EXHIBIT 99.1
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into this 12th day of
October, 2005, by and among PARADIGM HOLDINGS CORPORATION, a Wyoming corporation
("Parent"), PARADIGM SOLUTIONS INTERNATIONAL, INC., a Maryland corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), XXXXX MANAGEMENT SERVICES,
INC., t/d/b/a XXXXX TECHNOLOGY GROUP, a Pennsylvania corporation (the
"Company"), and the individuals listed on Exhibit A attached hereto
(individually, a "Shareholder" and collectively, the "Shareholders").
RECITALS:
A. The Shareholders own all of the outstanding capital stock of the
Company. The authorized capital stock of the Company consists of 1000 shares of
common stock, par value $0.10 per share, 300 of which are issued and outstanding
(the "Company Common Stock").
B. The Shareholders desire to exchange the Company Common Stock for
newly-issued shares of common stock, par value $0.01 per share of Parent (the
"Parent Common Stock") and cash, on the terms and conditions set forth herein.
C. Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall merge with and into Merger Sub (the "Merger") with
Merger Sub surviving, in accordance with the Maryland General Corporation Law
(the "MGCL").
D. For the purposes hereof, references to the Company shall mean Xxxxx
Management Services, Inc., t/d/b/a Xxxxx Technology Group, up to and including
the Closing Date and thereafter shall mean Merger Sub, which shall include the
operations of the Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein set forth and certain other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. THE MERGER AND RELATED TRANSACTIONS.
1.1. Merger. In accordance with the provisions of this Agreement, the MGCL
and other applicable law, on the Closing Date (as defined below), the Company
shall be merged with and into Merger Sub, which shall be the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation")
and shall continue its corporate existence under the laws of the State of
Maryland as a wholly-owned subsidiary of Parent. As of the Closing, the name of
the Merger Sub shall continue to be Paradigm Solutions Corporation, and the
separate existence of the Company shall cease. On the Closing Date and by virtue
of the Merger and without any action on the part of the Shareholders, all of the
then issued and outstanding shares of capital stock of the Company shall be
automatically canceled and shall entitle the Shareholders to receive the Merger
Consideration set forth in Section 1.2 hereof.
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1.2. Merger Consideration and Manner of Payment. In consideration of the
Merger, Parent shall issue, and deliver, to the Escrow Agent (as defined below),
in the denominations set forth opposite each Shareholder's name on Exhibit A
attached hereto, the following: (i) Five Hundred Thousand (500,000) newly-issued
shares of Parent Common Stock (the "Parent Shares") and; (ii) cash in the
aggregate amount equal to One Million Dollars (US $1,000,000) (the "Cash
Payment"). The Parent shall also issue the Contingent Shares, as defined below,
promptly after making a determination as to the number, if any, of such
Contingent Shares that are earned. The Parent Shares, the Contingent Shares and
the Cash Payment are sometimes referred to herein as the "Merger Consideration."
1.3. Escrow Arrangement. At the Closing, Sixty Thousand (60,000) of the
Parent Shares (such portion of the Parent Shares are referred to herein as the
"Escrowed Shares): shall be deposited with Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx
Xxxxxx LLP (the "Escrow Agent"), pursuant to the terms of the Escrow Agreement
(the "Escrow Agreement"), among Parent, Merger Sub, the Shareholders and the
Escrow Agent. Subject to the satisfaction of the terms and conditions of this
Agreement and the Escrow Agreement, the Escrow Agent shall deliver the Escrowed
Shares to the Shareholders on the one (1) year anniversary of the Closing.
1.4. Closing. The parties to this Agreement shall file Articles of Merger
(as defined below) pursuant to the MGCL and the Pennsylvania Business
Corporation Law of 1988, as amended (the "PBCL"), cause the Merger to become
effective and consummate the other transactions contemplated by this Agreement
(the "Closing") no later than October 15, 2005; provided, in no event shall the
Closing occur prior to the satisfaction of the conditions precedent set forth in
Sections 6, 7 and 8 hereof. The date of the Closing is referred to herein as the
"Closing Date." The Closing shall take place at the offices of Parent, or at
such other place as may be mutually agreed upon by Parent and the Shareholders.
At the Closing, (i) the Shareholders shall deliver to Parent the original stock
certificates representing the Company Common Stock; and (ii) Parent shall
deliver to Parent's transfer agent instructions with respect to issuing stock
certificates representing the Parent Shares, excluding the Escrowed Shares, and
shall deliver, via wire transfer, an aggregate of One Million Dollars (US
$1,000,000) to the Shareholders in the denominations set forth opposite each
Shareholder's name on Exhibit A attached hereto.
1.5. Plan of Merger; Articles of Merger. The parties to this Agreement
shall cause the Company and Merger Sub to enter into a Plan of Merger on the
date hereof, a copy of which is attached hereto as Exhibit "B" (the "Plan of
Merger"), and, at the Closing, to execute the Articles of Merger in the form
attached hereof as Exhibit "C" (the "Articles of Merger"). The Articles of
Merger shall be filed with the Secretary of State of Maryland and the Secretary
of the Commonwealth of Pennsylvania on the Closing Date in accordance with the
MGCL and PBCL.
1.6. Approval of Merger. By his execution of this Agreement, each
Shareholder hereby ratifies, approves and adopts the Plan of Merger for all
purposes under the MGCL and PBCL. On or before the execution of this Agreement,
the respective Boards of Directors of Parent, Merger Sub and the Company shall
have approved this Agreement, the Plan of Merger and the transactions
contemplated hereby and thereby.
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1.7. Contingent Shares. As part of the Merger Consideration, the Parent
shall issue to the Shareholders up to 350,000 newly-issued shares of Parent
Common Stock (the "Contingent Shares"), the exact number of which shall be
determined by reference to the net income of the Company during the twelve (12)
month period beginning on November 1, 2005 and ending October 31, 2006 (such 12
month period is referred to herein as the "Measurement Period"). The allocation
among Shareholders of the Contingent Shares earned shall be made to them pro
rata, based upon their respective current stock ownership of the Company. The
total number of Contingent Shares earned shall be based upon the amount of net
income earned by the Company during the Measurement Period (such net income
amount earned during the Measurement Period is referred to herein as the "Xxxxx
Net Income"). If the Xxxxx Net Income is less than $275,000 there shall be no
Contingent Shares issued. If the Xxxxx Net Income is at least $275,000, but less
than $300,000 there shall be 125,000 Contingent Shares Issued. If the Xxxxx Net
Income is at least $300,000 but less than $325,000 there shall be 250,000
Contingent Shares issued. If the Xxxxx Net Income is $325,000 or more there
shall be 350,000 Contingent Shares Issued.
For purposes of determining the Xxxxx Net Income, it is assumed that the
operations of the Company during the Measurement Period will be conducted, and
the determination of net income by such operations will be made, consistently
with the Company's historical practices. In the event that there is a
redirection of employee efforts during the Measurement Period such that the
efforts of the Shareholders and/or the former employees of the Company are
directed toward the business of the Parent, other than to the Company, the Xxxxx
Net Income determination shall be adjusted accordingly to give effect to such
redirection on a pro forma basis by including revenues for the work done by such
redirected employee(s) equal to the number of hours spent by each redirected
employee, as reflected on the time sheets or logs reasonably required to be
provided by the Parent, multiplied by that employee's standard billing rate. The
hours reflected on such time sheets or logs, as the case may be, shall be
approved by the Merger Sub's Senior Vice President and Chief Operating Officer,
respectively. Further, in the event that there are any allocations by the Parent
of administrative or other expenses to the former operations of the Company,
such allocations shall be removed in order to determine the Xxxxx Net Income.
The Parent hereby agrees that it shall provide the Shareholders a
reasonable opportunity to obtain the Xxxxx Net Income in order to earn the
Contingent Shares.
The determination of Xxxxx Net Income shall include full credit for the
revenues associated with each sale by the current employees of the Company of
the Parent's products and/or services after the Closing Date, including those in
process as of the Closing Date, and one half credit for such sales to the extent
such sales result from the joint efforts of such employees, together with the
employees of the Parent.
1.8. Working Capital Adjustment. The parties hereto agree that prior to
the Closing the Shareholders shall be paid in cash at an amount that is equal to
the Company's total net stockholders' equity as of August 31, 2005 which amount
is $885,544.26, of which up to $300,000 will be paid in cash and the balance
will be paid pursuant to a promissory note substantially in the form of Exhibit
"D" attached hereto to each Shareholder for each Shareholder's pro rata amount.
If, upon determining the Company's total net equity as of a date that is within
30 days of the Closing, such amount is less than $885,544.26 the Shareholders
shall pay to Parent the difference or, upon the Shareholders' election, shall
settle such obligation by directing the Escrow Agent to release that number of
Escrowed Shares, valued in the manner described in Section 9.5.3., needed to
settle such obligation.
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2. ADDITIONAL AGREEMENTS.
2.1. Access and Inspection, Etc. The Company and the Shareholders have
allowed and shall allow Parent and its authorized representatives full access
during normal business hours from and after the date hereof and prior to the
Closing Date to all of the properties, books, contracts, commitments and records
of the Company for the purpose of making such investigations as Parent may
reasonably request in connection with the transactions contemplated hereby, and
shall cause the Company to furnish Parent such information concerning its
affairs as Parent may reasonably request. The Company and the Shareholders have
caused and shall cause the personnel of the Company to assist Parent in making
such investigation and shall use their reasonable best efforts to cause the
counsel, accountants, and other non-employee representatives of the Company to
be reasonably available to Parent for such purposes. The Shareholders shall
cause the Company to comply with all obligations of the Company under this
Agreement.
