EXHIBIT 10.20
AGREEMENT AND PLAN OF REORGANIZATION
by and among
INSPECTECH CORPORATION,
PRIMIS, INC.
and
PRIMIS ACQUISITION CORP.
January 7, 2000
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is
made and entered into as of the 7th day of January, 2000, by and among
INSPECTECH CORPORATION, a California corporation ("InspecTech"), PRIMIS, INC., a
Georgia corporation ("Primis") and PRIMIS ACQUISITION CORP., a Delaware
corporation ("Acquisition Corp").
WITNESSETH:
PREAMBLE
The Boards of Directors of InspecTech, Primis and Acquisition
Corp are of the opinion that the transactions described herein are in the best
interests of the parties to this Agreement and their respective stockholders.
This Agreement provides for the acquisition of InspecTech by Primis pursuant to
the merger (the "Merger") of InspecTech with and into Acquisition Corp, a
wholly-owned subsidiary of Primis. At the Effective Time of the Merger (as
defined herein), the outstanding shares of capital stock of InspecTech shall be
converted into cash and shares of common stock of Primis as provided herein. As
a result, certain stockholders of InspecTech shall become stockholders of Primis
and InspecTech shall operate as a wholly-owned subsidiary of Primis. The
transactions described in this Agreement are subject to the approval of the
stockholders of InspecTech and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the Merger for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
Certain terms used in this Agreement are defined in Section 13
of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
1. TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, InspecTech shall be merged with and into
Acquisition Corp in accordance with the provisions of Section 252 of the DGCL
and with the effect provided in Section 259 of the DGCL and in accordance with
Section 1108 of the CGCL and with the effect provided in Section 1107 of the
CGCL. Acquisition Corp shall be the Surviving Corporation resulting from the
Merger and shall continue to be governed by the laws of the State of Delaware.
The Merger shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the Board of Directors of InspecTech and has
been or will be approved and adopted by the Board of Directors of Primis prior
to the Effective Time, and the Plan of Merger, in substantially the form of
EXHIBIT 1, which has been approved and adopted by the Board of Directors of
InspecTech and will be approved and adopted by the Board of Directors of
Acquisition Corp prior to the Effective Time.
1.2 TIME AND PLACE OF CLOSING. The consummation of the Merger
(the "Closing") shall take place at 9:00 A.M., P.S.T., on the date that the
Effective Time occurs or at such other time as the parties, acting through their
duly authorized officers, may mutually agree. The place of Closing shall be at
such location as may be mutually agreed upon by the parties.
1.3 EFFECTIVE TIME. The Merger and the other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Certificate of Merger shall become effective with the Secretary of
State of the State of Delaware (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the duly
authorized officers of each party, the parties shall use their reasonable best
efforts to cause the Effective Time to occur on or before January __, 2000.
2. TERMS OF MERGER
2.1 CHARTER. The Certificate of Incorporation of Acquisition
Corp in effect immediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation after the Effective Time until
otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of Acquisition Corp in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation after the Effective Time until otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The
directors and officers of InspecTech shall deliver their resignations effective
as of the Effective Time. The directors of Acquisition Corp in office
immediately prior to the Effective Time, together with such additional
individuals thereafter elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Acquisition Corp in office
immediately prior to the Effective Time, together with such additional
individuals thereafter elected, shall serve as the officers of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation.
3. MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any action
on the part of Primis, Acquisition Corp or InspecTech, or the stockholders of
any of the foregoing, the shares of the constituent corporations to the Merger
shall be converted as follows:
[a] Each share of Primis Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
2
[b] Each share of Acquisition Corp Common Stock
issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding from and after the Effective Time.
[c] Each share of InspecTech Common Stock issued and
outstanding at the Effective Time shall be converted into cash in an
amount equal to the InspecTech Value Per Share (as defined herein),
without interest (the "Common Stock Exchange Ratio").
[d] Each share of InspecTech Preferred Stock issued
and outstanding immediately prior to the Effective Time shall be
converted into .09938 share of Primis Common Stock, subject to
adjustment as provided in this Section 3.1 (the "Preferred Stock
Exchange Ratio").
Unless adjusted as provided in this Section 3.1, the InspecTech Value
Per Share shall equal $1.521, determined by dividing $12,168,068 (the "Aggregate
Merger Consideration") by 7,999,199, which is equal to the number of shares of
InspecTech Capital Stock issued and outstanding as of the date hereof and the
number of shares of InspecTech Capital Stock reserved for issuance as of the
date hereof with respect to outstanding options and warrants to purchase
InspecTech Capital Stock. If the "Closing Date Shareholders' Equity", as defined
herein, exceeds $1,000,000, the InspecTech Value Per Share and the Preferred
Stock Exchange Ratio shall be adjusted as follows: the InspecTech Value Per
Share shall equal the quotient obtained by dividing (a) $12,168,068, plus the
amount by which the Closing Date Shareholders' Equity exceeds $715,227, by (b)
7,999,199, and the Preferred Stock Exchange Ratio shall be determined by
dividing the InspecTech Value Per Share, as so adjusted, by $15.307. If the
Closing Date Shareholders' Equity is less than $500,000, the InspecTech Value
Per Share and the Preferred Stock Exchange Ratio shall be adjusted as follows:
the InspecTech Value Per Share shall equal the quotient obtained by dividing (x)
$12,168,068, less the amount by which the Closing Date Shareholders' Equity is
less than $715,227 by (y) 7,999,199, and the Preferred Stock Exchange Ratio
shall be determined by dividing the InspecTech Value Per Share, as so adjusted,
by $15.307.
For purposes of this Section 3, "Closing Date Balance Sheet" shall mean
InspecTech's unaudited consolidated balance sheet as of the Closing Date
prepared and delivered by InspecTech to Primis at the Closing. The Closing Date
Balance Sheet shall be prepared in accordance with GAAP applied on a basis
consistent with InspecTech's historical financial statements. InspecTech and its
accountants shall consult with Primis and its accountants in connection with the
preparation of the Closing Date Balance Sheet. The President and Chief Financial
Officer of InspecTech shall deliver to Primis a certificate to the effect that
the Closing Date Balance Sheet was prepared on the basis described above.
"Closing Date Shareholders' Equity" shall mean the consolidated shareholders'
equity of InspecTech as reflected on the Closing Date Balance Sheet.
Notwithstanding the foregoing, for purposes of calculating the Closing Date
Balance Sheet, the promissory notes to be purchased by Primis pursuant to the
Note Purchase Agreement referenced in Section 10.2[i] of this Agreement shall be
ignored.
3
3.2 ANTI-DILUTION PROVISIONS. In the event Primis changes the
number of shares of Primis Capital Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, recapitalization,
or similar transaction with respect to such stock and the record date therefor
(in the case of a stock dividend) or the effective date thereof (in the case of
a stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Common Stock Exchange
Ratio and the Preferred Stock Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY INSPECTECH. Each of the shares of
InspecTech Common Stock issued but not outstanding shall be canceled and retired
at the Effective Time and no consideration shall be issued in exchange therefor.
3.4 SHARES HELD BY PRIMIS. Notwithstanding anything contained
in this Section 3, each of the shares of InspecTech Capital Stock owned by
Primis shall be canceled and retired at the Effective Time and no consideration
shall be issued in exchange therefor.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, each holder of shares of InspecTech Preferred Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of Primis Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Primis Common Stock multiplied by the InspecTech Value Per Share. No such holder
will be entitled to dividends, voting rights, or any other rights as a
stockholder in respect of any fractional shares.
3.6 CONVERSION OF STOCK OPTIONS.
[a] At the Effective Time, each option to purchase or
acquire shares of InspecTech Common Stock ("InspecTech Rights") granted
by InspecTech pursuant to each InspecTech Stock Plan which is
outstanding at the Effective Time, whether or not exercisable, shall
not terminate but shall be converted into and become rights with
respect to Primis Common Stock, and Primis or Acquisition Corp shall
assume each InspecTech Right, in accordance with the terms of the
InspecTech Stock Plan and stock option agreement by which it is
evidenced, except that from and after the Effective Time, (i) Primis
and its Compensation Committee (or Board of Directors if no
Compensation Committee shall exist) shall be substituted for InspecTech
and the committee of InspecTech's Board of Directors (including, if
applicable, the entire Board of Directors of InspecTech) administering
such InspecTech Stock Plan, (ii) each InspecTech Right assumed by
Primis may be exercised solely for shares of Primis Common Stock, (iii)
the number of shares of Primis Common Stock subject to such InspecTech
Right shall be equal to the number of shares of InspecTech Common Stock
subject to such InspecTech Right immediately prior to the Effective
Time multiplied by the Preferred Stock Exchange Ratio and rounded down
to the nearest whole share, and (iv) the per share exercise price under
each such InspecTech Right shall be adjusted by dividing the per share
exercise price under each such InspecTech Right by the Preferred Stock
Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
4
provisions of clauses (iii) and (iv) of the first sentence of this
Section 3.6, each InspecTech Right which is an "incentive stock option"
shall be adjusted as required by Section 424 of the Internal Revenue
Code, so as not to constitute a modification, extension or renewal of
the option, within the meaning of Section 424(h) of the Internal
Revenue Code. Primis and Acquisition Corp agree to take all necessary
steps to effectuate the foregoing provisions of this Section 3.6.
[b] At or prior to the Effective Time, Primis shall
take all corporate action necessary to reserve for issuance sufficient
shares of Primis Common Stock for delivery upon exercise of InspecTech
Rights assumed by it in accordance with this Section 3.6.
[c] All restrictions or limitations on transfer with
respect to InspecTech Common Stock awarded under the InspecTech Stock
Plan or any other plan, program or arrangement of InspecTech, to the
extent that such restrictions or limitations shall not have already
lapsed, and except as otherwise expressly provided in such plan,
program or arrangement, shall remain in full force and effect with
respect to shares of Primis Common Stock into which such stock is
converted pursuant to Section 3.6.
