Exhibit 2.1
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PLAN AND AGREEMENT OF MERGER
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THIS PLAN AND AGREEMENT OF MERGER (this "Agreement") is made and entered
into as of February 7, 1999 by and among The Xxxxxxx Group, Inc., a Delaware
corporation ("Xxxxxxx"), MGI Acquisition III, Inc., a Delaware corporation and
wholly-owned, direct subsidiary of Xxxxxxx ("Acquisition Sub"), Strategic
Decisions Group, a California corporation (the "Company"), and the members of
the Company's Executive Officers whose names are set forth on the signature
pages attached hereto (individually a "Company Executive" and collectively, the
"Company Executives"). Xxxxxxx, Acquisition Sub, the Company and the Company
Executives are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
RECITALS
A. The members of the board of directors of Acquisition Sub and the
Company Executives have approved the transactions contemplated hereby and have
determined that it is advisable and in their respective best interests to
consummate the merger described in Article 2 hereof (the "Acquisition").
B. As a result of the Acquisition, Acquisition Sub will be merged with and
into the Company, all of the outstanding capital stock of the Company will be
converted into common stock of Xxxxxxx, and the Company will be the surviving
corporation, all on the terms and subject to the conditions set forth in this
Agreement.
C. For Federal income tax purposes, the Parties intend that the
Acquisition shall qualify as a reorganization within the meaning of Section
368(a) of the Code (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows:
1. DEFINITIONS
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1.1 Definitions. The following terms, when used herein and unless the
context clearly requires otherwise, shall have the following meanings:
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, costs of defense,
judgments, orders, decrees, stipulations, injunctions, damages (including
diminution in value), dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, Taxes, Liens, losses, expenses, and fees, including all attorneys'
fees and court costs, net of any related tax benefits, insurance payments or
recoveries from third parties.
"Affiliate" means, with respect to any particular Person, any Person
controlling, controlled by or under common control with such Person from time to
time, whether by ownership or control of voting securities, by contract or
otherwise. Affiliates of Xxxxxxx include the Surviving Corporation (as defined
in Section 2.3(a)) and its Subsidiaries.
"Affiliated Group" means any affiliated group within the meaning of Section
1504 of the Code.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could reasonably form the basis for
any specified consequence.
"CGCL" means the California General Corporation Law, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any successor
agency.
"Company Stock" means the common stock, no par value, of the Company.
"Confidential Information" means any and all technical, financial,
commercial, and other information concerning the businesses and affairs of a
Party other than any such information that (i) is generally available to or
known by the public immediately prior to the time of disclosure (except through
the actions or inaction of the Person to whom disclosure has been made by or on
behalf of such Party) or (ii) has been acquired or developed independent from
such Party.
"DGCL" means the Delaware General Corporation Law, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or other business entity that is
included in a controlled group of corporations within which the Company is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with the Company, as provided in Section 414(c) of
the Code; or which constitutes a member of an affiliated service group within
which the Company is also included, as provided in Section 414(m) of the Code;
or which is required to be aggregated with the Company pursuant to regulations
issued under Section 414(o) of the Code.
"Escrow Agreement" means that certain Escrow Agreement, a form of which is
attached hereto as Exhibit C.
"Escrow Agent" means the Person acting as the escrow agent under the Escrow
Agreement.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Company Documents" means, collectively, all agreements between
the Company and any Shareholder and all options, warrants, and other agreements
or documents relating to the issuance or possible issuance of Company Stock,
each as in existence as of the date hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a consistent basis.
"HSR Act" means the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Indebtedness" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person as
liabilities of such entity; and in any event, regardless of how classified in
accordance with GAAP, shall include (i) all obligations of such Person for
borrowed money or obligations of such Person evidenced by notes or similar
instruments which have been incurred in consideration for the acquisition of
property or assets, (ii) obligations secured by any Security Interest upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (iii) obligations created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of the property, and (iv)
capitalized lease obligations.