2.2. Confidential Treatment of Information. From and after the date
hereof, the parties hereto shall and shall cause their representatives to hold
in confidence this Agreement (including the Exhibits and Schedules hereto), all
matters relating hereto and all data and information obtained with respect to
the other parties or their business, except such data or information as is
published or is a matter of public record, or as compelled by legal process. In
the event this Agreement is terminated pursuant to Section 10 hereof, each party
shall promptly return to the other(s) any statements, documents, schedules,
exhibits or other written information obtained from them in connection with this
Agreement, and shall not retain any copies thereof.
2.3. Public Announcements. After the date hereof and prior to the Closing,
none of the parties hereto shall make any press release, statement to employees
or other disclosure of this Agreement or the transactions contemplated hereby
without the prior written consent of the other parties, except as may be
required by law. No party hereto shall make any such disclosure unless the other
shall have received prior notice of the contemplated disclosure and has had
adequate time and opportunity to comment on such disclosure, which shall be
satisfactory in form and content to such other party and its counsel.
2.4. Securities Law Compliance. The issuance of the Parent Shares to the
Shareholders hereunder shall not be registered under the Securities Act of 1933,
as amended (the "1933 Act"), by reason of the exemption provided by Section 4(2)
thereof, and such shares may not be further transferred unless such transfer is
registered under applicable securities laws or, in the opinion of Parent's
counsel, such transfer complies with an exemption from such registration. All
certificates evidencing the Parent Shares to be issued to the Shareholders shall
be legended to reflect the foregoing restriction.
2.5. Piggy-Back Registration Rights. Commencing on the Closing Date and
subject to the terms and conditions of this Agreement, Parent shall notify the
holder of Registrable Securities (as defined below) in writing at least ten (10)
days prior to the filing of any registration statement under the 1933 Act for
purposes of a public offering of securities of Parent (including, but not
limited to, registration statements relating to secondary offerings of
securities of Parent, but excluding any registration statement relating to any
(i) employee benefit plan, (ii) with respect to any corporate reorganization or
other transaction under Rule 145 of the 1933 Act), or (iii) any financing
transaction and will afford each such holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
holder. Each holder of Registrable Securities desiring to include in any such
registration statement, all of part of the Registrable Securities held by it
shall, within ten (10) days after the above-described notice from Parent, so
notify Parent in writing. Such notice shall state the intended method of
disposition of the Registrable Securities held by such holder. If a holder
decides not to include all of its Registrable Securities in the registration
statement thereafter filed by Parent, such holder shall nevertheless continue to
have the right to include any Registrable Securities in any subsequent
registration statement or registration statements as may be filed by Parent with
respect to offerings of its securities, all upon the terms and conditions set
forth herein. "Registrable Securities" means the Parent Shares issuable to the
Shareholders pursuant to this Agreement.
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2.6. Registration Upon A Change of Control. In the event of a Change of
Control (as defined below) of Parent, and subject to the terms and conditions of
this Agreement, Parent shall file a registration statement under the 1933 Act
covering the Registrable Securities. For the purpose of this Agreement, a
"Change in Control" of Parent has occurred when: (x) any person (defined for the
purposes of this Section 2.6 to mean any person within the meaning of Section
13(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than
Parent, or an employee benefit plan established by the Board of Directors of
Parent, acquires, directly or indirectly, the beneficial ownership (determined
under Rule 13d-3 of the regulations promulgated by the Securities and Exchange
Commission under Section 13(d) of the Exchange Act) of securities issued by
Parent having twenty percent (20%) or more of the voting power of all of the
voting securities issued by Parent in the election of directors at the meeting
of the holders of voting securities to be held for such purpose; or (y) a
majority of the directors elected at any meeting of the holders of voting
securities of Parent are persons who were not nominated for such election by the
Board of Directors of Parent or a duly constituted committee of the Board of
Directors of Parent having authority in such matters; or (z) Parent merges or
consolidates with or transfers substantially all of its assets to another
person.
2.7. Best Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties shall use its best efforts in good faith to take
or cause to be taken as promptly as practicable all reasonable actions that are
within its power to cause to be fulfilled those conditions precedent to its
obligations or the obligations of the other parties to consummate the
transactions contemplated by this Agreement that are dependent upon its actions.
2.8. Further Assurances. The parties shall deliver any and all other
instruments or documents required to be delivered pursuant to, or necessary or
proper in order to give effect to, the provisions of this Agreement, including,
without limitation, all necessary stock powers and such other instruments of
transfer as may be necessary or desirable to transfer ownership of the Company
Common Stock and to consummate the transactions contemplated by this Agreement.
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2.9. Noncompetition.
2.9.1. Competitive Business. From and after the Closing Date and for
a period one (1) year thereafter (the "Restricted Period"), no Shareholder shall
directly or indirectly compete with Parent and/or the Surviving Corporation by
owning, managing, controlling or participating in the ownership, management or
control of or be employed by or engaged in any Competitive Business (as defined
herein) in the continental United States. As used herein, a "Competitive
Business" is any other corporation, partnership, proprietorship, firm or other
business entity which is engaged in a "core business of Parent and/or the
Surviving Corporation". A "core business of Parent and/or the Surviving
Corporation" is the business of continuity planning software and related
services.
Notwithstanding the above, any Shareholder may become employed by or
engaged by a Competitive Business so long as the Shareholder (a) was not
directly involved with or participating in the areas of the "core business of
Parent and/or the Surviving Corporation" which makes the other business a
Competitive Business, or (b) if the Shareholder is not involved directly in that
part of the Competitive Business which is competitive with the "core business of
Parent and/or the Surviving Corporation." In addition, a Shareholder may be
employed by or engaged by any business which after the Closing Date becomes a
Competitive Business, if such employment or engagement occurred prior to Parent
and/or the Surviving Corporation entering into a new "core business of Parent
and/or the Surviving Corporation" (whether by acquisition or through Parent
and/or the Surviving Corporation's own initiative), which caused such other
business to become a Competitive Business. Also, this Section is not violated if
a Shareholder owns no more than five percent (5%) of the stock of any publicly
traded Competitive Business.
2.9.2. Non-Interference. From and after the date hereof and during
the Restricted Period, no Shareholder shall induce or solicit any employee of
Parent and/or the Surviving Corporation or any person doing business with Parent
and/or the Surviving Corporation to terminate his or her employment or business
relationship with Parent and/or the Surviving Corporation or otherwise interfere
with any such relationship.
2.9.3. Confidentiality. The Shareholders agree and acknowledge that,
by reason of the nature of the Shareholders' ownership interest in Parent and/or
the Surviving Corporation, each Shareholder will have or may have access to and
become informed of confidential and secret information which is a competitive
asset of Parent and/or the Surviving Corporation ("Confidential Information"),
including, without limitation, technology, any lists of customers, financial
statistics, research data or any other statistics and plans contained in profit
plans, capital plans, critical issue plans, strategic plans or marketing or
operation plans or other trade secrets of Parent and/or the Surviving
Corporation and any of the foregoing which belong to any person or company but
to which the Shareholders have had access by reason of their relationship with
Parent and/or the Surviving Corporation. The Shareholders agree faithfully to
keep in strict confidence, and not, either directly or indirectly, to make
known, divulge, reveal, furnish, make available or use any such Confidential
Information. The Shareholders acknowledge that all manuals, instruction books,
price lists, information and records and other information and aids relating to
Parent and/or the Surviving Corporation's business, and any and all other
documents containing Confidential Information furnished to the Shareholders by
Parent and/or the Surviving Corporation or otherwise acquired or developed by
the Shareholders, shall at all times be the property of Parent and/or the
Surviving Corporation. Upon the termination of this Agreement, each Shareholder
shall return to Parent and/or the Surviving Corporation any such property or
documents which are in their possession, custody or control, but the
Shareholders' obligation of confidentiality shall survive such termination and
unless any such Confidential Information shall have become, through no fault of
the Shareholder, generally known to the trade. The obligations of the
Shareholders under this subsection are in addition to, and not in limitation or
preemption of, all other obligations of confidentiality which each Shareholder
may have to Parent and/or the Surviving Corporation under general legal or
equitable principles. Notwithstanding the above, however, Parent and/or the
Surviving Corporation acknowledges that each Shareholder may have extensive
experience in the general industry in which Parent and/or the Surviving
Corporation operate, and these restrictions are not intended to prevent a
Shareholder from using his knowledge of the industry. These restrictions only
apply to Confidential Information which is owned by Parent and/or the Surviving
Corporation, or was learned by a Shareholder as a shareholder of Parent.
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2.9.4. Remedies. It is expressly agreed by the Shareholders and
Parent that the provisions in this Section 2 are reasonable for purposes of
preserving for Parent and/or the Surviving Corporation its business, goodwill
and Confidential Information. It is also agreed that if any provision is found
by a court having jurisdiction to be unreasonable because of scope, area or
time, then that provision shall be amended to correspond in scope, area and time
to that considered reasonable by a court and as amended shall be enforced and
the remaining provisions shall remain effective. In the event any breach of
these provisions by any Shareholder, the parties recognize and acknowledge that
a remedy at law will be inadequate and Parent and/or the Surviving Corporation
may suffer irreparable injury. The Shareholders consent to injunctive and other
appropriate equitable relief without the posting of a bond upon the institution
of proceedings therefor by Parent and/or the Surviving Corporation in order to
protect Parent and/or the Surviving Corporation's rights. Such relief shall be
in addition to any other relief to which any party may be entitled at law, in
equity, or under any other agreement between or among any Shareholder, the
Company and Parent and/or the Surviving Corporation. The provisions of Sections
2.9.3 and 2.9.4 shall survive the termination of this Agreement.