3.7 CONVERSION OF WARRANTS.
[a] At the Effective Time, each option to purchase or
acquire shares of InspecTech Common Stock pursuant to the InspecTech
Warrants, which is outstanding at the Effective Time, whether or not
exercisable, shall not terminate but shall be converted into and become
a warrant to purchase shares of Primis Common Stock, and Primis shall
assume each InspecTech Warrant, in accordance with the terms thereof by
which it is evidenced, except that from and after the Effective Time,
(i) each InspecTech Warrant assumed by Primis may be exercised solely
for shares of Primis Common Stock, (ii) the number of shares of Primis
Common Stock subject to such InspecTech Warrant shall be equal to the
number of shares of InspecTech Common Stock subject to such InspecTech
Warrant immediately prior to the Effective Time multiplied by the
Preferred Stock Exchange Ratio and rounded down to the nearest whole
share, and (iv) the per share exercise price under each such InspecTech
Warrant shall be adjusted by dividing the per share exercise price
under each such InspecTech Warrant by the Exchange Ratio and rounding
up to the nearest cent.
[b] At or prior to the Effective Time, Primis shall
take all corporate action necessary to reserve for issuance sufficient
shares of Primis Common Stock for delivery upon exercise of InspecTech
Warrants assumed by it in accordance with this Section 3.6.
3.8 FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
InspecTech, or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or their
5
designees shall be authorized to execute and deliver, in the name and on behalf
of InspecTech, all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of InspecTech, all such other acts and things as
may be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of InspecTech and otherwise
to carry out the purposes of this Agreement.
4. EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time,
Primis shall cause to be mailed to the former stockholders of InspecTech
appropriate transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of InspecTech Capital Stock shall pass, only upon proper
delivery of such certificates to Primis). After the Effective Time, each holder
of shares of InspecTech Capital Stock issued and outstanding at the Effective
Time shall surrender the certificate or certificates representing such shares to
Primis and shall promptly upon surrender thereof receive in exchange therefor
the consideration provided in Article 3 of this Agreement. Subject to Section
7.2 of this Agreement, to the extent required by Section 3.5 of this Agreement,
each holder of shares of InspecTech Capital Stock issued and outstanding at the
Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Primis Common Stock to which such holder may be otherwise entitled. No interest
shall accrue or be paid on the cash payable, if any, on the surrender of a
certificate. Primis shall not be obligated to deliver the consideration to which
any former holder of InspecTech Capital Stock is entitled as a result of the
Merger until such holder surrenders such holder's certificate or certificates
representing the shares of InspecTech Capital Stock for exchange as provided in
this Section 4.1. The certificate or certificates of InspecTech Capital Stock so
surrendered shall be duly endorsed as Primis may require. Any other provision of
this Agreement notwithstanding, neither the Surviving Corporation nor Primis
shall be liable to a holder of InspecTech Capital Stock for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
4.2 RIGHTS OF FORMER INSPECTECH STOCKHOLDERS. At the Effective
Time, the stock transfer books of InspecTech shall be closed as to holders of
InspecTech Capital Stock immediately prior to the Effective Time and no transfer
of InspecTech Capital Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 4.1 of this Agreement, each certificate theretofore representing shares
of InspecTech Capital Stock shall from and after the Effective Time represent
for all purposes only the right to receive the consideration provided in Article
3 of this Agreement in exchange therefor. To the extent permitted by law, former
holders of record of InspecTech Preferred Stock shall be entitled to vote after
the Effective Time at any meeting of Primis stockholders the number of whole
shares of Primis Common Stock into which their respective shares of InspecTech
Preferred Stock are converted, regardless of whether such holders have exchanged
their certificates representing InspecTech Preferred Stock for certificates
representing Primis Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by Primis on
the Primis Common Stock, the record date for which is at or after the Effective
Time, the declaration shall
6
include dividends or other distributions on all shares issuable pursuant to this
Agreement, but beginning 30 days after the Effective Time no dividend or other
distribution payable to the holders of record of Primis Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of InspecTech Preferred Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Agreement. However, upon
surrender of such InspecTech Preferred Stock certificate, both the Primis Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash payments
to be paid for fractional share interests (without interest) shall be delivered
and paid with respect to each share represented by such certificate.
4.3 LOST CERTIFICATES. If any certificate for shares of
InspecTech Capital Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed, Primis will issue in exchange for such lost,
stolen or destroyed certificate the cash, shares of Primis Common Stock, and any
cash in lieu of fractional shares of Primis Common Stock to which the holder
thereof is entitled pursuant to Section 3.1.
5. REPRESENTATIONS AND WARRANTIES OF INSPECTECH. InspecTech represents
and warrants to Primis as follows:
5.1 CORPORATE STANDING. InspecTech is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California. InspecTech has all requisite power and authority to: (i) own, lease
and operate its properties and to carry on its business as now being conducted
and as presently proposed to be conducted; and (ii) to execute, deliver and
perform this Agreement, the Plan of Merger and any other agreement to which
InspecTech is a party, the execution and delivery of which is contemplated
hereby or thereby. Each InspecTech Subsidiary listed in Section 5.6 of the
InspecTech Disclosure Letter is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
Each InspecTech Subsidiary has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted
and as presently proposed to be conducted. InspecTech and each InspecTech
Subsidiary is duly qualified and is authorized to transact business and is in
good standing as foreign corporation in each jurisdiction in which the failure
to so qualify would have a material adverse effect on its business, properties,
prospects or financial condition. InspecTech has delivered to Primis true and
complete copies of the Articles of Incorporation and Bylaws, and all amendments
thereto, of InspecTech and the InspecTech Subsidiaries.
5.2 AUTHORIZATION; BINDING AGREEMENT. The execution and
delivery of this Agreement and the Plan of Merger and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of InspecTech. This Agreement and the
Plan of Merger have been duly executed and delivered by InspecTech and
constitute the legal, valid and binding obligations of InspecTech enforceable
against it in accordance with its terms except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors rights
7
generally or (ii) general principles of equity (regardless of whether an
enforceability is considered in a proceeding at law or in equity).
5.3 CAPITALIZATION. Immediately prior to the Closing, the
authorized capital stock of InspecTech consists of (i) 30,000,000 shares of
Common Stock, no par value, of which 2,532,623 shares are validly issued and
outstanding, fully paid and nonassessable and owned, beneficially and of record,
as set forth in Section 5.3 of the InspecTech Disclosure Letter, and (ii)
10,000,000 shares of InspecTech Preferred Stock, no par value, of which
4,454,546 shares are designated Series A1 Preferred Stock and 3,991,828 are
validly issued and outstanding, fully paid and nonassessable and owned,
beneficially and of record, as set forth in Section 5.3 of the InspecTech
Disclosure Letter. The authorized, issued and outstanding shares of capital
stock of each InspecTech Subsidiary are as set forth in Section 5.3 of the
InspecTech Disclosure Letter. All of such issued and outstanding shares of
capital stock of each InspecTech Subsidiary are validly issued and outstanding,
fully paid and nonassessable and owned, beneficially and of record, by
InspecTech free and clear of all liens, claims, and encumbrances. Except as set
forth in Section 5.3 of the InspecTech Disclosure Letter, there are outstanding
no subscriptions, options, warrants, calls, commitments or rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements or agreements of any character relating to shares of
InspecTech's or any InspecTech Subsidiary's capital stock or any instruments
that can be converted into or exchanged for shares of InspecTech's or any
InspecTech Subsidiary's capital stock. None of the shares of InspecTech's or any
InspecTech Subsidiary's capital stock have been issued in violation of any
preemptive right. All issuances, sales, redemptions, transfers or purchases of
the capital stock of InspecTech and each InspecTech Subsidiary and any
involvement in any transfer of any such stock by InspecTech or any InspecTech
Subsidiary have been in compliance with all applicable agreements and all
applicable laws, including federal and state securities laws, and all taxes
thereon, if any, have been paid. Except as set forth in Section 5.3 of the
InspecTech Disclosure Letter, there are no contractual obligations of InspecTech
to repurchase, redeem or otherwise acquire any shares of capital stock of
InspecTech or any InspecTech Subsidiary. No bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into or exercisable for
securities having the right to vote) on any matters on which shareholders of
InspecTech may vote are issued or outstanding. Except as set forth in Section
5.3 of the InspecTech Disclosure Letter, neither InspecTech nor any InspecTech
Subsidiary is a party or subject to any agreement or understanding, and, to
InspecTech's best knowledge, there is no agreement or understanding between any
persons that affects or relates to the voting or giving of written consents with
respect to any security or the voting by any director of InspecTech or any
InspecTech Subsidiary.
5.4 NO CONFLICT. The execution and delivery of this Agreement
and the Plan of Merger does not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of,
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on assets (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") pursuant to, any provision of
InspecTech's Articles of Incorporation or Bylaws, or the Articles of
Incorporation or bylaws of any InspecTech Subsidiary,
8
or, except as set forth in Section 5.4 of the InspecTech Disclosure Letter,
result in any Violation of any material lease, agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to InspecTech or any
InspecTech Subsidiary or InspecTech's or any InspecTech Subsidiary's properties
or Assets.
5.5 CONTRACTS AND OTHER COMMITMENTS; COMPLIANCE. Section 5.5
of the InspecTech Disclosure Letter sets forth each material contract,
agreement, lease, loan, commitment and proposed transaction to which InspecTech
or any InspecTech Subsidiary is a party or is bound or which InspecTech or any
InspecTech Subsidiary is seeking to be bound (the "Contracts"). Neither
InspecTech nor any InspecTech Subsidiary is bound by any judgment, order, writ
or decree. Except as set forth in Section 5.5 of the InspecTech Disclosure
Letter, no event or condition has occurred or exists, or, to the knowledge of
InspecTech, is alleged by any of the other parties thereto to have occurred or
existed, which constitutes, or with lapse of time or giving of notice or both
might constitute, a default or breach under any Contract. InspecTech is not in
violation or default of any provision of its Articles of Incorporation or
Bylaws, no InspecTech Subsidiary is in violation or default of any provision of
its articles of incorporation or bylaws, and except as set forth in Section 5.5,
neither InspecTech nor any InspecTech Subsidiary is in violation or default in
any respect of any material provision of any Contract.