"Information Statement" means the information statement used by the Company
to solicit the approval of its Shareholders by written consent to the
Acquisition and the terms of this Agreement.
"Intellectual Property" means any and all of the following which is owned
by, licensed by, licensed to, used or held for use by the Company and/or any of
its Subsidiaries (including all copies and embodiments thereof, in electronic,
written or other media): (i) all registered and unregistered trademarks, trade
dress, service marks, logos, trade names, internet domain names, corporate names
(including the names "Strategic Decisions Group" and all derivations thereof)
and all applications to register the same (the "Trademarks"); (ii) all issued
U.S. and foreign patents and pending patent applications, patent disclosures and
improvements thereto (the "Patents"); (iii) all registered and unregistered
copyrights, mask work rights and all applications to register the same (the
"Copyrights"); (iv) all computer software and databases owned or used (excluding
software and databases licensed to the Company under standard, non-exclusive
software licenses granted to end-user customers by third parties in the ordinary
course of such third parties' business) by the Company or under development for
the Company by third parties (the "Software"); (v) all categories of trade
secrets, know-how, inventions (whether or not patentable and whether or not
reduced to practice), processes, procedures, drawings, specifications, designs,
plans, proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans,
client and supplier lists and information and other confidential and proprietary
information
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("Proprietary Rights"); (vi) all licenses and agreements pursuant to which the
Company has acquired rights in or to any of the Trademarks, Patents, Copyrights,
Software or Proprietary Rights (excluding software and databases licensed to the
Company under standard, non-exclusive software licenses granted to end-user
customers by third parties in the ordinary course of such third parties'
business) ("Licenses-In"); and (vii) all licenses and agreements pursuant to
which the Company has licensed or transferred any rights to any of the
Trademarks, Patents, Copyrights, Software or Proprietary Rights ("Licenses-
Out").
"Interim Balance Sheet" means the balance sheet of the Company dated
January 2, 1999, agreed to by and between Xxxxxxx and the Company.
"Knowledge" means (i) in the case of any individual, the knowledge of such
person after reasonable inquiry and (ii) in the case of a corporation, limited
liability company or other entity, the knowledge of the directors and officers
or managers of such corporation, limited liability company or other entity, as
appropriate, after reasonable inquiry.
"Liability" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), obligation or Indebtedness, including without limitation, any liability
for Taxes.
"Material Adverse Effect" means a material adverse effect or impact upon
the assets, financial condition, results of operations, prospects or business of
the Company and its Subsidiaries (taken as a single enterprise), or on the
ability of the Parties to consummate the transactions contemplated hereby.
"Xxxxxxx Common" means the Common Stock, par value $0.001 per share, of
Xxxxxxx.
"Xxxxxxx Value" means the per share closing price of Xxxxxxx Common for
the trading day immediately preceding the Merger Date (as defined in Section 2
below).
"Ordinary Course of Business" means the ordinary course of business of the
Company and its Subsidiaries consistent with past custom and practice of the
Company and its Subsidiaries, respectively, as the context herein may require
(including with respect to quantity and frequency).
"Person" means any individual, trust, corporation, partnership, limited
partnership, limited liability company or other business association or entity,
court, governmental body or governmental agency.
"Plans" means: (i) all employee benefit plans as defined in Section 3(3) of
ERISA; (ii) all other severance pay, deferred compensation, excess or
supplemental benefit, vacation, stock, stock option, and incentive plans, or
contracts, and schemes, programs, funds, commitments, or arrangements of any
kind; and (iii) all other plans, or contracts, and schemes, programs, funds,
commitments, or arrangements providing money, services, property, or other
benefits, whether written or oral, qualified or nonqualified, funded or
unfunded, and including any that have been frozen or terminated, which pertain
to any employee, former employee, director, officer,
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consultant, or independent contractor of the Company or any ERISA Affiliate of
the Company and (a) to which the Company or any ERISA Affiliate of the Company
is or within the last six years has been a party or by which any of them is or
within the last six years has been bound or (b) with respect to which the
Company or any ERISA Affiliate of the Company has made any payments or
contributions since December 31, 1991 or (c) to which the Company or any ERISA
Affiliate of the Company may otherwise currently have any liability (including
any such plan or arrangement formerly maintained by the Company or any ERISA
Affiliate of the Company).
