to vote with respect thereto.
6.4 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement
(including the Consents identified in Part 2.22 of the Disclosure Schedule)
shall have been obtained and shall be in full force and effect.
6.5 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have
received the following agreements and documents, each of which shall be in
full force and effect:
(a) Shareholder Investment Certifications in the form of Exhibit
H, each dated as of the date of the Company Shareholders' Meeting or as
of an earlier date, executed by each of the Company's shareholders;
(b) Affiliate Agreements in the form of Exhibit I-1, executed by
the Persons identified on Exhibit I-2 and by any other Person who could
reasonably be deemed to be an "affiliate" of the Company for purposes of
the Securities Act;
(c) a Release in the form of Exhibit K, executed by the
shareholders listed in Exhibit J;
(d) the waivers referred to in Section 5.9(a), executed by each of
the relevant shareholders;
(e) the agreement, if any, referred to in Section 5.9(b), executed
by Micromuse Plc;
34
(f) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees
and former employees of the Company and by all consultants and
independent contractors and former consultants and former independent
contractors to the Company who have not already signed such agreements
(including the individuals identified in Part 2.9(f) of the Disclosure
Schedule);
(g) the statement referred to in Section 5.10(a), executed by the
Company;
(h) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to
Parent, executed by X.X. Xxxx Real Estate Investment Trust;
(i) a legal opinion of Piper & Marbury L.L.P., dated as of the
Closing Date, in a form to be agreed;
(j) a legal opinion of Piper & Marbury, L.L.P., reasonably
satisfactory in form and content to Parent, to the effect that the
execution, delivery and performance of this Agreement and the
consummation of the Merger and the other transactions contemplated by
this Agreement do not and will not contravene, conflict with or result
in a violation of, or give any Governmental Body the right to exercise
any remedy or to obtain any relief under, any Government Contract to
which the Company is a party or under which the Company has any rights
or obligations;
(k) a letter from Ernst & Young LLP, dated as of the Closing Date,
regarding concurrence with Parent's management's conclusion regarding
the appropriateness of pooling of interests accounting treatment for the
Merger under APB Opinion No. 16 if consummated in accordance with this
Agreement, in a form customary in scope and substance for letters
delivered by independent public accountants in connection with
transactions of this type;
(l) a letter from Coopers & Xxxxxxx LLP, dated as of the Closing
Date, confirming that no transaction entered into by the Company, and no
other fact or circumstance relating to the Company, will prevent Parent
from accounting for the Merger as a "pooling of interests" in accordance
with generally accepted principles, Accounting Principles Board Opinion
No. 16 and all published rules, regulations and policies of the SEC;
(m) a certificate executed by the Company and containing the
representation and warranty of the Company that each of the
representations and warranties set forth in Section 2 is accurate in all
respects as of the Closing Date as if made on the Closing Date and that
the conditions set forth in Sections 6.1, 6.2 and 6.3 have been duly
satisfied (the "Closing Certificate");
(n) written resignations of all directors of the Company,
effective as of the Effective Time; and
35
(o) an Escrow Agreement substantially in the form of Exhibit E
executed by the Parent and the Company.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.10(b).
6.7 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing (subject to notice of issuance)
on the Nasdaq National Market.
6.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.9 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to
prohibit or limit the exercise by Parent of any material right pertaining to
its ownership of stock of the Surviving Corporation.
6.10 LEGENDS. The Company shall have provided Parent with evidence,
reasonably satisfactory to Parent, that all technical data, computer software
and Company Proprietary Assets delivered or otherwise provided or made
available by or on behalf of the Company to Governmental Bodies in connection
with Government Contracts have been marked with all markings and legends
(including any "restricted rights" legend and any "government purpose license
rights" legend) appropriate (under the FAR, under other applicable Legal
Requirements or otherwise) to ensure that no Governmental Body or other
Person is able to acquire any unlimited rights with respect to any of such
technical data, computer software or Company Proprietary Assets and to ensure
that the Company has not lost or relinquished and will not lose or relinquish
any material rights with respect thereto.
6.11 TERMINATION OF EMPLOYEE PLANS. The Company shall have provided
Parent with evidence, reasonably satisfactory to Parent, as to the
termination of the benefit plans referred to in Section 5.12.
6.12 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's business, condition, assets, liabilities,
operations, financial performance or prospects since the date of this
Agreement; PROVIDED, HOWEVER, that changes in projected revenues of the
Company resulting from the failure of the Company to execute agreements with
potential new customers after announcement of the execution of this Agreement
shall not be considered a material adverse change pursuant to this Section 6.
6.13 RULE 506. All applicable requirements of Rule 506 under the
Securities Act shall have been satisfied.