5.6 SUBSIDIARIES. Except as set forth in Section 5.6 of the
InspecTech Disclosure Letter, InspecTech does not own or control, directly or
indirectly, any interest in any other corporation, partnership, limited
liability company, association or other business entity. Neither InspecTech nor
any InspecTech Subsidiary is a participant in any joint venture, partnership or
similar arrangement.
5.7 CONSENTS. Except as set forth in Section 5.7 of the
InspecTech Disclosure Letter, no consent, approval, qualification, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other third party is required by or
with respect to InspecTech in connection with the execution and delivery of this
Agreement or the Plan of Merger, or the consummation by InspecTech of the
transactions contemplated hereby and thereby, which has not already been
obtained.
5.8 FINANCIAL STATEMENTS. InspecTech's audited consolidated
balance sheet as of December 31, 1998, and the related audited consolidated
statement of income for the year then ended and its unaudited balance sheet as
of September 30, 1999 and the related unaudited statement of income for the nine
months then ended (the "Financial Statements"), are attached to the InspecTech
Disclosure Letter. The Financial Statements were prepared in accordance with
GAAP (except for the omission of footnotes and other required schedules and
information and year end accruals which are immaterial, in the aggregate, in
amount). The balance sheets included in such Financial Statements fairly present
the financial condition of InspecTech and its Subsidiaries as of their
respective dates and the statements of income included in such Financial
Statements fairly present the results of operations of InspecTech and the
InspecTech Subsidiaries for the periods then ended. None of InspecTech or any of
the InspecTech Subsidiaries has any liabilities or obligations of any
9
nature, whether absolute, accrued, contingent or otherwise, which are not fully
reflected or reserved against in the Financial Statements, except for
liabilities that may have arisen in the ordinary course of business and that are
not required by GAAP to be included in the Financial Statements.
5.9 INDEBTEDNESS FOR BORROWED MONEY; NO UNDISCLOSED
LIABILITIES. Except as set forth in the Financial Statements, neither InspecTech
nor any InspecTech Subsidiary has any direct or indirect indebtedness for
borrowed money, indebtedness by way of lease-purchase arrangements, guarantees,
chattel mortgages or other security arrangements with any bank, financial
institution or other third party. Except as and to the extent reflected and
adequately reserved against in the Financial Statements or incurred in the
ordinary course of business since September 30, 1999, as of the Closing, neither
InspecTech nor any InspecTech Subsidiary will have any liability or obligation
whatsoever, whether accrued, absolute, contingent or otherwise of a nature
required by GAAP to be included in the Financial Statements.
5.10 ABSENCE OF CHANGES. Except as set forth in Section 5.10
of the InspecTech Disclosure Letter, since September 30, 1999, there has not
been:
[a] any change in the assets, liabilities, financial
condition or operating results of InspecTech or any InspecTech
Subsidiary from that reflected in the Financial Statements, except
changes in the ordinary course of business or otherwise that have not,
individually or in the aggregate, materially and adversely affected the
business, properties, prospects or financial condition of InspecTech or
any InspecTech Subsidiary (as such business is presently conducted and
as it is proposed to be conducted);
[b] any damage, destruction or loss, whether or not
covered by insurance, affecting the business, properties, prospects, or
financial condition of InspecTech or any InspecTech Subsidiary (as such
business is presently conducted and as it is presently proposed to be
conducted);
[c] any waiver or compromise by InspecTech or any
InspecTech Subsidiary of a valuable right or of a material debt owed to
it;
[d] any satisfaction or discharge of any lien, claim,
or encumbrance or payment of any obligation by InspecTech or any
InspecTech Subsidiary, except in the ordinary course of business and
that is not material to the business, properties, or financial
condition of InspecTech or any InspecTech Subsidiary (as such business
is presently conducted and as it is presently proposed to be
conducted);
[e] any material change to a material contract or
arrangement by which InspecTech or any InspecTech Subsidiary or any of
their respective assets is bound or subject;
[f] any material change in any compensation
arrangement or agreement with any employee or officer;
10
[g] any sale, assignment or transfer of any
intangible assets;
[h] any resignation or termination of employment of
any key officer or employee of InspecTech or any InspecTech Subsidiary
(and InspecTech does not know of any impending resignation or
termination of employment of any such officer or employee);
[i] any mortgage, pledge, transfer of a security
interest in, or lien, created by InspecTech or any InspecTech
Subsidiary with respect to any of their properties or assets, except
Liens for taxes not yet due or payable;
[j] any declaration, setting aside or payment of any
dividend or other distribution of InspecTech's assets in respect of any
of InspecTech's or any InspecTech Subsidiary's capital stock, or any
direct or indirect redemption, purchase, or other acquisition of any of
such stock by InspecTech or any InspecTech Subsidiary;
[k] to InspecTech's knowledge, any other event or
condition of any character that might materially and adversely affect
the business, properties, prospects or financial condition of
InspecTech or any InspecTech Subsidiary (as such business is presently
conducted and as it is presently proposed to be conducted); or
[l] any agreement or commitment by InspecTech or any
InspecTech Subsidiary to do any of the things described in this Section
5.10, except as provided in this Agreement.
5.11 TITLE TO PROPERTY AND ASSETS; LEASES.
[a] Section 5.11 of the InspecTech Disclosure Letter
sets forth a complete and accurate list and description of all the real
property and all the material personal property that InspecTech or any
InspecTech Subsidiary owns or leases. Neither InspecTech nor any
InspecTech Subsidiary is bound or committed to make any capital
improvement or capital expenditure with respect to any owned or leased
real or personal property, except as may be set forth in the Contracts.
[b] Except as set forth in Section 5.11 of the
InspecTech Disclosure Letter, InspecTech and each InspecTech Subsidiary
has good, valid and marketable title to all the real, personal and
mixed, tangible and intangible properties and assets which it purports
to own, free and clear of all liens, restrictions, claims, charges,
security interests, easements or other encumbrances of any nature
whatsoever, except for liens for current taxes not yet due and payable.
With respect to the property and assets that it leases, InspecTech and
each InspecTech Subsidiary is in compliance with such leases and holds
a valid leasehold interest, free and clear of any liens, claims and
encumbrances. All properties and Assets of InspecTech and each
InspecTech Subsidiary are in the possession or control of
11
InspecTech and such InspecTech Subsidiary, respectively, and no other
person is entitled to possession of any such properties and assets.
5.12 LEGAL PROCEEDINGS. Except as set forth in Section 5.12 of
the InspecTech Disclosure Letter, there are no claims of any kind or any
actions, suits, proceedings, arbitration's or investigations pending or, to
InspecTech's best knowledge, threatened against or affecting InspecTech or any
InspecTech Subsidiary against any asset, interest or right of InspecTech or any
InspecTech Subsidiary or which questions the validity of the transactions
contemplated by this Agreement.
5.13 ENVIRONMENTAL MATTERS. Neither InspecTech nor any
InspecTech Subsidiary is in violation in any material respect of any applicable
statute, law or regulation relating to the environment or occupational health
and safety (the "Environmental Laws") that would, individually, or, together
with all other such violations in the aggregate, result in a material and
adverse effect on the business and properties or financial condition of
InspecTech or any InspecTech Subsidiary and InspecTech has no knowledge of any
material expenditures necessary to comply with the Environmental Laws.
5.14 LICENSES AND PERMITS; COMPLIANCE WITH LAWS. InspecTech
and each InspecTech Subsidiary holds all franchises, permits, licenses,
variances, exemptions, orders and approvals of all governmental entities which
are material to the operation of InspecTech's and such InspecTech Subsidiary's
business and is in compliance with the terms thereof. InspecTech and each
InspecTech Subsidiary has complied in all material respects with, and is not in
any default in any material respect under (and has not been charged with or
received notice with respect to, nor is threatened with or under investigation
with respect to, any charge concerning any violation of any provision of) any
federal, state or local law, regulation, ordinance, rule or order (whether
executive, judicial, legislative or administrative) or any order, writ,
injunction or decree of any court, agency or instrumentality, and no action,
suit, proceeding, hearing, charge, claim, demand, or notice has been filed or
commenced against InspecTech or any InspecTech Subsidiary alleging any failures
to comply.
5.15 EMPLOYEE BENEFIT PLANS. Section 5.15 of the InspecTech
Disclosure Letter lists each employee benefit plan, including any profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of InspecTech or any InspecTech Subsidiary
(collectively "Benefit Plans"), and any employment, consulting, severance,
termination or indemnification agreement, arrangement or understanding between
InspecTech or any InspecTech Subsidiary and any officer, director or employee of
InspecTech or such InspecTech Subsidiary, or in the case of any unwritten
Benefit Plans, descriptions thereof. InspecTech has delivered to Primis true,
complete and correct copies of each Benefit Plan. Each Benefit Plan is and has
heretofore been maintained and operated in compliance in all material respects
with the terms of such Benefit Plan and with the requirements prescribed
(whether as a matter of substantive law or as necessary to secure favorable tax
treatment)
12
by any and all statutes, governmental or court orders, or governmental rules or
regulations in effect from time to time, including but not limited to the
Employee Retirement Income Security Act of 1974, as amended, and the Internal
Revenue Code and applicable to such Plan.
5.16 LABOR RELATIONS.
[a] InspecTech and each InspecTech Subsidiary is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours and occupational safety and health;
[b] There is no unfair labor practice charge or
complaint or any other matter against or involving InspecTech or any
InspecTech Subsidiary pending or, to InspecTech's best knowledge,
threatened before the National Labor Relations Board, any other agency
or any court of law;
[c] There is no labor strike, dispute, slowdown or
stoppage actually pending or, to InspecTech's best knowledge,
threatened against InspecTech or any InspecTech Subsidiary;
[d] Neither InspecTech nor any InspecTech Subsidiary
is a party to or bound by any collective bargaining agreement or any
similar labor union arrangement; and
[e] There are no charges, investigations,
administrative proceedings or formal complaints of discrimination
(including discrimination based upon sex, age, marital status, race,
color, religion, national origin, sexual preference, disability,
handicap or veteran status) pending or, to InspecTech's best knowledge,
threatened, before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against InspecTech or any
InspecTech Subsidiary. There are no pending governmental audits of the
equal employment opportunity practices of InspecTech or any InspecTech
Subsidiary and, to InspecTech's best knowledge, no basis for any such
claim exists.