2.10. Certain Tax Matters.
(a) Section 338 Election. The Company and the Shareholders
agree to refrain from making any election under Code ss.338(h)(10) or ss.338(n)
of the Internal Revenue Code of 1986, as amended (the "Code") (or any
corresponding election under state, local, and foreign tax law) with respect to
the Merger, it being agreed and acknowledged that the parties intend to effect
the transactions contemplated hereunder as a reorganization pursuant to Section
368 of the Code with at least forty percent (40%) of the Merger Consideration,
in terms of fair value determined pursuant to the Code and the regulations and
rulings thereunder, in the form of the capital stock of the Parent.
(b) Allocation of Merger Consideration. Parent and the
Shareholders agree that the Merger Consideration and the liabilities of the
Company (plus other relevant items) will be allocated to the assets of the
Company for all purposes (including tax and financial accounting) in a manner
consistent with the fair market values set forth on Schedule 2.8 hereto. Parent,
the Company and the Shareholders shall file all tax returns (including amended
returns and claims for refund) and information reports in a manner consistent
with such values).
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(c) Tax Periods Ending on or before the Closing Date. Prior to
the Closing Date, the Company shall prepare or cause to be prepared and filed or
cause to be filed all tax returns for the Company for all periods ending on or
prior to the Closing Date which are filed after the Closing Date. The Company
shall accrue a liability on its financial statements for any taxes of the
Company with respect to such period. The foregoing preparation and accrual will,
to the extent practicable, be completed prior to the Closing Date by way of
estimates, if necessary, and adjustments will be made to reconcile such
estimates to the actual amounts as soon as is practicable after the Closing
Date.
(d) Cooperation on Tax Matters.
(i) Parent, the Company and the Shareholders shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of tax returns pursuant to this Section 2.10 and any
audit, litigation or other proceeding with respect to taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and the Shareholders agree (A) to
retain all books and records with respect to tax matters pertinent to the
Company relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent notified by
Parent or any Shareholder, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other party so requests, the Company or any Shareholder, as the case may
be, shall allow the other party to take possession of such books and records.
(ii) Parent and the Shareholders further agree, upon request,
to use their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(e) The parties hereto acknowledge and agree that the Parent
shall only be responsible for the payment of taxes with respect to the Company
arising after the Closing Date. Further, the parties hereto acknowledge and
agree that any tax liabilities of the Company arising before the Closing Date
shall remain the obligation of the Shareholders, subject to the limitations set
forth in Section 9.5.2.
2.11. Employment Matters. At the Closing, Merger Sub shall execute and
deliver employment agreements with Messrs. Xxx Xxxxxxxxx, Xxx Xxxxx and Xxxxx
Xxxxxxx substantially in the forms of Exhibit E, Exhibit F and Exhibit G
attached hereto.
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2.12. Release of Claims By Each Shareholder. Effective as of the Closing
Date, and except for any obligations arising out of this Agreement, each
Shareholder, and his successors, predecessors, assigns, agents, advisors, legal
representatives, partners and all persons acting by, through or under him,
hereby release the Company and each of its successors, predecessors, assigns,
agents, advisors, officers, directors, employees, legal representatives,
partners and all persons acting by, through or under each of them, from any and
all claims, obligations, causes of action, actions, suits, contracts,
controversies, agreements, promises, damages, demands, costs, attorneys' fees
and liabilities of any nature whatsoever from the beginning of time up to and
including the Closing Date, in law or at equity, whether known now or on the
Closing Date, anticipated or unanticipated, suspected or claimed, fixed or
contingent, liquidated or unliquidated, arising out of, in connection with or
relating to any matter, cause or thing whatsoever.
3. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE SHAREHOLDERS.
To induce Parent and Merger Sub to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and each of the
Shareholders severally, but not jointly, represent and warrant to and covenant
with Parent and Merger Sub as follows, except as specified to the contrary in
the corresponding section of the disclosure schedule (the "Schedule") attached
hereto and incorporated herein by reference:
3.1. Organization; Compliance. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Pennsylvania.
The Company is: (a) entitled to own or lease its properties and to carry on its
business as and in the places where such business is now conducted, and (b) duly
licensed and qualified in all jurisdictions where the character of the property
owned by it or the nature of the business transacted by it makes such license or
qualification necessary, except where the failure to do so would not result in a
material adverse effect on the Company. Schedule 3.1 lists all locations where
the Company has an office or place of business and the nature of the ownership
interest in such property (fee, lease, or other).
3.2. Capitalization and Related Matters.
3.2.1.1. The Company has an authorized capital
consisting of 1,000 shares of common stock, par value per share,
$0.10, of which 300 shares of Company Common Stock are issued and
outstanding as of the date hereof. All shares of Company Common
Stock are duly and validly issued, fully paid and nonassessable. No
shares of Company Common Stock (i) were issued in violation of the
preemptive rights of any shareholder, or (ii) except as disclosed in
Section 3.2(a) of the Disclosure Schedule, are held as treasury
stock.
3.2.1.2. There are not outstanding any securities
convertible into capital stock of the Company nor any rights to
subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise)
of, or any calls, commitments or claims of any character relating
to, such capital stock or securities convertible into such capital
stock. The Company: (i) is not subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any of
its capital stock; and (ii) has no liability for dividends or other
distributions declared or accrued, but unpaid, with respect to any
capital stock.
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3.2.1.3. The Shareholders are, and will be at Closing,
the record and beneficial owner of 300 shares of Company Common
Stock, free and clear of all claims, liens, options, agreements,
restrictions, and encumbrances whatsoever and no Shareholder is a
party to any agreement, understanding or arrangement, direct or
indirect, relating to the Company Common Stock, including, without
limitation, agreements, understandings or arrangements regarding
voting or sale of such stock.
3.3. Subsidiaries. The Company owns (a) no shares of capital stock of any
other corporation, including any joint stock company, and (b) no other
proprietary interest in any company, partnership, trust or other entity,
including any limited liability company.
3.4. Execution; No Inconsistent Agreements; Etc.
3.4.1.1. This Agreement is a valid and binding agreement
of the Company and the Shareholders, enforceable in accordance with
its terms, except as such enforcement may be limited by bankruptcy
or similar laws affecting the enforcement of creditors' rights
generally, and the availability of equitable remedies. The Company
and the Shareholders have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement
and the documents to be delivered by them in connection with the
Closing and to perform their obligations under this Agreement.
3.4.1.2. Except as set forth in Schedule 3.4, the
execution and delivery of this Agreement by the Company and the
Shareholders does not, and the consummation of the transactions
contemplated hereby will not, constitute a breach or violation of
the charter or bylaws of the Company, or a default under any of the
terms, conditions or provisions of (or an act or omission that would
give rise to any right of termination, cancellation or acceleration
under) any note, bond, mortgage, lease, indenture, agreement or
obligation to which the Company or any Shareholder is a party,
pursuant to which the Company or any Shareholder otherwise receives
benefits, or to which any of the properties of the Company or any
Shareholder is subject, or, to the knowledge of the Company and the
Shareholders, violate any judgment, order, decree, statute or
regulation applicable to the Company or any Shareholder or by which
any of them may be subject.
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3.5. Corporate Records. The statutory records, including the stock
register and minute books of the Company, fully reflect all issuances, transfers
and redemptions of its capital stock, currently show and will correctly show the
total number of shares of its capital stock issued and outstanding on the date
hereof and on the Closing Date, the charter or other organizational documents
and all amendments thereto, the bylaws as amended and currently in force. To the
knowledge of the Shareholders, the books of account, minute books, stock record,
books, and other records of the Company, all of which have been made available
to Parent, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
Shareholders, the Board of Directors, and committees of the Boards of Directors
of the Company, and no meeting of any such Shareholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Company.
3.6. Financial Statements.
3.6.1.1. The Company and the Shareholders have delivered
to Parent the audited balance sheet of the Company as of December
31, 2003 (the balance sheet as of December 31, 2003 is hereinafter
referred to as the "Balance Sheet'), and the related statements of
income, shareholders' equity and cash flows of the Company for the
fiscal year ended December 31, 2003 and the independent auditors'
report thereon. All the foregoing financial statements are referred
to herein collectively as the "Company Financial Statements". The
Company and the Shareholders have also delivered to the Parent, a
balance sheet of the Company as of December 31, 2004 and the related
statements of income, shareholders' equity and cash flows of the
Company for the fiscal year ended December 31, 2004 and the
independent accountant's review report thereon, as well as the
unaudited statement of income for the eight (8) months ended August
31, 2005.
3.6.1.2. The Company Financial Statements have been and
will be prepared in accordance with applicable generally accepted
accounting principles ("GAAP") throughout the periods involved,
subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially
from those included in the Balance Sheet), applied on a consistent
basis, and fairly reflect and will reflect in all material respects
the financial condition of the Company as at the dates thereof and
the results of the operations of the Company for the periods then
ended, and are true and complete and are consistent with the books
and records of the Company.