"Pro Rata Percentage" means, with respect to each Shareholder, the
percentage set forth opposite such Shareholder's name on Section 3.1(d) of the
Disclosure Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, security interest, lien or
other similar encumbrance or right of any third party.
"Shareholder(s)" means each shareholder or collectively, the shareholders
of the Company whose names are set forth on Schedule 2.6 hereto.
"Subsidiary" means any corporation, limited liability company, limited
partnership, partnership, trust or other entity with respect to which another
Person has the power, directly or indirectly through one or more intermediaries,
to vote or direct the voting of sufficient securities or interests to elect a
majority of the directors or management committee or similar governing body.
"Tax" or "Taxes" means all taxes, however denominated, including any
interest, penalties or other additions to tax that may become payable in respect
thereof, imposed by any federal, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include, but not be limited to, any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Sec. 59A), customs duties, capital stock, franchise, profits, withholding
(employment, backup, foreign, or otherwise), social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
other tax of any kind whatsoever, or other obligations of the same or of a
similar nature to any of the foregoing, which are required to be paid, withheld,
or collected and whether disputed or not.
"Tax Proceeding" means, with respect to Taxes, any proceeding, judicial or
administrative, civil or criminal, including, without limitation, any audit or
investigation.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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"Total Merger Consideration" means 2,700,000 shares of Xxxxxxx Common;
provided, however, that the Total Merger Consideration shall be adjusted as set
forth in Section 2.6 herein.
1.2 Principles of Construction.
(a) In this Agreement, unless otherwise stated or the context
otherwise requires, the following usage apply: (i) unless otherwise provided
herein, actions permitted, but not required, under this Agreement may be taken
at any time and from time to time in the actor's sole discretion; (ii) in
computing periods from a specified date to a later specified date, the words
"from" and "commencing on" (and the like) mean "from and including," and the
words "to," "until" and "ending on" (and the like) mean "to, but excluding";
(iii) the captions and headings of articles, sections, schedules and exhibits
appearing in or attached to this Agreement have been inserted for convenience of
reference only and are not a part of, nor shall they affect any construction or
interpretation of this Agreement or any of its provisions; (iv) unless otherwise
specified, indications of time of day mean Chicago, Illinois time; (v) all
references to articles, sections, schedules and exhibits are to articles,
sections, schedules and exhibits in or to this Agreement unless otherwise
specified; (vi) references to a statute shall refer to the statute as amended
from time to time and any successor statute, and to all rules and regulations
promulgated under or implementing the statute or successor, as in effect at the
relevant time; (vii) references to a governmental or quasi-governmental agency,
authority or instrumentality shall also refer to a regulatory body that succeeds
to the functions of the agency, authority or instrumentality; (viii) "including"
means "including, but not limited to"; (ix) unless the context requires
otherwise, all words used in this Agreement in the singular number shall extend
to and include the plural, all words in the plural number shall extend to and
include the singular and all words in any gender shall extend to and include all
genders; and (x) any reference to a document or set of documents in this
Agreement, and the rights and obligations of the parties under any such
documents, shall mean such document or documents as amended or otherwise
modified from time to time, and any and all extensions, renewals, substitutions
or replacements thereof.
(b) Except as otherwise expressly provided in this Agreement, all
accounting not specifically defined herein shall be construed in accordance with
United States GAAP applied on a consistent basis.