[f] InspecTech is in compliance in all material
respects with the requirements of the American with Disabilities Act.
5.17 INSURANCE. InspecTech and each InspecTech Subsidiary
maintains insurance policies, including property, casualty, liability and other
insurance with respect to its assets and business in amounts customary for
similarly situated companies and sufficient in amount to allow it to replace any
of its properties that might be damaged or destroyed. Neither InspecTech nor any
InspecTech Subsidiary is liable for any material retroactive premium adjustments
with respect to any of its insurance policies or bonds. All such policies and
bonds are listed in Section 5.17 of the InspecTech Disclosure Letter and are
legal, valid and enforceable and in full force and effect and neither InspecTech
nor any InspecTech Subsidiary is in breach or default (including with respect to
the payment of premiums or the giving of notices) and no event has occurred
which, with notice or
13
the lapse of time, would constitute such a breach or default, or permit
termination, modification or acceleration under the policy or received any
notice of premium increases or cancellations with respect to any of such
policies and bonds. InspecTech believes the amount and type of InspecTech's and
each InspecTech Subsidiary's insurance coverage is adequate for InspecTech's and
each InspecTech Subsidiary's business and is consistent with good business
practice.
5.18 TAX MATTERS. InspecTech and each InspecTech Subsidiary
has timely filed or caused to be filed all federal, state, foreign and local
income, franchise, gross receipts, payroll, sales, use, withholding, occupancy,
excise, real and personal property, employment and other tax returns, tax
information returns and reports ("Tax Returns") required to be filed and all
such Tax Returns were correct and complete in all material respects. InspecTech
and each InspecTech Subsidiary has paid, or made adequate provisions for the
payment of, all taxes, duties or assessments of any nature whatsoever, interest
payments, penalties and additions (whether or not reflected in the returns as
filed) due and payable (and/or properly accruable for all periods ending on or
before the date of this Agreement) to any city, county, state, foreign country,
the United States or any other taxing authority. There are no security interests
on any of the assets of InspecTech or any InspecTech Subsidiary that arise in
connection with any failure (or alleged failure) to pay any tax. InspecTech and
each InspecTech Subsidiary has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
5.19 RELATED PARTY TRANSACTIONS. Except as set forth in
Section 5.19 of the InspecTech Disclosure Letter, no employee, officer or holder
of InspecTech's capital stock or member of his or her immediate family is
indebted to InspecTech or any InspecTech Subsidiary, nor is InspecTech or any
InspecTech Subsidiary indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses, or advances with
respect to expenses to be, incurred on behalf of InspecTech or any InspecTech
Subsidiary, and (iii) for other standard employee benefits made generally
available to all employees. To InspecTech's best knowledge, none of such persons
has any direct or indirect ownership interest in any firm or corporation with
which InspecTech or any InspecTech Subsidiary has a material business
relationship, or any firm or corporation that competes with InspecTech or any
InspecTech Subsidiary, except that employees, stockholders, and officers of
InspecTech and members of their immediate families may own stock in publicly
traded companies that may compete with InspecTech or a InspecTech Subsidiary.
5.20 BROKERS' AND FINDERS' FEES. InspecTech has not employed
any broker, finder or financial advisor or incurred any liability for fees or
commissions payable to any broker, finder or financial advisor in connection
with the negotiations relating to or the transactions contemplated by this
Agreement.
5.21 REGISTRATION RIGHTS. Except as set forth in Section 5.21
of the InspecTech Disclosure Letter, neither InspecTech nor any InspecTech
Subsidiary is presently under any obligation and has not granted any rights to
register under the Securities Act any of its outstanding securities or any of
its securities that may be subsequently issued.
14
15
5.22 INTELLECTUAL PROPERTY. Section 5.22 of the InspecTech
Disclosure Letter sets forth a complete and correct list of all intellectual
property, including, without limitation, trademarks, service marks, patents,
copyrights and applications, used in the conduct of the business of InspecTech
and each InspecTech Subsidiary other than commercially available software
programs. InspecTech and the InspecTech Subsidiaries either own or have properly
licensed all rights necessary or required to provide and perform the services
they now provide and perform. InspecTech's and each InspecTech Subsidiary's
provision or operation of such services will not violate or infringe any
intellectual property laws or violate or infringe any rights of third parties.
There is no complaint, action or proceeding before any court pending or, to
InspecTech's best knowledge, threatened against InspecTech or any InspecTech
Subsidiary asserting that InspecTech's or any InspecTech Subsidiary's use of any
intellectual property infringes the rights of any third party or otherwise
contesting InspecTech's and each InspecTech Subsidiary's rights with respect to
any intellectual property, and there is no basis for such assertion or contest.
To InspecTech's best knowledge, no third party is infringing on InspecTech's or
any InspecTech Subsidiary's rights with respect to its intellectual property.
5.23 YEAR 2000 COMPLIANCE. All devices, systems, machinery,
information technology, computer software and hardware, and other date-sensitive
technology necessary for InspecTech to carry on its businesses as presently
conducted and as contemplated to be conducted in the future are Year 2000
Compliant or will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of InspecTech's business operations. The
term "Year 2000 Compliant" means each of the aforementioned items are designed
to be used prior to, during and after the year 2000 and will operate during each
such time period without error relating to date data, specifically including any
error to, or the product of, date data which represents or references different
centuries or more than one century.
5.24 REQUIRED VOTE OF INSPECTECH STOCKHOLDERS. The affirmative
vote of a majority of the shares present in person or by proxy at the InspecTech
Stockholder Meeting (as hereinafter defined) and entitled to vote on the Merger,
or by written consent in lieu of a meeting, is required to approve the Merger.
No other vote of the security holders of InspecTech is required by law,
InspecTech's Articles of Incorporation or Bylaws or otherwise in order for
InspecTech to consummate the Merger and the transactions contemplated hereby.
5.25 MATERIAL FACTS. This Agreement and the documents or
written statements furnished by InspecTech to Primis in connection with the
transactions contemplated hereby, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
6. REPRESENTATIONS AND WARRANTIES OF PRIMIS. Primis and Acquisition
Corp hereby represents and warrants to InspecTech as follows:
6.1 ORGANIZATION AND GOOD STANDING. Primis is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Georgia. Acquisition Corp is
16
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Primis and Acquisition Corp has all
requisite power and authority to: (i) own, lease and operate its properties and
to carry on its business as now being conducted and as presently proposed to be
conducted; and (ii) to execute, deliver and perform this Agreement and any other
agreement to which Primis or Acquisition Corp is a party, the execution and
delivery of which is contemplated hereby or thereby. Each of Primis and
Acquisition Corp is duly qualified and is authorized to transact business and is
in good standing as foreign corporation in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business,
properties, prospects or financial condition.
6.2 AUTHORITY. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby has been duly
authorized by all necessary corporate action on the part of Primis. The
execution and delivery of this Agreement and the Plan of Merger and the
consummation of the transactions contemplated thereby has been duly authorized
by all necessary corporate action on the part of Acquisition Corp. This
Agreement and the Plan of Merger have been duly executed and delivered by Primis
and Acquisition Corp, respectively, and constitute the legal, valid and binding
obligation of Primis and Acquisition Corp, respectively, enforceable against
them in accordance with their respective terms except as such enforceability may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors rights generally
or (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
6.3 CAPITALIZATION. Immediately prior to the Closing, the
authorized capital stock of Primis consists of 23,000,000 shares comprised of
(i) 15,000,000 shares of Common Stock, par value $.01 per share, of which
7,078,671 shares are issued and outstanding, and (ii) 8,000,000 shares of
Preferred Stock, par value $.01 per share, of which (a) 1,200,000 shares are
designated Series A Convertible Preferred Stock, of which 1,091,242 shares are
issued and outstanding, [b] 3,000,000 shares are designated Series B Convertible
Preferred Stock, of which 725,130 shares are issued and outstanding, and [c]
2,500,000 shares are designated Series C Convertible Preferred Stock, of which
no shares are issued and outstanding. Immediately prior to the Closing, the
authorized capital stock of Acquisition Corp consists of 1,000 shares of Common
Stock, $.01 par value per share, of which 1,000 shares are issued and
outstanding and owned by Primis. Primis also has reserved for issuance under its
Third Amended and Restated 1997 Employee Stock Option Plan 1,650,000 shares of
Common Stock, par value $.01 per share. All such outstanding shares have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth in Section 6.3 of the Primis Disclosure Letter, there are
outstanding no subscriptions, options, warrants, calls, commitments or rights
(including conversion or preemptive rights and rights of first refusal), proxy
or stockholder agreements or agreements of any character relating to shares of
Primis's or Acquisition Corp's capital stock or any instruments that can be
converted into or exchanged for shares of Primis's or Acquisition Corp's capital
stock. None of the shares of Primis's capital stock have been issued in
violation of any preemptive right. All issuances, sales, redemptions, transfers
or purchases of the capital stock of Primis and any involvement in any transfer
of any such stock by Primis have been in compliance in all material respects
with all applicable agreements and all applicable laws, including federal and
state securities laws, and all taxes thereon, if any, have been
17
paid. Except as set forth in Section 6.3 of the Primis Disclosure Letter, there
are no contractual obligations of Primis to repurchase, redeem or otherwise
acquire any shares of capital stock of Primis or Acquisition Corp. No bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into or exercisable for securities having the right to vote) on any matters on
which shareholders of Primis or Acquisition Corp. may vote are issued or
outstanding. Except as set forth in Section 6.3 of the Primis Disclosure Letter,
neither Primis nor Acquisition Corp. is a party or subject to any agreement or
understanding and, to Primis's best knowledge, there is no agreement or
understanding between any persons that affects or relates to the voting or
giving of written consents with respect to any security or the voting by any
director of Primis or Acquisition Corp.