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3.6.1.3. Until Closing, the Company will furnish to
Parent unaudited interim income statements of the Company for each
month subsequent to August 31, 2005 through the Closing Date as soon
as practicable but in any event within thirty (30) days after the
close of any such month.
3.7. Liabilities. Except as set forth on Schedule 3.7 the Company has no
debt, liability or obligation of any kind, whether accrued, absolute, contingent
or otherwise, except: (a) those reflected on the Balance Sheet, including the
notes thereto, and (b) liabilities incurred in the ordinary course of business
since December 31, 2004, none of which have had or will have a material adverse
effect on the financial condition of the Company.
3.8. Absence of Changes. Except as described in Schedule 3.8, from
December 31, 2004 to the date of this Agreement:
3.8.1.1. there has not been any adverse change in the
business, assets, liabilities, results of operations or financial
condition of the Company or in its relationships with suppliers,
customers, employees, lessors or others, other than changes in the
ordinary course of business, none of which, singularly or in the
aggregate, have had or will have a material adverse effect on the
business, properties or financial condition of the Company;
3.8.1.2. there has not been any: (i) change in the
Company's authorized or issued capital stock, retirement, or other
acquisition by the Company of any shares of any such capital stock;
(ii) a declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock, except as set
forth on Schedule 3.27; (iii) amendment to the Articles of
Incorporation or Bylaws of the Company; (iv) increase by the Company
of any bonuses, salaries, or other compensation to any shareholder,
director, officer, or (except in the ordinary course of business)
employee or entry into any employment, severance, or similar
agreement with any director, officer, or employee; (v) adoption of,
or increase in the payments to or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees
of the Company; (vi) sale, lease, or other disposition of any asset
or property of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of the
Company; (vii) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000; (viii) material change in
the accounting methods used by the Company; or (ix) agreement,
whether oral or written, by the Company to do any of the foregoing;
and
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3.8.1.3. the Company has complied with the covenants and
restrictions set forth in Section 5 to the same extent as if this
Agreement had been executed on, and had been in effect since, August
31, 2005.
3.9. Title to Properties. The Company has good and marketable title to all
of its properties and assets, including, but not limited to, those reflected in
the Balance Sheet (except as since sold or otherwise disposed of in the ordinary
course of business, or as expressly provided for in this Agreement), free and
clear of all encumbrances, liens or charges of any kind or character except: (a)
those securing liabilities of the Company incurred in the ordinary course (with
respect to which no default exists); (b) liens of 2004 real estate and personal
property taxes; and (c) imperfections of title and encumbrances, if any, which,
in the aggregate (i) are not substantial in amount; (ii) do not detract from the
value of the property subject thereto or impair the operations of the Company;
and (iii) do not have a material adverse effect on the business, properties or
assets of the Company.
3.10. Compliance With Law. The business and activities of the Company
have, to the knowledge of the Shareholders, at all times been conducted in
accordance with its Articles of Incorporation and Bylaws and any applicable law,
regulation, ordinance, order, License (as defined below), permit, rule,
injunction or other restriction or ruling of any court or administrative or
governmental agency, or body, except where the failure to do so would not result
in a material adverse effect on the Company.
3.11. Taxes. The Company has duly filed all federal, state, and material
local and foreign tax returns and reports, and all returns and reports of all
other governmental units having jurisdiction with respect to taxes imposed on it
or on its income, properties, sales, franchises, operations or employee benefit
plans or trusts, all such returns were complete and accurate when filed, and all
taxes and assessments payable by the Company have been paid to the extent that
such taxes have become due. All taxes accrued or payable by the Company for all
periods through December 31, 2004 have been accrued or paid in full, whether or
not due and payable and whether or not disputed. The Company has withheld proper
and accurate amounts from its employees for all periods in full compliance with
the tax withholding provisions of applicable foreign, federal, state and local
tax laws. There are no waivers or agreements by the Company for the extension of
time for the assessment of any taxes. There are not now any examinations of the
income tax returns of the Company pending, or to the knowledge of the
Shareholders, any proposed deficiencies or assessments against the Company of
additional taxes of any kind.
3.12. Real Properties. The Company does not have an interest in any real
property, except for the Leases (as defined below).
3.13. Leases of Real Property. All leases pursuant to which the Company is
a lessee of any real property (the "Leases") are listed in Schedule 3.13 and are
valid and enforceable in accordance with their terms. There is not under any of
such Leases any material default or any claimed material default by the Company
or any event of default or event which with notice or lapse of time, or both,
would constitute a material default by the Company and in respect to which the
Company has not taken adequate steps to prevent a default on its part from
occurring. The copies of the Leases heretofore furnished to Parent are true,
correct and complete, and such Leases have not been modified in any respect
since the date they were so furnished, and are in full force and effect in
accordance with their terms. The Company is lawfully in possession of all real
properties of which they are a lessee (the "Leased Properties").
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3.14. Contingencies. Except as disclosed on Schedule 3.14, there are no
actions, suits, claims or proceedings pending, or to the knowledge of the
Shareholders threatened against, by or affecting, the Company in any court or
before any arbitrator or governmental agency that may have a material adverse
effect on the Company or which could materially and adversely affect the right
or ability of any Shareholder to consummate the transactions contemplated
hereby. To the knowledge of the Shareholders, there is no valid basis upon which
any such action, suit, claim, or proceeding may be commenced or asserted against
the Company. There are no unsatisfied judgments against the Company and no
consent decrees or similar agreements to which the Company is subject and which
could have a material adverse effect on the Company.
3.15. Intellectual Property Rights. To its knowledge, except as disclosed
on Schedule 3.15, the Company has: (a) no exclusive right to use the name Xxxxx
Technology Group in the geographic regions in which it operates. The Company has
good and marketable title to its trade secrets, free and clear of all
encumbrances, liens, or charges of any kind or character.
3.16. Material Contracts. Schedule 3.16 contains a complete list of all
contracts of the Company which involve consideration in excess of the equivalent
of $10,000 or have a term of one (1) year or more (the "Material Contracts").
The Company has delivered to Parent a true, correct and complete copy of each of
the written contracts, and a summary of each oral contract, listed on Schedule
3.16. Except as disclosed in Schedule 3.16: (a) the Company has performed all
material obligations to be performed by it under all such contracts, and is not
in material default thereof, and (b) no condition exists or has occurred which
with the giving of notice or the lapse of time, or both, would constitute a
material default by the Company or accelerate the maturity of, or otherwise
modify, any such contract, and (c) all such contracts are in full force and
effect. No material default by any other party to any of such contracts is known
or claimed by the Company or any Shareholder to exist.
3.17. Insurance. Schedule 3.17 contains a complete list of all policies of
insurance presently maintained by the Company all of which are, and will be
maintained through the Closing Date, in full force and effect; and all premiums
due thereon have been paid and the Company has not received any notice of
cancellation with respect thereto. The Company has heretofore delivered to
Parent or its representatives a true, correct and complete copy of each such
insurance policy.
3.18. Employment and Labor Matters. Schedule 3.18 sets forth the name,
position, employment date, and 2004 compensation (base and bonus) of each
employee of the Company who earned $25,000 or more in 2004 or is anticipated to
earn $25,000 or more in 2005. The Company is not a party to any collective
bargaining agreement (whether industry wide or on a company level) or agreement
of any kind with any union or labor organization. There has not been any attempt
by any union or other labor organization to organize the employees of the
Company at any time in the past five (5) years. Except as disclosed in Schedule
3.18, the Company is not a party to or bound by any employment contract,
consulting agreement, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing.
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3.19. Employee Benefit Matters.
3.19.1.1. Except as disclosed in Schedule 3.19, the
Company does not provide, nor is it obligated to provide, directly
or indirectly, any benefits for employees other than salaries, sales
commissions and bonuses, including, but not limited to, any pension,
profit sharing, stock option, retirement, bonus, hospitalization,
insurance, severance, vacation or other employee benefits (including
any housing or social fund contributions) under any practice,
agreement or understanding.
3.19.1.2. Each employee benefit plan maintained by or on
behalf of the Company or any other party (including any terminated
pension plans) which covers or covered any employees or former
employees of the Company (collectively, the "Employee Benefit Plan")
is listed in Schedule 3.19. The Company has delivered to Parent true
and complete copies of all such plans and any related documents.
With respect to each such plan: (i) no litigation, administrative or
other proceeding or claim is pending, or to the knowledge of the
Shareholders, threatened or anticipated involving such plan; (ii)
there are no outstanding requests for information by participants or
beneficiaries of such plan; and (iii) such plan has been
administered in compliance in all material respects with all
applicable laws and regulations.
3.19.1.3. The Company has timely made payment in full of
all contributions to all of the Employee Benefit Plans which the
Company was obligated to make prior to the date hereof; and there
are no contributions declared or payable by the Company to any
Employee Benefit Plan which, as of the date hereof, has not been
paid in full.
3.20. Possession of Franchises, Licenses, Etc. The Company: (a) possess
all material, licenses, permits and other authorizations (collectively, the
"Licenses") from governmental authorities, political subdivisions or regulatory
authorities that are necessary for the ownership, maintenance and operation of
its business in the manner presently conducted; (b) is not in violation of any
provisions thereof; and (c) has maintained and amended, as necessary, all
Licenses and duly completed all filings and notifications in connection
therewith.