36
6.14 WAIVER OF DISSENTERS RIGHTS. Shareholders representing the right
to receive 95% of the shares of Parent Common Stock outstanding as of the
Closing Date shall have delivered Waivers of their appraisal rights under
Section 262 of the Delaware General Corporation Law.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material
respects as of the Scheduled Closing Time as if made at the Scheduled Closing
Time (without giving effect to any materiality or similar qualifications
contained in such representations and warranties).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that Parent and Merger Sub are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all
respects.
7.3 DOCUMENTS. The Company shall have received the following documents:
(a) a legal opinion of Xxxxxx Godward llp, dated as of the Closing
Date, in a form to be agreed; and
(b) a Registration Rights Agreement substantially in the form of
Exhibit L executed by the Parent.
7.4 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing (subject to notice of issuance)
on the Nasdaq National Market.
7.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
37
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become
impossible (other than as a result of any failure on the part of Parent
or Merger Sub to comply with or perform any covenant or obligation of
Parent or Merger Sub set forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the
Company to comply with or perform any covenant or obligation set forth
in this Agreement or in any other agreement or instrument delivered to
Parent);
(c) by Parent at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled
Closing Time;
(d) by the Company at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled
Closing Time;
(e) by Parent if the Closing has not taken place on or before
February 28, 1997 (other than as a result of any failure on the part of
Parent to comply with or perform any covenant or obligation of Parent
set forth in this Agreement);
(f) by the Company if the Closing has not taken place on or before
February 28, 1997 (other than as a result of the failure on the part of
the Company to comply with or perform any covenant or obligation set
forth in this Agreement or in any other agreement or instrument
delivered to Parent); or
(g) by the mutual consent of Parent and the Company.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Parent shall deliver to the Company a written notice stating that Parent is
terminating this Agreement and setting forth a brief description of the basis
on which Parent is terminating this Agreement. If the Company wishes to
terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or
Section 8.1(f), the Company shall deliver to Parent a written notice stating
that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement
shall terminate; PROVIDED, HOWEVER, that: (a) neither the Company nor Parent
shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement; (b) the parties
shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10.6; and (c) the Company shall, in all
events, remain bound by and continue to be subject to Section 5.4.
38
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Company
(including the representations and warranties set forth in Section 2 and the
representations and warranties set forth in the Closing Certificate) shall
survive the Closing and shall expire on the first anniversary of the Closing
Date; PROVIDED, HOWEVER, that if, at any time prior to the first anniversary
of the Closing Date, any Indemnitee (acting in good faith) delivers to any of
the Indemnitors (as defined below) a written notice alleging the existence of
a material inaccuracy in or a material breach of any of the representations
and warranties made by the Company (and setting forth in reasonable detail
the basis for such Indemnitee's belief that such an inaccuracy or breach may
exist) and asserting a claim for recovery under Section 9.2 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the first anniversary of the Closing until such time as such claim is
fully and finally resolved. All representations and warranties made by
Parent and Merger Sub shall terminate and expire as of the Effective Time,
and any liability of Parent or Merger Sub with respect to such
representations and warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations of
the Company, and the rights and remedies that may be exercised by the
Indemnitees, shall not be limited or otherwise affected by or as a result of
any information furnished to, or any investigation made by or knowledge of,
any of the Indemnitees or any of their Representatives, except to the extent
such information is included in the Disclosure Schedule or any update to the
Disclosure Schedule.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made
by the Company.
9.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section
9.1(a)), the holders of Company Shares who shall have received, or are
entitled to receive, Parent Common Stock pursuant to Section 1 above (the
"Indemnitors"), jointly and severally, shall hold harmless and indemnify each
of the Indemnitees from and against, and shall compensate and reimburse each
of the Indemnitees for, any Damages which are directly or indirectly suffered
or incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are
directly or indirectly connected with: (i) any material inaccuracy in or
material breach of any representation or warranty set forth in Section 2 or
in the Closing Certificate (without giving effect to any "Material Adverse
Effect" or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty, but giving effect to any update to the Disclosure Schedule
delivered by the Company to Parent prior to the Closing); (ii) any material
breach of any covenant or obligation of the Company (including the covenants
set forth in Sections 4 and 5); or (iii) any
39
Legal Proceeding relating to any inaccuracy or breach of the type referred to
in clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by
any Indemnitee for the purpose of enforcing any of its rights under this
Section 9).
(b) The Indemnitors acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation such as would be subject to
indemnification in Section 9.2(a), then (without limiting any of the rights
of the Surviving Corporation as an Indemnitee) Parent shall also be deemed,
by virtue of its ownership of the stock of the Surviving Corporation, to have
incurred Damages as a result of and in connection with such inaccuracy or
breach.