2. THE MERGER
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In connection with the Acquisition, the respective boards of directors and
shareholders of Acquisition Sub and the Company have, by resolutions duly
adopted, approved the following provisions of this Article 2 as the Plan of
Reorganization within the meaning of Code Section 368(a), as a "Merger
Agreement" within the meaning of Section 1101 of the CGCL and as an "Agreement
of Merger" within the meaning of Section 252 of the DGCL:
2.1 Plan of Merger. Subject to the provisions of this Agreement, an
Agreement of Merger as required by Section 1101 of the CGCL, together with an
officer's certificate of each of Acquisition Sub and the Company (collectively,
the "California Merger Agreement") in the form attached hereto as Exhibit D
shall be duly prepared, executed and acknowledged by the Company, Acquisition
Sub and such other parties as may be appropriate, and thereafter the
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California Merger Agreement shall be delivered to the Secretary of State of the
State of California (the "California Department") for filing. Simultaneously
with filing in the State of California and subject to the provisions of this
Agreement, an Agreement of Merger as required by Section 252 of the DGCL,
together with an officer's certificate of each of Acquisition Sub, Xxxxxxx and
the Company (collectively, the "Delaware Certificate of Merger") shall be duly
prepared, executed and acknowledged by the Company, Acquisition Sub and such
other parties as may be appropriate, and thereafter the Delaware Certificate of
Merger shall be delivered to the Department of State of the State of Delaware
(the "Delaware Department") for filing. The Acquisition shall become effective
for corporate law issues on at 5:00 p.m. Eastern Time on the date such filings
occur (the "Merger Time"). The date on which the Merger Time occurs is referred
to herein as the "Merger Date".
2.2 Closing. The closing of the transactions contemplated hereby (the
"Closing") will take place at the offices of Barack Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxx & Xxxxxxxxx, 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
on February 7, 1999, to the extent that the conditions set forth in Sections 4.5
and 4.6 have been satisfied or waived (where permissible), unless another time
or place is agreed to by the Parties. The effective date of this transaction
will be the date of Closing (the "Effective Date"). At the Closing, the Parties
shall make delivery of those materials set forth, respectively, in Sections 4.5
and 4.6 hereof.
2.3 Effects of the Merger.
(a) At the Merger Time, the separate legal existence of Acquisition Sub
shall cease and Acquisition Sub shall be merged with and into the Company and
the Company, as the surviving corporation in the Acquisition (the "Surviving
Corporation"), shall continue its legal existence under the laws of the State of
California under the name "Strategic Decisions Group".
(b) At and after the Merger Time, the Acquisition will have the effects
set forth in Chapter 11 of the CGCL and in Subchapter IX of Title 8 of the DGCL.
2.4 Articles of Incorporation and By-laws. The Articles of Incorporation
and By-laws of the Company, each as in effect immediately prior to the Merger
Time, as amended, shall respectively become the Articles of Incorporation and
By-laws of the Surviving Corporation immediately after the Merger Time and shall
thereafter continue to be its Articles of Incorporation and Bylaws until amended
as provided therein and under the CGCL.
2.5 Directors and Officers. The directors of Acquisition Sub holding
office immediately prior to the Merger Time shall be the directors of the
Surviving Corporation immediately after the Merger Time. The officers of
Acquisition Sub holding office immediately prior to the Merger Time shall be the
officers of the Surviving Corporation immediately after the Merger Time, with
additional officers from the Company being appointed by the directors of the
Surviving Corporation.