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3.21. Environmental Matters. Except as disclosed in Schedule 3.21: (i) the
Company is not in violation, in any material respect, of any Environmental Law
(as defined below); (ii) the Company has received all permits and approvals with
respect to emissions into the environment and the proper collection, storage,
transport, distribution or disposal of Wastes (as defined below) and other
materials required for the operation of its business at present operating
levels; and (iii) the Company is not liable or responsible for any material
clean up, fines, liability or expense arising under any Environmental Law, as a
result of the disposal of Wastes or other materials in or on the property of the
Company (whether owned or leased), or in or on any other property, including
property no longer owned, leased or used by the Company. As used herein, (a)
"Environmental Laws" means, collectively, any federal, or applicable state or
local statute, law, ordinance, code, rule, regulation, order or decree (foreign
or domestic) regulating, relating to, or imposing liability or standards of
conduct concerning, Wastes, or the environment; and (b) "Wastes" means and
includes any hazardous, toxic or dangerous waste, liquid, substance or material
(including petroleum products and derivatives), the generation, handling,
storage, disposal, treatment or emission of which is subject to any
Environmental Law.
3.22. Accounts Receivable. On the Closing Date, the Company and the
Shareholders will deliver to Parent a complete and accurate list, as of August
31, 2005, of the accounts and notes receivable due to the Company (including,
without limitation, receivables from advances to employees and the
Shareholders), which includes an aging of all accounts and notes receivable
showing amounts due in thirty (30) day aging categories (collectively, the
"Accounts Receivables"). As of the Closing Date, the Accounts Receivables: (a)
will represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business; (b) will be current and
collectible net of any applicable reserves shown on the Company's books and
records (which reserves are adequate and calculated consistently with past
practice); (c) subject to such reserves, will be collected in full, without any
set-off, within one hundred fifty (150) days after the Closing Date; and (d) are
not and will not be subject to any contest, claim, defense or right of set-off,
other than rebates and returns in the ordinary course of business.
3.23. Agreements and Transactions with Related Parties. Except as
disclosed on Schedule 3.23, and except as disclosed in the Company Financial
Statements, the Company is not a party to any contract, agreement, lease or
transaction with, or any other commitment to, (a) any Shareholder, (b) any
person related by blood, adoption or marriage to any Shareholder, (c) any
director or officer of the Company, (d) any corporation or other entity in which
any of the foregoing parties has, directly or indirectly, at least five percent
(5.0%) beneficial interest in the capital stock or other type of equity interest
in such corporation or other entity, or (e) any partnership in which any such
party is a general partner or a limited partner having a five percent (5%) or
more interest therein (any or all of the foregoing being herein referred to as a
"Related Party" and, collectively, as the "Related Parties"). Without limiting
the generality of the foregoing, except as set forth in Schedule 3.23, and
except as disclosed in the Company Financial Statements no Related Party,
directly or indirectly, owns or controls any assets or properties which are used
in the business of the Company.
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3.24. Business Practices. Except as disclosed on Schedule 3.24, the
Company has not, at any time, directly or indirectly, made any contributions or
payment, or provided any compensation or benefit of any kind, to any municipal,
county, state, federal or foreign governmental officer or official, or any other
person charged with similar public or quasi-public duties, or any candidate for
political office. The Company's books, accounts and records (including, without
limitation, customer files, product packaging and invoices) accurately describe
and reflect, in all material respects, the nature and amount of the Company's
products, purchases, sales and other transactions. Without limiting the
generality of the foregoing, the Company has not engaged, directly or
indirectly, in: (a) the practice known as "double-invoicing;" or (b) the
incorrect or misleading labeling, marketing or sale of refurbished goods as new
goods or the sale of rebuilt goods as original manufactured equipment.
3.25. Condition and Sufficiency of Assets. The buildings and equipment
leased by the Company are generally in good operating condition and repair, and
are adequate for the uses to which they are being put. The buildings and
equipment of the Company are sufficient for the continued conduct of the
Company's business after the Closing in substantially the same manner as
conducted prior to the Closing.
3.26. Accounting System. The Company's accounting software is owned or
licensed by the Company, free and clear of all claims, liens and encumbrances,
and the transactions contemplated hereby will not result in a breach of any
license or other agreement with respect to the accounting software. The
Company's accounting software is to the Company's knowledge, in good working
order and condition, has been maintained in accordance with the manufacturer's
recommended maintenance program, if any, and is suitable for maintaining the
books and records of the Company.
3.27. Dividends and Other Distributions. Schedule 3.27 sets forth the
dates and amounts of all dividends and other distributions declared, paid or
payable by the Company to the Shareholders between January 1, 2000 and the date
hereof, which Schedule 3.27 shall be updated as of the Closing Date to set forth
all dividends and other distributions through the Closing Date.
3.28. Litigation. There is no suit, action or proceeding pending, and no
person has overtly-threatened in a writing delivered to the Company or the
Shareholders to commence any suit, action or proceeding, against or affecting
the Company that would, individually or in the aggregate, have a material
adverse effect on the Company, nor is there any judgment, decree, injunction, or
order of any governmental entity or arbitrator outstanding against, or, to the
knowledge of the Company, pending investigation by any governmental entity
involving, the Company or any Shareholders that individually or in the aggregate
would have a material adverse effect on the Company.
3.29. Full Disclosure. No representation or warranty of the Shareholders
contained in this Agreement, and none of the statements or information
concerning the Company contained in this Agreement and the Schedules, contains
or will contain as of the date hereof and as of the Closing Date any untrue
statement of a material fact nor will such representations, warranties,
covenants or statements taken as a whole omit a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
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4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
To induce the Shareholders to enter into this Agreement and to consummate
the transactions contemplated hereby, each of Parent and Merger Sub represents
and warrants to and covenants with the Shareholders as follows:
4.1. Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wyoming. Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland. Parent and each of its subsidiaries is entitled
to own or lease its properties and to carry on its business as and in the places
where such business is now conducted, and Parent and each of its subsidiaries is
duly licensed and qualified in all jurisdictions where the character of the
property owned by it or the nature of the business transacted by it makes such
license or qualification necessary, except where such failure would not result
in a material adverse effect on Parent or its subsidiaries.
4.2. Capitalization and Related Matters.
4.2.1.1. Parent has authorized capital stock consisting
of 50,000,000 shares of common stock, par value $0.01 per share, of
which 20,003,368 shares were issued and outstanding as of the date
hereof. Parent owns all of the outstanding capital stock of Merger
Sub. The Parent Shares will be, when issued, duly and validly
authorized and fully paid and non-assessable, and will be issued to
the Shareholder free of all encumbrances, claims and liens
whatsoever.
4.2.1.2. Except as disclosed in documents filed by
Parent with the Securities and Exchange Commission (the "SEC
Documents"), and except for employee stock options to purchase
shares of the Parent's Common Stock, Parent does not have
outstanding any securities convertible into capital stock, nor any
rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of
any character relating to, its capital stock or securities
convertible into its capital stock.
4.3. Execution; No Inconsistent Agreements; Etc.
4.3.1.1. Subject to Parent's Board of Directors approval
contemplated by Section 7.6 hereof, the execution and delivery of
this Agreement and the performance of the transactions contemplated
hereby have been duly and validly authorized and approved by Parent,
Merger Sub and this Agreement is a valid and binding agreement of
Parent and Merger Sub, enforceable against Parent and Merger Sub in
accordance with its terms, except as such enforcement may be limited
by bankruptcy or similar laws affecting the enforcement of
creditors' rights generally, and the availability of equitable
remedies.
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4.3.1.2. The execution and delivery of this Agreement by
Parent and Merger Sub does not, and the consummation of the
transactions contemplated hereby will not, constitute a breach or
violation of the charter or bylaws of Parent or Merger Sub, or a
default under any of the terms, conditions or provisions of (or an
act or omission that would give rise to any right of termination,
cancellation or acceleration under) any material note, bond,
mortgage, lease, indenture, agreement or obligation to which Parent
or any of its subsidiaries is a party, pursuant to which any of them
otherwise receive benefits, or by which any of their properties may
be bound.
4.4. Financial Statements. Parent has delivered to the Company the
consolidated audited balance sheets of Parent as of December 31, 2004, the
consolidated unaudited balance sheet as of June 30, 2005, the consolidated
audited statement of income for the three fiscal years ended December 31, 2004,
and the unaudited statement of income for the six (6) months ended June 30, 2005
(collectively, the "Parent Financial Statements"). The Parent Financial
Statements have been prepared in accordance with GAAP, applied on a consistent
basis (except that the unaudited statements do not contain all the disclosures
required by GAAP), and fairly reflect in all material respects the consolidated
financial condition of Parent and its subsidiaries as at the dates thereof and
the consolidated results of Parent's operations for the periods then ended.
Since June 30, 2005, or as disclosed in the SEC Documents or press releases
issued by Parent, there has been no material adverse change in the assets or
liabilities, in the business or condition, financial or otherwise, of Parent, or
in its results of operations.
4.5. Liabilities. Except as disclosed in the SEC Documents or press
releases issued by Parent, Parent nor any of its subsidiaries has any material
debt, liability or obligation of any kind, whether accrued, absolute, contingent
or otherwise, except (a) those reflected on the Parent Financial Statements,
including the notes thereto, and (b) liabilities incurred in the ordinary course
of business since June 30, 2005, none of which have had or will have a material
adverse affect on the financial condition of Parent and its subsidiaries taken
as a whole.