9.3 LIMITATION OF PARENT CLAIMS. The obligations and liabilities of
the Indemnitors hereunder with respect to indemnification for Damages shall
be subject to the following limitations:
(a) No indemnification shall be required to be made by the
Indemnitors hereunder unless the amount of Damages exceeds $100,000 in the
aggregate, in which case the Stockholders' indemnification obligations shall
apply to the amount of such Parent Claims in excess of $100,000.
(b) All claims for indemnification pursuant to Section 9.2 hereof
shall be brought and recovered by the Indemnitees solely by the return to
Parent of property from the Escrow Fund. Without limiting the generality of
the foregoing, Parent shall not have any recourse against any Indemnitors
individually, or any Indemnitor's assets or property, for Damages, except for
recovery against the Escrow Fund pursuant to the terms of this Agreement and
the Escrow Agreement.
(c) For purposes of determining the amount of property recoverable
from the Escrow Fund sufficient to satisfy any claim subject to
indemnification hereunder, the value of a share of Parent Stock shall be
equal to $29 per share.
(d) The Indemnitors and the Indemnitees acknowledge and agree that
any distribution of property from the Escrow Fund to satisfy a claim
hereunder shall be done so as to reduce each Indemnitor's interest in the
Parent Common Stock in the Escrow Fund in a pro rata manner based on the
Indemnitors' respective ownership interests in the Parent Common Stock in the
Escrow Fund.
9.4 EXCLUSIVE REMEDY. The indemnification provided in this Article 9
shall be the Indemnitees' exclusive remedy for any breach by the Company of a
representation or warranty contained in this Agreement or any certificate or
other writing delivered by the Company pursuant hereto or in connection
herewith. Notwithstanding the foregoing, nothing contained herein shall
limit a party's rights or remedies with respect to claims resulting from or
arising out of or willful misconduct or fraud.
40
9.5 NO CONTRIBUTION. Each Indemnitor waives, and acknowledges and
agrees that he shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become
subject under or in connection with this Agreement or the Closing Certificate.
9.6 INTEREST. Any Indemnitor who is required to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9
with respect to any Damages shall also be liable to such Indemnitee for
interest on the amount of such Damages (for the period commencing as of the
date on which such Indemnitor first received notice of a claim for recovery
by such Indemnitee and ending on the date on which the liability of such
Indemnitor to such Indemnitee is fully satisfied by such Indemnitor) at a
floating rate equal to the rate of interest publicly announced by Bank of
Boston from time to time as its prime, base or reference rate.
9.7 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against Parent or against any other Person) with
respect to which the Indemnitors may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9,
Parent shall have the right, at its election, to proceed with the defense of
such claim or Legal Proceeding on its own. If Parent so proceeds with the
defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim
or Legal Proceeding shall be borne and paid exclusively by the
Indemnitors out of the Escrow Fund;
(b) each Indemnitor shall make available to Parent any documents
and materials in his possession or control, if any, that may be
necessary to the defense of such claim or Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the consent of the Indemnitors'
Agent (as defined in Section 10.1); PROVIDED, HOWEVER, that such consent
shall not be unreasonably withheld.
Parent shall give the Indemnitors' Agent prompt notice of the commencement of
any such Legal Proceeding against Parent or the Surviving Corporation;
PROVIDED, HOWEVER, that any failure on the part of Parent to so notify the
Indemnitors' Agent shall not limit any of the obligations of the Indemnitors
under this Section 9 (except to the extent such failure materially prejudices
the defense of such Legal Proceeding).
9.8 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT. No
Indemnitee (other than Parent or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless Parent (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim
or the exercise of such other remedy.
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SECTION 10. MISCELLANEOUS PROVISIONS
10.1 INDEMNITORS' AGENT. The Indemnitors hereby irrevocably appoint
Xxxxxxx Xxxxx as their agent for purposes of Section 9 (the "Indemnitors'
Agent"), and Xxxxxxx Xxxxx hereby accepts his appointment as the Indemnitors'
Agent. Parent shall be entitled to deal exclusively with the Indemnitors'
Agent on all matters relating to Section 9, and shall be entitled to rely
conclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Indemnitor by
the Indemnitors' Agent, and on any other action taken or purported to be
taken on behalf of any Indemnitor by the Indemnitors' Agent, as fully binding
upon such Indemnitor. If the Indemnitors' Agent shall die, become disabled
or otherwise be unable to fulfill his responsibilities as agent of the
Indemnitors, then the Indemnitors shall, within ten days after such death or
disability, appoint a successor agent and, promptly thereafter, shall notify
Parent of the identity of such successor. Any such successor shall become
the "Indemnitors' Agent" for purposes of Section 9 and this Section 10.1. If
for any reason there is no Indemnitors' Agent at any time, all references
herein to the Indemnitors' Agent shall be deemed to refer to the Indemnitors.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to
Parent and its Representatives in connection with such investigation and
review), (b) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule) and all agreements, certificates,
opinions and other instruments and documents delivered or to be delivered in
connection with the transactions contemplated by this Agreement, (c) the
preparation and submission of any filing or notice required to be made or
given in connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions, and (d) the consummation of the
Merger.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name
42
of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
parties hereto):
IF TO PARENT:
Xxxxx & Xxxxxxx, Inc.