6.4 NO CONFLICT. The execution and delivery of this Agreement
and the Plan of Merger does not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of,
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on assets (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") pursuant to, any provision of
Primis's Articles of Incorporation or Bylaws, or the Articles of Incorporation
or bylaws of any Primis Subsidiary, or result in any Violation of any material
lease, agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Primis or any Primis Subsidiary or Primis's or any Primis
Subsidiary's properties or Assets.
6.5 CONTRACTS AND OTHER COMMITMENTS; COMPLIANCE. Neither
Primis nor any Primis Subsidiary is bound by any judgment, order, writ or
decree. No event or condition has occurred or exists, or, to the knowledge of
Primis, is alleged by any of the other parties thereto to have occurred or
existed, which constitutes, or with lapse of time or giving of notice or both
might constitute, a default or breach under any material contract, agreement,
lease, loan, commitment and proposed transaction to which Primis or any Primis
Subsidiary is a party or is bound or which Primis or any Primis Subsidiary is
seeking to be bound (the "Contracts"). Primis is not in violation or default of
any provision of its Articles of Incorporation or Bylaws, no Primis Subsidiary
is in violation or default of any provision of its articles of incorporation or
bylaws, and neither Primis nor any Primis Subsidiary is in violation or default
in any material respect of any material provision of any Contract.
6.6 SUBSIDIARIES. Except as set forth in Section 6.6 of the
Primis Disclosure Letter, Primis does not own or control, directly or
indirectly, any interest in any other corporation, partnership, limited
liability company, association or other business entity. Except as set forth in
Section 6.6 of the Disclosure Letter, neither Primis nor any Primis Subsidiary
is a participant in any joint venture, partnership or similar arrangement.
6.7 CONSENTS. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other third party is required by or
with respect to Primis in connection with the execution and delivery of this
Agreement or the Plan
18
of Merger, or the consummation by Primis of the transactions contemplated hereby
and thereby, which has not already been obtained except for notices of sale
required to be filed with the SEC under Regulation D of the Securities Act or
such filings as may be required under applicable state securities laws.
6.8 FINANCIAL STATEMENTS. Primis's audited consolidated
balance sheet as of December 31, 1998, and the related audited consolidated
statement of income for the year then ended and its unaudited balance sheet as
of September 30, 1999 and the related unaudited statement of income for the nine
months then ended (the "Financial Statements"), are attached to the Primis
Disclosure Letter. The Financial Statements were prepared in accordance with
GAAP (except for the omission of footnotes and other required schedules and
information and year end accruals which are immaterial, in the aggregate, in
amount). The balance sheets included in such Financial Statements fairly present
the financial condition of Primis and its Subsidiaries as of their respective
dates and the statements of income included in such Financial Statements fairly
present the results of operations of Primis and the Primis Subsidiaries for the
periods then ended. Except as set forth in Section 6.8 of the Primis Disclosure
Letter, none of Primis or any of the Primis Subsidiaries has any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
which are not fully reflected or reserved against in the Financial Statements,
except for liabilities that may have arisen in the ordinary course of business
and that are not required by GAAP to be included in the Financial Statements.
6.9 INDEBTEDNESS FOR BORROWED MONEY; NO UNDISCLOSED
LIABILITIES. Except as set forth in the Financial Statements, neither Primis nor
any Primis Subsidiary has any direct or indirect indebtedness for borrowed
money, indebtedness by way of lease-purchase arrangements, guarantees, chattel
mortgages or other security arrangements with any bank, financial institution or
other third party. Except as and to the extent reflected and adequately reserved
against in the Financial Statements or incurred in the ordinary course of
business since September 30, 1999 or as set forth in Section 6.9 of the Primis
Disclosure Letter, as of the Closing, neither Primis nor any Primis Subsidiary
will have any liability or obligation whatsoever, whether accrued, absolute,
contingent or otherwise of a nature required by GAAP to be included in the
Financial Statements.
6.10 ABSENCE OF CHANGES. Except as set forth in Section 6.10
of the Primis Disclosure Letter, since September 30, 1999, there has not been:
[a] any change in the assets, liabilities, financial
condition or operating results of Primis or any Primis Subsidiary from
that reflected in the Financial Statements, except changes in the
ordinary course of business or otherwise that have not, individually or
in the aggregate, materially and adversely affected the business,
properties, prospects or financial condition of Primis or any Primis
Subsidiary (as such business is presently conducted and as it is
proposed to be conducted);
[b] any damage, destruction or loss, whether or not
covered by insurance, affecting the business, properties, prospects, or
financial condition of Primis or any Primis
19
Subsidiary (as such business is presently conducted and as it is
presently proposed to be conducted);
[c] any waiver or compromise by Primis or any Primis
Subsidiary of a valuable right or of a material debt owed to it;
[d] any satisfaction or discharge of any lien, claim,
or encumbrance or payment of any obligation by Primis or any Primis
Subsidiary, except in the ordinary course of business and that is not
material to the business, properties, or financial condition of Primis
or any Primis Subsidiary (as such business is presently conducted and
as it is presently proposed to be conducted);
[e] any material change to a material contract or
arrangement by which Primis or any Primis Subsidiary or any of their
respective assets is bound or subject;
[f] any material change in any compensation
arrangement or agreement with any employee or officer;
[g] any sale, assignment or transfer of any
intangible assets;
[h] any resignation or termination of employment of
any key officer or employee of Primis or any Primis Subsidiary (and
Primis does not know of any impending resignation or termination of
employment of any such officer or employee);
[i] any mortgage, pledge, transfer of a security
interest in, or lien, created by Primis or any Primis Subsidiary with
respect to any of their properties or assets, except Liens for taxes
not yet due or payable;
[j] any declaration, setting aside or payment of any
dividend or other distribution of Primis's assets in respect of any of
Primis's or any Primis Subsidiary's capital stock, or any direct or
indirect redemption, purchase, or other acquisition of any of such
stock by Primis or any Primis Subsidiary;
[k] any other event or condition of any character
that might materially and adversely affect the business, properties,
prospects or financial condition of Primis or any Primis Subsidiary (as
such business is presently conducted and as it is presently proposed to
be conducted); or
[l] any agreement or commitment by Primis or any
Primis Subsidiary to do any of the things described in this Section
6.10, except as provided in this Agreement.
20
6.11 TITLE TO PROPERTY AND ASSETS; LEASES. Except as set forth
in Section 6.11 of the Primis Disclosure Letter, Primis and each Primis
Subsidiary has good, valid and marketable title to all the real, personal and
mixed, tangible and intangible properties and assets which it purports to own,
free and clear of all liens, restrictions, claims, charges, security interests,
easements or other encumbrances of any nature whatsoever, except for liens for
current taxes not yet due and payable. With respect to the property and assets
that it leases, Primis and each Primis Subsidiary is in compliance with such
leases and holds a valid leasehold interest, free and clear of any liens, claims
and encumbrances. All properties and Assets of Primis and each Primis Subsidiary
are in the possession or control of Primis and such Primis Subsidiary,
respectively, and no other person is entitled to possession of any such
properties and assets.
6.12 LEGAL PROCEEDINGS. Except as set forth in Section 6.12 of
the Primis Disclosure Letter, there are no claims of any kind or any actions,
suits, proceedings, arbitrations or investigations pending or, to Primis's best
knowledge, threatened against or affecting Primis or any Primis Subsidiary
against any asset, interest or right of Primis or any Primis Subsidiary or which
questions the validity of the transactions contemplated by this Agreement.
6.13 ENVIRONMENTAL MATTERS. Neither Primis nor any Primis
Subsidiary is in violation in any material respect of any applicable statute,
law or regulation relating to the environment or occupational health and safety
(the "Environmental Laws") that would, individually, or, together with all other
such violations in the aggregate, result in a material and adverse effect on the
business and properties or financial condition of Primis or any Primis
Subsidiary and Primis has no knowledge of any material expenditures necessary to
comply with the Environmental Laws.
6.14 LICENSES AND PERMITS; COMPLIANCE WITH LAWS. Primis and
each Primis Subsidiary holds all franchises, permits, licenses, variances,
exemptions, orders and approvals of all governmental entities which are material
to the operation of Primis's and such Primis Subsidiary's business and is in
compliance with the terms thereof. Primis and each Primis Subsidiary has
complied with, and is not in any default under (and has not been charged with or
received notice with respect to, nor is threatened with or under investigation
with respect to, any charge concerning any violation of any provision of) any
federal, state or local law, regulation, ordinance, rule or order (whether
executive, judicial, legislative or administrative) or any order, writ,
injunction or decree of any court, agency or instrumentality, and no action,
suit, proceeding, hearing, charge, claim, demand, or notice has been filed or
commenced against Primis or any Primis Subsidiary alleging any failures to
comply.
6.15 LABOR RELATIONS.
[a] Primis and each Primis Subsidiary is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours and occupational safety and health;
[b] There is no unfair labor practice charge or
complaint or any other matter against or involving Primis or any Primis
Subsidiary pending or, to Primis's best
21
knowledge, threatened before the National Labor Relations Board, any
other agency or any court of law;
[c] There is no labor strike, dispute, slowdown or
stoppage actually pending or, to Primis's best knowledge, threatened
against Primis or any Primis Subsidiary;
[d] Neither Primis nor any Primis Subsidiary is a
party to or bound by any collective bargaining agreement or any similar
labor union arrangement; and
[e] There are no charges, investigations,
administrative proceedings or formal complaints of discrimination
(including discrimination based upon sex, age, marital status, race,
color, religion, national origin, sexual preference, disability,
handicap or veteran status) pending or, to Primis's best knowledge,
threatened, before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against Primis or any Primis
Subsidiary. There are no pending governmental audits of the equal
employment opportunity practices of Primis or any Primis Subsidiary
and, to Primis's best knowledge, no basis for any such claim exists.