4.6. Contingencies. Except as set forth in the SEC Documents, there are no
actions, suits, claims or proceedings pending or, to the knowledge of Parent's
management, threatened against, by or affecting Parent or any of its
subsidiaries in any court or before any arbitrator or governmental agency which
could have a material adverse effect on Parent or its subsidiaries or which
could materially and adversely affect the right or ability of Parent to
consummate the transactions contemplated hereby. To the knowledge of Parent,
there is no valid basis upon which any such action, suit, claim or proceeding
may be commenced or asserted against Parent or its subsidiaries. Except as set
forth in the SEC Documents, there are no unsatisfied judgments against Parent
and no consent decrees or similar agreements to which Parent or its subsidiaries
is subject and which could have a material adverse effect on Parent or its
subsidiaries or which could materially and adversely affect the right or ability
of Parent to consummate the transactions contemplated hereby.
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4.7. Full Disclosure. No representation or warranty of Parent contained in
this Agreement, and none of the statements or information concerning Parent
contained in this Agreement and the Schedules, contains or will contain as of
the date hereof and as of the Closing Date any untrue statement of a material
fact nor will such representations, warranties, covenants or statements taken as
a whole omit a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
5. CONDUCT OF BUSINESS OF THE COMPANY PENDING CLOSING.
The Company and the Shareholders covenant and agree that between the date
hereof and the Closing Date:
5.1. Business in the Ordinary Course. Except as set forth in Schedule 5.1,
the business of the Company shall be conducted only in the ordinary course, and
consistent with past practice. Without limiting the generality of the foregoing,
and except as set forth in Schedule 5.1 or as otherwise approved in writing by
Parent:
5.1.1.1. the Company shall not enter into any contract,
agreement or other arrangement which would entail the receipt or
expenditure of ten thousand dollars ($10,000) or more (each a
"Material Contract"), except for contracts to sell or supply goods
or services to customers in the ordinary course of business at
prices and on terms substantially consistent with the prior
operating practices of the Company;
5.1.1.2. except for sales of personal property in the
ordinary course of its business, the Company shall not sell, assign,
transfer, mortgage, convey, encumber or otherwise dispose of, or
cause the sale, assignment, transfer, mortgage, conveyance,
encumbrance or other disposition of any of the assets or properties
of the Company or any interest therein;
5.1.1.3. the Company shall not acquire any material
assets, except expenditures made in the ordinary course of business
as reasonably necessary to enable the Company to conduct its normal
business operations and to maintain its normal inventory of goods
and materials, at prices and on terms substantially consistent with
current market conditions and prior operating practices;
5.1.1.4. the Company shall maintain in full force and
effect all insurance policies referred to in Section 3.17 hereof or
other insurance equivalent thereto;
5.1.1.5. the books, records and accounts of the Company
shall be maintained in the usual, regular and ordinary course of
business on a basis consistent with prior practices and in
accordance with GAAP;
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5.1.1.6. the Company shall use its reasonable best
efforts to preserve its business organization, to preserve the good
will of its suppliers, customers and others having business
relations with the Company, and to retain the services of key
employees and agents of the Company after the Closing Date on terms
acceptable to Parent;
5.1.1.7. except as they may terminate in accordance with
the terms of this Agreement, the Company shall keep in full force
and effect, and not cause a default of any of its obligations under,
each of its Material Contracts;
5.1.1.8. the Company shall duly comply in all material
respects with all laws applicable to it and to the conduct of its
business;
5.1.1.9. the Company shall not create, incur or assume
any liability or indebtedness, except in the ordinary course of
business consistent with past practices;
5.1.1.10. the Company shall not make or commit to make
any capital expenditures in excess of ten thousand dollars ($10,000)
in the aggregate;
5.1.1.11. other than as contemplated in this Agreement,
the Company shall not apply any of its assets to the direct or
indirect payment, discharge, satisfaction or reduction of any amount
payable directly or indirectly to or for the benefit of the
Shareholder or any Related Party; and
5.1.1.12. neither the Company nor the Shareholders shall
take or omit to take any action which would render any of the
Shareholders' representations or warranties untrue or misleading, or
which would be a breach of any of the Shareholders' covenants.
5.2. No Material Changes. The Company shall not, without the prior written
consent of Parent which consent shall not be unreasonably delayed or withheld,
materially alter its organization, capitalization, or financial structure,
practices or operations. Without limiting the generality of the foregoing:
5.2.1.1. no change shall be made in the Articles of
Incorporation or Bylaws of the Company;
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5.2.1.2. no change shall be made in the authorized or
issued capital stock of the Company;
5.2.1.3. the Company shall not issue or grant any right
or option to purchase or otherwise acquire any of its capital stock
or other securities;
5.2.1.4. except as contemplated hereunder, no dividend
or other distribution or payment shall be declared or made with
respect to any of the capital stock of the Company; and
5.2.1.5. no change shall be made affecting the banking
arrangements of the Company.
5.3. Compensation. No increase shall be made in the compensation or
employee benefits payable or to become payable to any director, officer,
employee or agent of the Company, and no bonus or profit-sharing payment or
other arrangement (whether current or deferred) shall be made to or with any
such director, officer, employee or agent, except in the ordinary course of
business and consistent with prior practices.
5.4. Notification. Each party to this Agreement shall promptly notify the
other parties in writing of the occurrence, or threatened occurrence, of any
event that would constitute a breach or violation of this Agreement by any party
or that would cause any representation or warranty made by the notifying party
in this Agreement to be false or misleading in any respect. The Shareholders
will promptly notify Parent of any event of which the Shareholders obtain
knowledge which could have a material adverse effect on the business, assets,
financial condition or prospects of the Company. The Shareholders shall have the
right to update the Schedules to this Agreement immediately prior to Closing.
6. CONDITIONS TO OBLIGATIONS OF ALL PARTIES.
The obligation of the Company, the Shareholders, Parent to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, on
or before the Closing, of each of the following conditions; any or all of which
may be waived in whole or in part by the joint agreement of Parent, the Company
and the Shareholders:
6.1. Absence of Actions. No action or proceeding shall have been brought
or threatened before any court or administrative agency to prevent the
consummation or to seek damages in a material amount by reason of the
transactions contemplated hereby, and no governmental authority shall have
asserted that the within transactions (or any other pending transaction
involving Parent, any of its subsidiaries, the Shareholders or the Company when
considered in light of the effect of the within transactions) shall constitute a
violation of law or give rise to material liability on the part of the
Shareholders, the Company or Parent or its subsidiaries.
6.2. Consents. The parties shall have received from any suppliers,
lessors, lenders, lien holders or governmental authorities, bodies or agencies
having jurisdiction over the transactions contemplated by this Agreement, or any
part hereof, such consents, authorizations and approvals as are necessary for
the consummation hereof, including, without limitation, the consents listed on
Schedule 6.2.
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7. CONDITIONS TO OBLIGATIONS OF PARENT.
All obligations of Parent to consummate the transactions contemplated by
this Agreement are subject to the fulfillment and satisfaction of each and every
of the following conditions on or prior to the Closing, any or all of which may
be waived in whole or in part by Parent:
7.1. Representations and Warranties. The representations and warranties
contained in Section 3 of this Agreement and in any certificate, instrument,
schedule, agreement or other writing delivered by or on behalf of the
Shareholders in connection with the transactions contemplated by this Agreement
shall be true, correct and complete in all material respects (except for
representations and warranties which are by their terms qualified by
materiality, which shall be true, correct and complete in all respects) as of
the date when made and shall be deemed to be made again at and as of the Closing
Date and shall be true, correct and complete at and as of such time in all
material respects (except for representations and warranties which are by their
terms qualified by materiality, which shall be true, correct and complete in all
respects).
7.2. Compliance with Agreements and Conditions. The Shareholders and the
Company shall have performed and complied with all material agreements and
conditions required by this Agreement to be performed or complied with by him
and/or by the Company prior to or on the Closing Date.
7.3. Absence of Material Adverse Changes. No material adverse change in
the business, assets, financial condition, or prospects of the Company shall
have occurred, no substantial part of the assets of the Company not
substantially covered by insurance shall have been destroyed due to fire or
other casualty, and no event shall have occurred which has had or will have a
material adverse effect on the business, assets, financial condition or
prospects of the Company.
7.4. Certificate of the Shareholders. The Shareholders shall have executed
and delivered, or caused to be executed and delivered, to Parent one or more
certificates, dated the Closing Date, certifying in such detail as Parent may
reasonably request to the fulfillment and satisfaction of the conditions
specified in Sections 7.1 through 7.3 above.
7.5. Board Approval. This Agreement and the transactions contemplated
hereby shall have been approved by the unanimous approval of the Parent's Board
of Directors.
7.6. Satisfactory Results of Inspection. The results of the inspection
referred to in Section 2.1 hereof shall be satisfactory to the Parent in its
sole discretion.
8. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS.
All of the obligations of the Shareholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment and satisfaction
of each and every one of the following conditions on or prior to the Closing,
any or all of which may be waived in whole or in part by the Shareholders:
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8.1. Representations and Warranties. The representations and warranties
contained in Section 4 of this Agreement and in any certificate, instrument,
schedule, agreement or other writing delivered by or on behalf of Parent in
connection with the transactions contemplated by this Agreement shall be true
and correct in all material respects (except for representations and warranties
which are by their terms qualified by materiality, which shall be true, correct
and complete in all respects) when made and shall be deemed to be made again at
and as of the Closing Date and shall be true at and as of such time in all
material respects (except for representations and warranties which are by their
terms qualified by materiality, which shall be true, correct and complete in all
respects).