0000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxx X.X. Black
WITH A COPY TO:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
IF TO THE COMPANY:
MAXM Systems Corporation
0000 Xxxxxxxxxx Xxxxx, 0xx Xx.
XxXxxx, XX 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxx Xxxxxxx
WITH A COPY TO:
Piper & Marbing L.L.P.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Xx., Esq.
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.4, on and at all times after the Closing Date, the
Company shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public information in the
Company's possession that relates to the business of the Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
43
10.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
10.10 GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the
State of Delaware (without giving effect to principles of conflicts of laws).
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
the Company and its successors and assigns (if any); Parent and its
successors and assigns (if any); and Merger Sub and its successors and
assigns (if any). This Agreement shall inure to the benefit of: the Company;
the Company's shareholders (to the extent set forth in Section 1.5); the
holders of assumed Company Options (to the extent set forth in Section 1.6);
Parent; Merger Sub; the other Indemnitees (subject to Section 9); and the
respective successors and assigns (if any) of the foregoing. Parent may
freely assign any or all of its rights under this Agreement (including its
indemnification rights under Section 9), in whole or in part, to any other
Person without obtaining the consent or approval of any other party hereto or
of any other Person.
10.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative).
The parties to this Agreement agree that, in the event of any breach or
threatened breach by any party to this Agreement of any covenant, obligation
or other provision set forth in this Agreement for the benefit of any other
party to this Agreement, such other party shall be entitled (in addition to
any other remedy that may be available to it) to (a) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach.
10.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have
any effect except in the specific instance in which it is given.
44
10.14 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto.
10.15 SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable,
shall not be impaired or otherwise affected and shall continue to be valid
and enforceable to the fullest extent permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections
1.5, 1.6 and 9, none of the provisions of this Agreement is intended to
provide any rights or remedies to any Person other than the parties hereto
and their respective successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof; PROVIDED, HOWEVER, that the
confidentiality provisions agreed to in the letter of intent dated November
25, 1996 executed on behalf of Parent and the Company shall remain in effect
in accordance with its terms until the earlier of (a) the Effective Time, or
(b) the date on which such agreement is terminated in accordance with its
terms.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
45
The parties hereto have caused this Agreement to be executed and
delivered as of the date first above written.
XXXXX & BABBAGE, INC.,
a Delaware corporation
By:
--------------------------------------
MINIMUM ACQUISITION SUB, INC.,
a Delaware corporation
By:
--------------------------------------
MAXM SYSTEMS CORPORATION,
a Delaware corporation
By:
--------------------------------------
46
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock issued
to employees of the Company, upon exercise of Company Options or otherwise,
in routine transactions in accordance with the Company's past practices),
(ii) any option, call, warrant or right (whether or not immediately
exercisable) to acquire any capital stock or other equity security of the
Company (other than stock options granted to employees of the Company in
routine transactions in accordance with the Company's past practices), or
(iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock or other equity
security of the Company; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets
is or may become bound or under which the Company has, or may become subject
to, any obligation; or (c) under which the Company has or may acquire any
right or interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
material Proprietary Asset owned by or licensed to the Company or otherwise
used by the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental
Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking
of any nature.
A-1
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including reasonable attorneys' fees),
charge, cost (including costs of investigation) or expense of any nature.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to Parent on behalf of the
Company.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on
the voting of any security, any restriction on the transfer of any security
or other asset, any restriction on the receipt of any income derived from any
asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor
or higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body
or any such prime contractor or subcontractor otherwise has or may acquire
any right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement; or (b) right under any Contract with
any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental
authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
Entity and any court or other tribunal).
A-2
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a)
Parent; (b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the respective Representatives of the Persons referred to
in clauses "(a)" and "(b)" above; and (d) the respective successors and
assigns of the Persons referred to in clauses "(a)", "(b)" and "(c)" above;
PROVIDED, HOWEVER, that the Indemnitors shall not be deemed to be
"Indemnitees."
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or
any arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body.
MATERIAL. With respect to determining whether any item or other thing
is "material," such materiality shall be judged both individually and in the
aggregate.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
or in the Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications,
in such representations and warranties) would have a material adverse effect
on the Company's business, condition, assets, liabilities, operations,
financial performance or prospects.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or
other intellectual property right or intangible asset; or (b) right to use or
exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
A-3
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
A-4