[f] Primis is in compliance in all material respects
with the requirements of the American with Disabilities Act.
6.16 INSURANCE. Primis and each Primis Subsidiary maintains
insurance policies, including property, casualty, liability and other insurance
with respect to its assets and business in amounts customary for similarly
situated companies and sufficient in amount to allow it to replace any of its
properties that might be damaged or destroyed. Neither Primis nor any Primis
Subsidiary is liable for any material retroactive premium adjustments with
respect to any of its insurance policies or bonds. All such policies and bonds
are legal, valid and enforceable and in full force and effect and neither Primis
nor any Primis Subsidiary is in breach or default (including with respect to the
payment of premiums or the giving of notices) and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification or acceleration under the policy or received
any notice of premium increases or cancellations with respect to any of such
policies and bonds. Primis believes the amount and type of Primis's and each
Primis Subsidiary's insurance coverage is adequate for Primis's and each Primis
Subsidiary's business and is consistent with good business practice.
6.17 TAX MATTERS. Primis and each Primis Subsidiary has timely
filed or caused to be filed all federal, state, foreign and local income,
franchise, gross receipts, payroll, sales, use, withholding, occupancy, excise,
real and personal property, employment and other tax returns, tax information
returns and reports ("Tax Returns") required to be filed and all such Tax
Returns were correct and complete in all material respects. Primis and each
Primis Subsidiary has paid, or made adequate provisions for the payment of, all
taxes, duties or assessments of any nature whatsoever, interest payments,
penalties and additions (whether or not reflected in the returns as filed) due
and payable (and/or properly accruable for all periods ending on or before the
date of this Agreement) to any city, county, state, foreign country, the United
States or any other taxing authority. There are
22
no security interests on any of the assets of Primis or any Primis Subsidiary
that arise in connection with any failure (or alleged failure) to pay any tax.
Primis and each Primis Subsidiary has withheld and paid all taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
6.18 RELATED PARTY TRANSACTIONS. Except as set forth in
Section 6.18 of the Primis Disclosure Letter, no employee, officer or holder of
Primis' capital stock or member of his or her immediate family is indebted to
Primis or any Primis Subsidiary, nor is Primis or any Primis Subsidiary indebted
(or committed to make loans or extend or guarantee credit) to any of them, other
than (i) for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses, or advances with respect to expenses to be, incurred on
behalf of Primis or any Primis Subsidiary, and (iii) for other standard employee
benefits made generally available to all employees. To Primis' knowledge, none
of such persons has any direct or indirect ownership interest in any firm or
corporation with which Primis or any Primis Subsidiary has a material business
relationship, or any firm or corporation that competes with Primis or any Primis
Subsidiary, except that employees, stockholders and officers of Primis or
members of their immediately families xxx xxx stock in publicly traded companies
that may compete with Primis or a Primis Subsidiary.
6.19 BROKERS' AND FINDERS' FEES. Primis has not employed any
broker, finder or financial advisor or incurred any liability for fees or
commissions payable to any broker, finder or financial advisor in connection
with the negotiations relating to or the transactions contemplated by this
Agreement.
6.20 INTELLECTUAL PROPERTY. Primis and the Primis Subsidiaries
either own or have properly licensed all rights necessary or required to provide
and perform the services they now provide and perform. Primis's and each Primis
Subsidiary's provision or operation of such services will not violate or
infringe any intellectual property laws or violate or infringe any rights of
third parties. There is no complaint, action or proceeding before any court
pending or, to Primis's best knowledge, threatened against Primis or any Primis
Subsidiary asserting that Primis's or any Primis Subsidiary's use of any
intellectual property infringes the rights of any third party or otherwise
contesting Primis's and each Primis Subsidiary's rights with respect to any
intellectual property, and there is no basis for such assertion or contest. To
Primis's best knowledge, no third party is infringing on Primis's or any Primis
Subsidiary's rights with respect to its intellectual property.
6.21 YEAR 2000 COMPLIANCE. All devices, systems, machinery,
information technology, computer software and hardware, and other date-sensitive
technology necessary for Primis to carry on its businesses as presently
conducted and as contemplated to be conducted in the future are Year 2000
Compliant or will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of Primis's business operations. The
term "Year 2000 Compliant" means each of the aforementioned items are designed
to be used prior to, during and after the year 2000 and will operate during each
such time period without error relating to date data, specifically including any
error to, or the product of, date data which represents or references different
centuries or more than one century.
23
6.22 REQUIRED VOTE OF PRIMIS STOCKHOLDERS. The vote of Primis'
stockholders is not required to approve the Merger. Primis is, or will be prior
to the Closing, the sole shareholder of Acquisition Corp. As the sole
stockholder of Acquisition Corp, Primis will approve the Merger prior to the
Closing.
6.23 MATERIAL FACTS. This Agreement and the documents or
written statements furnished by Primis to InspecTech in connection with the
transactions contemplated hereby, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
7.1 SURVIVAL. After the Closing, any claim for indemnification
must be asserted by notice given no later than the end of the Survival Period
(as defined herein). All representations, warranties, covenants, and obligations
in this Agreement and any other certificate or document delivered pursuant to
this Agreement will survive the Closing until the sooner of (a) December 31,
2000, or (b) the date which is the expiration of any "lock-up period" imposed on
the shareholders of Primis by the underwriter following the sale of Primis
Common Stock in a firm commitment underwritten public offering registered under
the Securities Act of 1933, as amended (a "Qualified Public Offering");
provided, however, any claims for fraud and any claims related to or arising
from those matters set forth on SCHEDULE 7.1 attached hereto shall survive
indefinitely (the "Survival Period"). The right to indemnification, payment of
damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing, with respect to the accuracy or inaccuracy of or compliance with any
such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of damages, or other remedy based on such
representations, warranties, covenants, and obligations.
7.2 INDEMNIFICATION; RETAINED STOCK. InspecTech will indemnify
and hold harmless Primis and its stockholders, controlling persons, and
affiliates (except Shareholders) (collectively, the "Indemnified Persons") for,
and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with: (a) any breach of any representation or warranty
made by InspecTech in this Agreement or any other certificate or document
delivered by InspecTech pursuant to this Agreement; (b) any breach by InspecTech
of any covenant or obligation of InspecTech in this Agreement; and (c) those
matters set forth on SCHEDULE 7.1 attached hereto.
24
Certificates representing 25% of the shares of Primis Common
Stock to be issued in exchange for the InspecTech Preferred Stock pursuant to
Section 3 of this Agreement (the "Retained Stock") shall be deposited with Bank
One Kentucky, N.A., as escrow agent pursuant to the terms of an escrow agreement
substantially in the form attached hereto as EXHIBIT 2. After the Closing,
except for claims with respect to fraud, any liability under this Section 7.2
shall be discharged by surrender of that number of shares of the Retained Stock,
the value of which is equal to the amount of the Damages. The value of the
Retained Stock shall for all purposes of this Section 7 be deemed to equal the
per share value of the stock issued by Primis in Primis' latest round of equity
financing prior to the time Primis would be required to give notice of the
applicable claim for indemnification pursuant to Section 7.4, such value to
initially be $15.307 per share (as adjusted for any stock splits,
recapitalizations and the like with respect to the Primis Common Stock). Upon a
Qualified Public Offering, the value of the Primis Common Stock shall be deemed
to be equal to the initial public offering price per share. After (i) the
expiration of the Survival Period, or (ii) the final resolution of any claims
for indemnification brought pursuant to this Section 7, the Retained Stock shall
be delivered to the holders of the InspecTech Preferred Stock in accordance with
the provisions of Section 4.1 of this Agreement. Until delivery of the Retained
Stock to the holders of InspecTech Preferred Stock as provided herein, the
holders of the InspecTech Preferred Stock shall be deemed the owners of the
Retained Stock for all purposes, including for purposes of voting and the right
to receive dividends. The remedy provided for in this Section 7.2 shall be the
sole and exclusive remedy, and the amount of the Retained Stock shall be the
limit for Damages, for any of the matters set forth in this Section 7.2.
7.3 INDEMNIFICATION BY PRIMIS. Primis will indemnify and hold
harmless InspecTech and its stockholders (collectively, the "InspecTech
Indemnified Parties") for and will pay to the InspecTech Indemnified Parties the
amount of any Damages arising, directly or indirectly, from or in connection
with: any breach of any representation or warranty made by Primis in this
Agreement or in any other certificate or document delivered by Primis pursuant
to this Agreement; and any breach by Primis of any covenant or obligation of
Primis in this Agreement; provided, however, that, except with respect to claims
for fraud, Primis's liability for Damages under this Section 7.3 shall be
limited to 25% of the Aggregate Merger Consideration. The remedy provided for in
this Section 7.3 shall be the sole and exclusive remedy for any of the matters
set forth in this Section 7.3.
7.4 PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.
[a] Promptly after receipt by an indemnified party under
Section 7.2 or 7.3 of notice of the commencement of any proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
25
[b] If any proceeding is brought against an indemnified party
and it gives notice to the indemnifying party of the commencement of such
proceeding, the indemnifying party will, unless the claim involves taxes, be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 7 for any fees of other
counsel or any other expenses with respect to the defense of such proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that proceeding are within the scope of and subject to indemnification; and (ii)
no compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent; and (iii) the indemnified party
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an indemnifying party
of the commencement of any proceeding and the indemnifying party does not,
within ten (10) days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of such
proceeding, the indemnifying party will be bound by any determination made in
such proceeding or any compromise or settlement effected by the indemnified
party.
[c] Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such proceeding, but
the indemnifying party will not be bound by any determination of a proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
8. CONDUCT OF BUSINESS PENDING CONSUMMATION
8.1 AFFIRMATIVE COVENANTS OF BOTH PARTIES. From the date of
this Agreement until the earlier of the Effective Time or the termination of
this Agreement, unless the prior written consent of the other party shall have
been obtained, and except as otherwise expressly contemplated herein, each party
shall operate its business only in the usual, regular, and ordinary course,
preserve intact its business organization and Assets and maintain its rights and
franchises, and use its reasonable efforts to maintain its current employee
relationships.