8.2. Compliance with Agreements and Conditions. Parent and Merger Sub
shall have performed and complied with all material agreements and conditions
required by this Agreement to be performed or complied with by Parent and/or
Merger Sub prior to or on the Closing Date.
8.3. Absence of Material Adverse Changes. No material adverse change in
the business, assets, financial condition, trading price of the Parent Shares or
prospects of Parent and its subsidiaries, taken as a whole, shall have occurred,
no substantial part of the assets of Parent and its subsidiaries, taken as a
whole, shall have been destroyed due to fire or other casualty, and no event
shall have occurred which has had, or will have a material adverse effect on the
business, assets, financial condition or prospects of Parent and its
subsidiaries, taken as a whole.
8.4. Certificate of Parent. Parent shall have delivered to the
Shareholders a certificate, executed by an executive officer and dated the
Closing Date, certifying to the fulfillment and satisfaction of the conditions
specified in Sections 8.1 through 8.3 above.
8.5. Tax Treatment. The Shareholders shall have satisfied themselves that
at least forty percent (40%) of the Merger Consideration, in terms of fair value
determined as of the Closing Date pursuant to the Code and the regulations and
rulings thereunder, is in the form of the capital stock of the Parent.
8.6. Legal Opinion. Parent shall have delivered to the Shareholders a
legal opinion from Kirkpartick & Xxxxxxxx LLP addressed to the Shareholders and
dated on the Closing Date in the form and substance substantially as set forth
in Exhibit H.
9. INDEMNITY.
9.1. Indemnification by Shareholders. Subject to Section 9.5, the
Shareholders (hereinafter, collectively, called the "Shareholder Indemnitors")
shall jointly and severally defend, indemnify and hold harmless Parent and
Merger Sub and their direct and indirect parent corporations, subsidiaries
(including the Company after Closing) and affiliates, their officers, directors,
employees and agents (hereinafter, collectively, called "Parent Indemnitees")
against and in respect of any and all loss, damage, liability, fine, penalty,
cost and expense, including reasonable attorneys' fees and amounts paid in
settlement (collectively, "Parent Losses"), suffered or incurred by any Parent
Indemnitee by reason of, or arising out of:
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9.1.1.1. any misrepresentation, breach of warranty or
breach or non-fulfillment of any agreement of the Shareholders
contained in this Agreement or in any certificate, schedule,
instrument or document delivered to Parent by or on behalf of the
Shareholders or the Company pursuant to the provisions of this
Agreement (without regard to materiality thresholds contained
therein); and
9.1.1.2. any liabilities of the Company of any nature
whatsoever (including tax liability, penalties and interest),
whether accrued, absolute, contingent or otherwise, (i) existing as
of the date of the Balance Sheet, and required to be shown therein
in accordance with applicable GAAP, to the extent not reflected or
reserved against in full in the Balance Sheet; or (ii) arising or
occurring between January 1, 2004 and the Closing Date, except for
liabilities arising in the ordinary course of business, none of
which shall have a material adverse effect on the Company.
9.2. Indemnification by Parent. Subject to Section 9.5, Parent and Merger
Sub (hereinafter called the "Parent Indemnitor") shall jointly and severally
defend, indemnify and hold harmless the Shareholders (hereinafter called
"Shareholder Indemnitees") against and in respect of any and all loss, damage,
liability, cost and expense, including reasonable attorneys' fees and amounts
paid in settlement (collectively, "Shareholder Losses"), suffered or incurred by
Shareholder Indemnitees by reason of or arising out of:
9.2.1.1. any misrepresentation, breach of warranty or
breach or non-fulfillment of any material agreement of Parent
contained in this Agreement or in any other certificate, schedule,
instrument or document delivered to the Shareholders by or on behalf
of Parent pursuant to the provisions of this Agreement (without
regard to materiality thresholds contained therein); and
9.2.1.2. any liabilities of the Company of any nature
whatsoever (including tax liability, penalties and interest),
whether accrued, absolute, contingent or otherwise, arising from
Parent's ownership or operation of the Company after Closing, but
only so long as such liability is not the result of an act or
omission of the Company or any Shareholder occurring prior to the
Closing. Parent Losses and Shareholder Losses are sometimes
collectively referred to as "Indemnifiable Losses".
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9.3. Defense of Claims.
9.3.1.1. Each party seeking indemnification hereunder
(an "Indemnitee"): (i) shall provide the other party or parties (the
"Indemnitor") written notice of any claim or action by a third party
arising after the Closing Date for which an Indemnitor may be liable
under the terms of this Agreement, within ten (10) days after such
claim or action arises and is known to Indemnitee, and (ii) shall
give the Indemnitor a reasonable opportunity to participate in any
proceedings and to settle or defend any such claim or action. The
expenses of all proceedings, contests or lawsuits with respect to
such claims or actions shall be borne by the Indemnitor. If the
Indemnitor wishes to assume the defense of such claim or action, the
Indemnitor shall give written notice to the Indemnitee within ten
(10) days after notice from the Indemnitee of such claim or action,
and the Indemnitor shall thereafter assume the defense of any such
claim or liability, through counsel reasonably satisfactory to the
Indemnitee, provided that Indemnitee may participate in such defense
at their own expense, and the Indemnitor shall, in any event, have
the right to control the defense of the claim or action.
9.3.1.2. If the Indemnitor shall not assume the defense
of, or if after so assuming it shall fail to defend, any such claim
or action, the Indemnitee may defend against any such claim or
action in such manner as they may deem appropriate and the
Indemnitees may settle such claim or litigation on such terms as
they may deem appropriate but subject to the Indemnitor's approval,
such approval not to be unreasonably withheld; provided, however,
that any such settlement shall be deemed approved by the Indemnitor
if the Indemnitor fails to object thereto, by written notice to the
Indemnitee, within fifteen (15) days after the Indemnitor's receipt
of a written summary of such settlement. The Indemnitor shall
promptly reimburse the Indemnitee for the amount of all expenses,
legal and otherwise, incurred by the Indemnitee in connection with
the defense and settlement of such claim or action.
9.3.1.3. If a non-appealable judgment is rendered
against any Indemnitee in any action covered by the indemnification
hereunder, or any lien attaches to any of the assets of any of the
Indemnitee, the Indemnitor shall immediately upon such entry or
attachment pay such judgment in full or discharge such lien unless,
at the expense and direction of the Indemnitor, an appeal is taken
under which the execution of the judgment or satisfaction of the
lien is stayed. If and when a final judgment is rendered in any such
action, the Indemnitor shall forthwith pay such judgment or
discharge such lien before any Indemnitee is compelled to do so.
26
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9.4. Waiver. The failure of any Indemnitee to give any notice or to take
any action hereunder shall not be deemed a waiver of any of the rights of such
Indemnitee hereunder, except to the extent that Indemnitor is actually
prejudiced by such failure.
9.5. Limitations on Indemnification. Notwithstanding anything to the
contrary contained in this Agreement:
9.5.1. Time Limitation. No party shall be responsible hereunder for
any Indemnifiable Loss unless the Indemnitee shall have provided such party with
written notice containing a reasonable description of the claim, action or
circumstances giving rise to such Indemnifiable Loss by December 31, 2006 (the
period ended on that date is referred to herein as the "Indemnity Notice
Period").
9.5.2. Caps on Losses. The aggregate liability of the Shareholders
after the Closing for Parent Losses shall be settled solely from the Escrowed
Shares. No Shareholder shall be required to pay any amount of money in
settlement of any Parent Loss, regardless of the nature of such Parent Loss. The
Parent and Merger Sub shall look solely to the Escrowed Shares for any Parent
Losses. The aggregate liability of Parent and Merger Sub after the Closing for
Shareholder Losses shall not exceed the Merger Consideration paid to the
Shareholders.
9.5.3. Basket. No party shall have any liability hereunder for
Indemnifiable Losses after the Closing, with respect to a breach of the
representations and warranties contained herein, until the aggregate of all
Indemnifiable Losses for which the Shareholder or Parent and Merger Sub as a
group, as applicable, are responsible under this Agreement exceeds Twenty-Five
Thousand ($25,000) Dollars (the "Basket"); provided that once such Basket is
exceeded for the Shareholders or Parent and Merger Sub as a group, as
applicable, the responsible party or parties shall be responsible for all
Indemnifiable Losses, from the first dollar as if such Basket never existed, and
further provided that this Section 9.5.3 shall not limit in any respect
indemnity claims: (a) based upon fraud or intentional breach or intentional
misrepresentation; (b) arising from a breach by the Parent Indemnitor of any
covenant contained in this Agreement; (c) arising from a breach by the
Shareholders of any representation or warranty contained in Section 3.2 hereof;
or (d) related to any tax or tax liability of the Company for periods prior to
the Closing Date. The parties hereto agree that the Escrowed Shares shall be
held in escrow pursuant to the terms of the Escrow Agreement and any and all
Parent Losses incurred or suffered by Parent shall be paid solely by the
Shareholders by the return from the Escrow Agent of such number of Escrowed
Shares, based on the average closing price of the Parent Common Stock for the
immediately preceding ten (10) trading days from the date of notice to the
Shareholders of such Parent Losses.