8.2 NEGATIVE COVENANTS OF INSPECTECH. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, InspecTech covenants and
26
agrees that it will not do or agree or commit to do, or permit any of its
Subsidiaries to do or agree or commit to do, any of the following without the
prior written consent of Primis:
[a] amend the Articles of Incorporation, Bylaws, or
other governing instruments of InspecTech or any InspecTech Subsidiary,
or
[b] incur, guarantee, or otherwise become responsible
for, any additional debt obligation or other obligation for borrowed
money or impose, or suffer the imposition, on any Asset of InspecTech
or any InspecTech Subsidiary of any Lien or permit any such Lien to
exist, other than for taxes not yet due and payable; or
[c] repurchase, redeem, or otherwise acquire or
exchange, directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of InspecTech or any
InspecTech Subsidiary, or declare or pay any dividend or make any other
distribution in respect of InspecTech's Capital Stock; or
[d] except for this Agreement, issue, sell, pledge,
encumber, authorize the issuance of, enter into any contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise
permit to become outstanding, any additional shares of InspecTech
Capital Stock, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock; or
[e] adjust, split, combine, or reclassify any
InspecTech Capital stock or issue or authorize the issuance of any
other securities in respect of or in substitution for shares of
InspecTech Capital Stock, or sell, lease, mortgage, or otherwise
dispose of or otherwise encumber any shares of capital stock of any
InspecTech Subsidiary or any Asset; or
[f] purchase any securities or make any material
investment, either by purchase of stock or securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any person; or
[g] grant any increase in compensation or benefits to
the employees or officers of InspecTech or any InspecTech Subsidiary,
except in accordance with the ordinary course of business consistent
with past practice or as required by Law; pay any severance or
termination pay or any bonus other than pursuant to written policies or
written contracts in effect on the date of this Agreement; enter into
or amend any severance agreements with officers or employees of
InspecTech or any InspecTech Subsidiary; grant any material increase in
fees or other increases in compensation or other benefits to directors
of InspecTech or any InspecTech Subsidiary except in accordance with
the ordinary course of business consistent with past practice; or
voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits; or
27
[h] enter into or amend any employment contract
between InspecTech or any InspecTech Subsidiary and any person (unless
such amendment is required by Law or a pre-existing contractual
obligation) that InspecTech or the InspecTech Subsidiary does not have
the unconditional right to terminate without liability (other than
liability for services already rendered), at any time on or after the
Effective Time; or
[i] adopt any new employee benefit plan of InspecTech
or any InspecTech Subsidiary or make any material change in or to any
existing employee benefit plans of InspecTech or any InspecTech
Subsidiary other than any such change that is required by Law or that,
in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan; or
[j] except in the ordinary course of business,
modify, amend, or terminate any material contract or waive, release,
compromise, or assign any material rights or claims.
9. ADDITIONAL AGREEMENTS
9.1 STOCKHOLDER APPROVAL. Prior to the Effective Time,
InspecTech shall duly call, give notice of, convene and hold a stockholders'
meeting (the "Stockholder Meeting"), to be held as soon as reasonably
practicable (or shall seek the written consent of its stockholders in lieu
thereof) for the purpose of voting upon approval of the Merger, this Agreement
and the Plan of Merger. In connection with the Stockholder Meeting or such
written consent, the Board of Directors of InspecTech shall recommend to
InspecTech's stockholders the approval of the matters submitted for approval,
and the Board of Directors and officers of InspecTech shall use their reasonable
efforts to obtain such stockholders' approvals. InspecTech's Board of Directors
shall not withdraw or modify, or propose to withdraw or modify, such
recommendation. Primis and InspecTech shall also take any action reasonably
required to be taken under any applicable federal or state securities laws in
connection with the issuance of Primis Common Stock in the Merger, and Primis
and InspecTech shall furnish to the InspecTech stockholders all information
concerning Primis as may be reasonably requested in connection with any such
action.
9.2 FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions of this Agreement, at the Effective Time, Primis shall
cause Acquisition Corp to execute and file the Certificate of Merger with the
Secretary of State of the State of Delaware and the Secretary of State of the
State of California.
9.3 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the
terms and conditions of this Agreement, each party agrees to use its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper, or advisable under applicable laws to
consummate and make effective, as soon as reasonably practicable after the date
of this Agreement, the transactions contemplated by this Agreement.
28
9.4 INVESTIGATION AND CONFIDENTIALITY.
[a] Prior to the Effective Time, each party shall
keep the other party advised of all material developments relevant to
its business and to consummation of the Merger and shall permit the
other party to make or cause to be made such investigation of the
business and properties of it and its Subsidiaries and of their
respective financial and legal conditions as the other party reasonably
requests, provided that such investigation shall be reasonably related
to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a party shall
affect the representations and warranties of the other party.
[b] Each party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential
information furnished to it by the other party concerning its and its
Subsidiaries' businesses, operations, and financial positions and shall
not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. If this Agreement is
terminated prior to the Effective Time, each party shall promptly
return or certify the destruction of all documents and copies thereof,
and all work papers containing confidential information received from
the other party.
[c] Each party agrees to give the other party notice
as soon as practicable after any determination by it of any fact or
occurrence relating to the other party which it has discovered through
the course of its investigation and which represents, or is reasonably
likely to represent, either a material breach of any representation,
warranty, covenant, or agreement of the other party or which has had or
is reasonably likely to have a material adverse effect on the other
party.
9.5 CERTAIN ACTIONS. Except with respect to this Agreement and
the Plan of Merger and the transactions contemplated hereby and thereby, neither
InspecTech, any InspecTech Subsidiary nor any Affiliate thereof nor any
Representatives thereof retained by InspecTech or any InspecTech Subsidiary
shall directly or indirectly solicit or engage in negotiations concerning any
Acquisition Proposal, or provide any confidential information or assistance to,
or have any discussions with, any person with respect to an Acquisition
Proposal.
9.6 TAX TREATMENT. Each of the parties undertakes and agrees
to use its reasonable efforts to cause the Merger, and to take no action, either
before or after the Merger is effective, which would cause the Merger not, to
qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code for federal income tax purposes.
9.7 APPOINTMENT OF DIRECTOR. Primis will add Xxxxx Xxxx to its
board of directors at the next meeting of Primis' board of directors.
9.8 INSPECTECH PRINCIPAL OFFICE. For a period of one year from
the Effective Time, Primis shall not relocate the principal office of InspecTech
outside of the San Francisco Bay, California area.
29
9.9 DIRECTORS AND OFFICERS LIABILITY INSURANCE. Primis shall
use its reasonable best efforts to maintain InspecTech's existing directors' and
officers' liability insurance covering persons who are currently covered by such
insurance for a period of one year after the Effective Time on terms no less
favorable than those in effect on the date hereof; provided, however, that
Primis may substitute therefore policies providing at least comparable coverage
containing terms and conditions no less favorable than those in effect on the
date hereof; and provided, further that Primis shall not be obligated to make
annual premium payments which materially exceed the annual premium payments in
effect as of the date of this Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
10.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to perform this Agreement and the Plan of Merger and
to consummate the Merger and the other transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by both
parties pursuant to Section 17 of this Agreement:
[a] The stockholders of InspecTech shall have
approved this Agreement and the Plan of Merger and the consummation of
the transactions contemplated hereby and thereby, including the Merger,
as and to the extent required by Law and by the provisions of any
governing instruments.
[b] All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall
be in full force and effect and all waiting periods required by Law
shall have expired.
[c] Each party shall have obtained any and all
Consents required for consummation of the Merger or for the preventing
of any default under any Contract or permit of such party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a material adverse effect on such party.
[d] No court or governmental or Regulatory Authority
of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered any Law or order (whether temporary, preliminary,
or permanent) or taken any other action which prohibits, restricts, or
makes illegal consummation of the transactions contemplated by this
Agreement.
10.2 CONDITIONS TO OBLIGATIONS OF PRIMIS. The obligations of
Primis and Acquisition Corp to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by Primis pursuant to Section 17 of
this Agreement:
[a] The representations and warranties of InspecTech
set forth in this Agreement shall be true and accurate in all material
respects as of the date of this Agreement
30
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date).
[b] Each and all of the agreements and covenants of
InspecTech to be performed and complied with pursuant to this Agreement
and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material
respects.
[c] InspecTech shall have delivered to Primis (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its duly authorized officers, to the effect that the conditions of its
obligations set forth in Section 10.2(a) and 10.2(b) of this Agreement
have been satisfied and (ii) certified copies of resolutions duly
adopted by InspecTech's Board of Directors and stockholders evidencing
the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement and the Plan of
Merger, and the consummation of the transactions contemplated hereby
and thereby, all in such reasonable detail as Primis and its counsel
shall request.
[d] There shall not have been any material adverse
change in the InspecTech Assets or business, working capital,
liabilities, financial condition, business prospects or relationships
with any suppliers or customers or any material change or any material
commitment or transaction of any nature that would adversely affect the
business of InspecTech or any agreement in writing to take any action
that would have such an effect.
[e] There shall not have been any damage or
destruction materially adversely affecting the InspecTech Assets or
business.
[f] Shareholders of InspecTech holding more than 5.0%
of the outstanding InspecTech capital stock shall not have exercised or
preserved their right to dissent from the Merger.
[g] Each holder of InspecTech Preferred Stock shall
have executed a shareholders agreement substantially in the form
attached hereto as EXHIBIT 3.
[h] Primis shall have received the opinion of
InspecTech's counsel substantially in the form of EXHIBIT 4 attached
hereto.