10. TERMINATION.
10.1. Termination. This Agreement may be terminated at any time on or
prior to the Closing:
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10.1.1.1. By mutual consent of Parent and the
Shareholders; or
10.1.1.2. At the election of Parent if: (i) any
Shareholder has breached or failed to perform or comply with any of
his representations, warranties, covenants or obligations under this
Agreement; (ii) any of the conditions precedent set forth in Section
6 or 7 is not satisfied as and when required by this Agreement; or
(iii) the Closing has not been consummated by October 15, 2005; or
10.1.1.3. At the election of the Shareholders if: (i)
Parent or the Merger Sub has breached or failed to perform or comply
with any of its representations, warranties, covenants or
obligations under this Agreement; (ii) any of the conditions
precedent set forth in Section 6 or 8 is not satisfied as and when
required by this Agreement; or (iii) if the Closing has not been
consummated by October 15, 2005.
10.2. Manner and Effect of Termination. Written notice of any termination
("Termination Notice") pursuant to this Section 10 shall be given by the party
electing termination of this Agreement ("Terminating Party") to the other party
or parties (collectively, the "Terminated Party"), and such notice shall state
the reason for termination. The party or parties receiving Termination Notice
shall have a period of ten (10) days after receipt of Termination Notice to cure
the matters giving rise to such termination to the reasonable satisfaction of
the Terminating Party. If the matters giving rise to termination are not cured
as required hereby, this Agreement shall be terminated effective as of the close
of business on the tenth (10th) day following the Terminated Party's receipt of
Termination Notice. Upon termination of this Agreement prior to the consummation
of the Closing and in accordance with the terms hereof, this Agreement shall
become void and of no effect, and none of the parties shall have any liability
to the others, except that nothing contained herein shall relieve any party
from: (a) its obligations under Sections 2.2 and 2.3; or (b) liability for its
intentional breach of any representation, warranty or covenant contained herein,
or its intentional failure to comply with the terms and conditions of this
Agreement or to perform its obligations hereunder.
11. MISCELLANEOUS.
11.1. Notices.
11.1.1.1. All notices, requests, demands, or other
communications required or permitted hereunder shall be in writing
and shall be deemed to have been duly given upon receipt if
delivered in person, or upon the expiration of four (4) days after
the date sent, if sent by federal express (or similar overnight
courier service) to the parties at the following addresses:
28
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(i) If to Parent of Merger Sub: Paradigm Holdings Corporation
0000 Xxxxxx Xxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxx
with a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxx.
Xxxxx 0000, Xxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
(ii) If to a Shareholder:
The name and address
as listed on the
Exhibit A attached
hereto.
(ii) If to the Company:
Xxxxx Technology
Group 0000 Xxxxxxxx
Xxxxx Xxxxxxx,
Xxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
with a copy to: Xxxxxxxx Xxxxxxxxx PC
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx, Esq.
11.1.1.2. Notices may also be given in any other manner
permitted by law, effective upon actual receipt. Any party may
change the address to which notices, requests, demands or other
communications to such party shall be delivered or mailed by giving
notice thereof to the other parties hereto in the manner provided
herein.
11.2. Survival. The representations, warranties, agreements and
indemnifications of the parties contained in this Agreement or in any writing
delivered pursuant to the provisions of this Agreement shall survive any
investigation heretofore or hereafter made by the parties and the consummation
of the transactions contemplated herein and shall continue in full force and
effect after the Closing, subject to the limitations of Section 9.5.
11.3. Counterparts; Interpretation. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument. This Agreement supersedes
all prior discussions and agreements between the parties with respect to the
subject matter hereof, and this Agreement contains the sole and entire agreement
among the parties with respect to the matters covered hereby. All Schedules
hereto shall be deemed a part of this Agreement. This Agreement shall not be
altered or amended except by an instrument in writing signed by or on behalf of
all of the parties hereto. No ambiguity in any provision hereof shall be
construed against a party by reason of the fact it was drafted by such party or
its counsel. For purposes of this Agreement: "herein", "hereby", "hereunder",
"herewith", "hereafter" and "hereinafter" refer to this Agreement in its
entirety, and not to any particular section or paragraph. References to
"including" means including without limiting the generality of any description
preceding such term. Nothing expressed or implied in this Agreement is intended,
or shall be construed, to confer upon or give any person other than the parties
hereto any rights or remedies under or by reason of this Agreement.
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11.4. Governing Law. The validity and effect of this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Maryland, without regard to principles of conflicts of laws thereof. Any
dispute, controversy or question of interpretation arising under, out of, in
connection with or in relation to this Agreement or any amendments hereof, or
any breach or default hereunder, shall be litigated in the state or federal
courts in Xxxxxxxxxx County, Maryland, U.S.A. Each of the parties hereby
irrevocably submits to the jurisdiction of any state or federal court sitting in
Xxxxxxxxxx County, Maryland. Each party hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of any such action in Xxxxxxxxxx County, Maryland.
11.5. Successors and Assigns; Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, legal representatives, and successors; provided, however, that
no Shareholder may assign this Agreement or any rights hereunder, in whole or in
part.
11.6. Partial Invalidity and Severability. All rights and restrictions
contained herein may be exercised and shall be applicable and binding only to
the extent that they do not violate any applicable laws and are intended to be
limited to the extent necessary to render this Agreement legal, valid and
enforceable. If any terms of this Agreement not essential to the commercial
purpose of this Agreement shall be held to be illegal, invalid or unenforceable
by a court of competent jurisdiction, it is the intention of the parties that
the remaining terms hereof shall constitute their agreement with respect to the
subject matter hereof and all such remaining terms shall remain in full force
and effect. To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement shall be replaced by a valid provision
which will implement the commercial purpose of the illegal, invalid or
unenforceable provision.
11.7. Waiver. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof, but only if such
waiver is evidenced by a writing signed by such party. No failure on the part of
a party hereto to exercise, and no delay in exercising, any right, power or
remedy created hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy by any such party
preclude any other future exercise thereof or the exercise of any other right,
power or remedy. No waiver by any party hereto to any breach of or default in
any term or condition of this Agreement shall constitute a waiver of or assent
to any succeeding breach of or default in the same or any other term or
condition hereof.
11.8. Headings. The headings as to contents of particular paragraphs of
this Agreement are inserted for convenience only and shall not be construed as a
part of this Agreement or as a limitation on the scope of any terms or
provisions of this Agreement.
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11.9. Expenses. Except as otherwise expressly provided herein, all legal
and other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by Parent, the Company or the
Shareholders as each party incurs such expenses. Notwithstanding the foregoing,
the Parent shall pay the cost of any audit or review services associated with
the Company's financial statements incurred after the date hereof.
11.10. Finder's Fees. Parent represents to the Shareholders and the
Company that no broker, agent, finder or other party has been retained by it in
connection with the transactions contemplated hereby and that no other fee or
commission has been agreed by the Parent to be paid for or on account of the
transactions contemplated hereby. The Shareholders represent to Parent that no
broker, agent, finder or other party has been retained by Shareholders or the
Company in connection with the transactions contemplated hereby and that no
other fee or commission has been agreed by the Shareholders or the Company to be
paid for or on account of the transactions contemplated hereby.
11.11. Gender. Where the context requires, the use of the singular form
herein shall include the plural, the use of the plural shall include the
singular, and the use of any gender shall include any and all genders.
11.12. Acceptance by Fax. This Agreement shall be accepted, effective and
binding, for all purposes, when the parties shall have signed and transmitted to
each other, by telecopier or otherwise, copies of the signature pages hereto.
11.13. Opportunity to Hire counsel; Role of Xxxxxxxxxxx & Xxxxxxxx LLP.
The Shareholders acknowledge that they have been advised and have been given an
opportunity to hire counsel with respect to this Agreement and the transactions
contemplated hereby. The Shareholders further acknowledge that the law firm of
Xxxxxxxxxxx & Xxxxxxxx LLP has solely represented the Parent and Merger Sub in
connection with this Agreement and the transactions contemplated hereby and no
other person.
11.14. Time is of the Essence. It is understood and agreed among the
parties hereto that time is of the essence in this Agreement and this applies to
all terms and conditions contained herein.
11.15. NO JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement to be duly
executed by their duly authorized officers as of the day and year first above
written.
PARENT:
PARADIGM HOLDINGS CORPORATION
By: /s/ Xxxxx Jacovac
----------------------------------------
Name: Xxxxx Jacovac
Title: President and Chief Operating
Officer
MERGER SUB:
PARADIGM SOLUTIONS INTERNATIONAL, INC.
By: /s/ Xxxxx Jacovac
----------------------------------------
Name: Xxxxx Jacovac
Title: President and Chief Operating
Officer
SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxx
------------------------------------------
Xxxxxx X. Xxxxx
THE COMPANY:
XXXXX MANAGEMENT SERVICES, INC.
t/d/b/a XXXXX TECHNOLOGY GROUP
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President
32
EXHIBIT A
SHAREHOLDERS OF XXXXX MANAGEMENT SERVICES, INC.
Number of Total Number of
Xxxxx Management Paradigm Holdings
Services, Inc. Corporation
Name Address Shares Owned Shares to be Received
000 Xxxx Xxx Xxxx
-------------------------------- -------------------- ---------------------------
Xxxxxx X. Xxxxxxxxx Xxxxxxxxxxxxx, XX 00000 200 Tbd
000 Xxxxxxxxxx Xxxxx
Xxxxxxx X. Xxxxxxx Xxxxxxxxxxxxx, XX 00000 50 Xxx
00 Xxxxxxxxxxxx Xxxx
Xxxxxx X. Xxxxx Xxxxxxxxxxx, XX 00000 50 Tbd
EXHIBIT A-1