[i] Immediately prior to the Closing, (x) each share
of InspecTech Preferred Stock owned by any non-accredited investor, as
such term is defined in Rule 501 promulgated under the Securities Act
and as designated in Section 5.3 of the InspecTech Disclosure Letter,
shall have been converted into InspecTech Common Stock, and Primis
shall be satisfied, in its sole reasonable discretion, that each holder
of InspecTech Preferred Stock receiving Primis Common Stock in the
Merger is an accredited investor, as such term is defined in such Rule
501, (y) the transactions contemplated by that certain Common Stock
31
Purchase Agreement dated as of January ___, 2000 between Primis and
Shareholders shall have been consummated, and (z) the transactions
contemplated by that certain Note Purchase Agreement dated as of
January ___, 2000 by and between Primis and the Sellers named therein
shall have been consummated.
10.3 CONDITIONS TO OBLIGATIONS OF INSPECTECH. The obligations of
InspecTech to perform this Agreement and the Plan of Merger and consummate
the Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by InspecTech
pursuant to Section 17 of this Agreement:
[a] The representations and warranties of Primis set
forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time
with the same effect as though all such representations and warranties
had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date
shall speak only as of such date).
[b] Each and all of the agreements and covenants of
Primis to be performed and complied with pursuant to this Agreement and
the other agreements contemplated hereby prior to the Effective Time
shall have been duly performed and complied with in all material
respects.
[c] Primis shall have delivered to InspecTech (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its duly authorized officers, to the effect that the conditions of its
obligations set forth in Sections 10.3(a) and 10.3(b) of this Agreement
have been satisfied and (ii) certified copies of resolutions duly
adopted by Primis's and Acquisition Corp's Board of Directors
evidencing the taking of all corporate action necessary to authorize
the execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as InspecTech and its counsel shall request.
[d] InspecTech shall have received the opinion of
Primis's counsel substantially in the form of EXHIBIT 5 attached
hereto.
[e] There shall not have been any material adverse
change in the Primis Assets or business, working capital, liabilities,
financial condition, business prospects or relationships with any
material suppliers or material customers or any material change or any
material commitment or transaction of any nature that would materially
adversely affect the business of Primis or any agreement in writing to
take any action that would have such effect.
11. TERMINATION. Notwithstanding any other provision of this Agreement
and the Plan of Merger, and notwithstanding the approval of this Agreement by
the stockholders of InspecTech or Primis, this Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time:
32
[a] By mutual consent of the Board of Directors of
Primis and the Board of Directors of InspecTech; or
[b] By the Board of Directors of either party
(provided that the terminating party is not then in material breach of
any representation or warranty contained in this Agreement) in the
event of an inaccuracy in any material respect of any representation or
warranty of the other party contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice
to the breaching party of such inaccuracy; or
[c] By the Board of Directors of either party
(provided that the terminating party is not then in material breach of
any representation or warranty contained in this Agreement) in the
event of a material breach by the other party of any covenant or
agreement contained in this Agreement which cannot be or has not been
cured within 30 days after the giving of written notice to the
breaching party of such breach; or
[d] By the Board of Directors of either party in the
event that the Merger shall not have been consummated by January 31,
2000, if the failure to consummate the transactions contemplated hereby
on or before such date is not caused by any breach of this Agreement by
the party electing to terminate pursuant to this Section.
In the event of the termination and abandonment of this
Agreement, this Agreement and the Plan of Merger shall become void and have no
effect, except that the provisions of this Section 11 and Sections 9.4 and 20 of
this Agreement shall survive any such termination and abandonment.
12. DEFINITIONS. Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"ACQUISITION CORP" shall mean the wholly-owned subsidiary of
Primis organized under the Laws of the State of Delaware.
"ACQUISITION CORP COMMON STOCK" shall mean the $.001 par value
common stock of Acquisition Corp.
"ACQUISITION PROPOSAL" with respect to a party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of all
of the stock or Assets of, or other business combination involving such party or
any of its Subsidiaries or the acquisition of a substantial equity interest in,
or a substantial portion of the Assets of, such party or any of its
Subsidiaries.
"AFFILIATE" of a person shall mean any other person directly,
or indirectly through one or more intermediaries, controlling, controlled by or
under common control with such person.
33
"AGREEMENT" shall mean this Agreement and Plan of
Reorganization, including the Exhibits hereto delivered pursuant hereto and
incorporated herein by reference.
"ASSETS" of a person shall mean all of the assets, properties,
businesses, and rights of such person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such person, and whether or not owned in the name of such person
or any Affiliate of such person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger
to be executed by Acquisition Corp and filed with the Secretary of State of the
State of Delaware and the Secretary of State of the State of California relating
to the Merger as contemplated by Sections 1.1 and 1.3 of this Agreement.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any person pursuant to
any contract, Law, order, or permit.
"DGCL" shall mean the Delaware General Corporation Law.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended.
"INSPECTECH CAPITAL STOCK" shall mean InspecTech Common Stock
and InspecTech Preferred Stock.
"INSPECTECH COMMON STOCK" shall mean the no par value common
stock of InspecTech.
"INSPECTECH DISCLOSURE LETTER" shall mean the letter delivered
prior to the execution of this Agreement to Primis describing in reasonable
detail the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section or subsection of this Agreement
under which such disclosure is being made.
"INSPECTECH PREFERRED STOCK" shall mean the no par value
preferred stock of InspecTech, of which 4,454,546 shares have been designated
Series A1 Preferred Stock.
"INSPECTECH STOCK PLANS" shall mean the existing stock option
and other stock-based compensation plans of InspecTech as disclosed in the
InspecTech Disclosure Letter.
"INSPECTECH SUBSIDIARIES" shall mean the Subsidiaries of
InspecTech, which shall include the InspecTech Subsidiaries described in Section
5.4 of this Agreement and any corporation,
34
or other organization acquired as a Subsidiary of InspecTech in the future and
owned by InspecTech at the Effective Time.
""INSPECTECH WARRANTS"" shall mean the warrants to acquire
InspecTech Common Stock described on Section 5.3 of the InspecTech Disclosure
Letter.
"LAW" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a person or
its Assets, liabilities, or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention,
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than Liens for property taxes not yet due and payable.
"PLAN OF MERGER" shall mean the plan of merger providing for
the Merger, in substantially the form of Exhibit 1.
"PRIMIS CAPITAL STOCK" shall mean, collectively, the Primis
Common Stock, the Primis Preferred Stock and any other class or series of
capital stock of Primis.
"PRIMIS COMMON STOCK" shall mean the $.01 par value common
stock of Primis.
"PRIMIS DISCLOSURE LETTER" shall mean the letter delivered
prior to the execution of this Agreement to InspecTech describing in reasonable
detail the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section or subsection of this Agreement
under which such disclosure is being made.
"PRIMIS PREFERRED STOCK" shall mean the $.01 par value Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock of
Primis.
"REGULATORY AUTHORITIES" shall mean, collectively, all federal
and state regulatory agencies having jurisdiction over the parties and their
respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative of a person.
"RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants, or
other binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights.
35
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SECURITIES LAWS" shall mean the Securities Act, the 1934 Act,
the Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SUBSIDIARIES" shall mean all those corporations or other
entities of which the entity in question owns or controls 50% or more of the
outstanding equity securities either directly or through an unbroken chain of
entities as to each of which 50% or more of the outstanding equity securities is
owned directly or indirectly by its parent.
"SURVIVING CORPORATION" shall mean Acquisition Corp as the
surviving corporation resulting from the Merger.
13. PUBLIC STATEMENTS. Except as required by law, neither
InspecTech, Shareholders nor Primis shall, without the prior written approval
of the other party hereto, make any press release or other public
announcement concerning the transactions contemplated by this Agreement.
Primis, InspecTech and Shareholders may disclose information with respect to
the transaction contemplated hereby to their respective employees, agents,
consultants and third parties only to the extent such persons have a need to
know such information or as may be required by law, rule, regulation, decree
or court order.
14. NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be mailed
by first class, registered, or certified mail, postage prepaid, or sent via
overnight courier service, or delivered personally and sent by facsimile:
(a) If to Primis or Acquisition Corp:
Primis, Inc.
Attn.: Chief Executive Officer
00000 Xxxxx Xxxx Xxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
36
With a copy to:
Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxx, Xxxxxxx & Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
(b) If to InspecTech:
InspecTech, Inc.
Attn.: Xxxxxx Xxxxxxx, President
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
With a copy to:
Xxxxxx X. Star, Esq.
Howard, Rice, et al
Three Xxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
or to such other address of which the addressee shall have notified the sender
in writing. Notices mailed in accordance with this section shall be deemed given
when mailed, and notices sent by overnight courier service shall be deemed given
when placed in the hands of a representative of such service.
15. PARTIES IN INTEREST; ASSIGNMENT. Except as otherwise provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of either party to this Agreement shall bind and inure to the benefit of their
respective heirs, executors, successors, and assigns, whether so expressed or
not. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement. This Agreement is not assignable (whether by merger, operation
of law or otherwise) and any purported assignment shall be null and void.
16. CONSTRUCTION; GOVERNING LAW. The section headings contained in this
Agreement are inserted as a matter of convenience and shall not affect in any
way the construction of the terms of this Agreement. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
California, without regard to the principles of conflicts of laws thereof.
37
17. ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement, including
the InspecTech Disclosure Letter and Exhibits hereto, constitutes and contains
the entire agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes any prior writing by the parties. Any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of Company and
Primis (or its permitted assigns). Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder
of all such securities, and Company.
18. SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the
remaining provisions.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same Agreement.
20. EXPENSES. Each party shall pay their respective legal and out-of-
pocket expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
21. TIME OF ESSENCE. Time is of the essence to the performance of the
obligations set forth in this Agreement.
38
IN WITNESS WHEREOF, InspecTech, Primis and Acquisition Corp
have caused this Agreement to be executed as of the day and year first written
above.
"InspecTech"
INSPECTECH CORPORATION
By:_______________________________
Title:____________________________
"Primis"
PRIMIS, INC.
By: ______________________________
Title: ___________________________
PRIMIS ACQUISITION CORP.
By:_______________________________
Title:____________________________