2.6 Conversion of Securities. At the Merger Time, by virtue of the
Acquisition and without any action on the part of Acquisition Sub, the Company
or the Shareholders, (x) each share of outstanding common stock of Acquisition
Sub held by Xxxxxxx immediately prior to the
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Merger Time shall be converted into one share of common stock of the Surviving
Corporation, and (y) each share of Company Stock which is issued and outstanding
immediately prior to the Merger Time (other than treasury shares) shall be
canceled and extinguished and converted into the number of shares of Xxxxxxx
Common equal to the Total Merger Consideration divided by the number of shares
of Company Stock outstanding at the Closing; provided, however, that shares of
Company Stock held by a holder who has exercised and perfected appraisal rights
shall not be converted into shares of Xxxxxxx Common, but the holder of such
shares shall only be entitled to such rights as are provided by California Law
and the shares of the Xxxxxxx Common otherwise allocable to all such holders
exercising and perfecting appraisal rights shall not be issued by Xxxxxxx; and
provided, further, however, that if as the result of the conversion of any
Shareholder's Company Stock upon consummation of the Acquisition, a fractional
interest in a share of Xxxxxxx Common would be deliverable under this Section
2.6, in lieu of a fractional share being delivered therefor, such fractional
interest shall automatically be converted into the right to receive an amount in
cash (without interest) equal to the product of the Xxxxxxx Common Value
multiplied by the amount of such fractional interest. No such holder will be
entitled to dividends, voting rights or any other rights as a shareholder of
Xxxxxxx in respect of any fractional share. For all purposes of this Agreement
(including all computations pursuant to Schedule 2.6), the Total Merger
Consideration shall be adjusted in accordance with the following provisions:
(a) Closing Balance Sheet. As soon as practicable but no later than
45 days following the Closing Date, the Company shall deliver to Xxxxxxx a
balance sheet (the "Closing Balance Sheet") for the Company dated as of the
close of business the day prior to the date of Closing (the "Closing Balance
Sheet Date"), which Closing Balance Sheet shall be prepared by the Company and
reviewed by the Company's certified public accountants (the "Company
Accountants") and shall set forth the assets and liabilities of the Company as
of the close of business on the Closing Balance Sheet Date. The Closing Balance
Sheet shall present fairly the financial position of the Company as of the
Closing Balance Sheet Date, in accordance with GAAP and on a basis consistent
with the presentation of the Interim Balance Sheet (the "Interim Financial
Statement Standards").
(i) If Xxxxxxx determines to dispute in good faith that the
Closing Balance sheet has not been prepared in accordance with the Interim
Financial Statement Standards, Xxxxxxx shall notify the Shareholder's
Representative in writing thereof (the "Xxxxxxx Notice") within 14 days after
delivery to the Xxxxxxx of the Closing Balance Sheet (the "Notice Period"). The
Xxxxxxx Notice shall set forth in reasonable detail the alleged non-conformance
and the amount(s) being disputed. If Xxxxxxx does not deliver the Xxxxxxx Notice
within the Notice Period, the Closing Balance Sheet shall become final and
binding upon all parties.
(ii) If the Xxxxxxx Notice is delivered within the Notice
Period, the Shareholders' Representative and Xxxxxxx shall attempt in good faith
to resolve all dispute(s). If Xxxxxxx and the Shareholders are unable to resolve
any disputed item within 14 days after receipt of the Xxxxxxx Notice, such
disputed item(s), together with each party's calculation of the Company's
Working Capital, Total Assets and Net Shareholders' Capital (in each case, as
defined below) as of the Closing Balance Sheet Date, shall be submitted to a
nationally recognized "Big Five" accounting firm or its successor (other than
the Company's or Xxxxxxx'x
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regular auditors or their successors) chosen by lot, which accounting firm shall
be instructed to arbitrate such disputed item(s) and determine the Company's
Working Capital, Total Assets and Net Shareholders' Capital as of the Closing
Balance Sheet Date. The resolution of disputes by the accounting firm so
selected shall be set forth in writing and shall be conclusive and binding upon
all parties and adjustment may be entered thereon by any court having
jurisdiction over the parties. The costs of such resolution by such accounting
firm multiplied by the percentage (not to exceed 100%) calculated as the amount
of the actual adjustment divided by the amount disputed by Xxxxxxx shall be
borne by the Shareholders, in proportion to their respective Pro Rata
Percentages, on the one hand, and the balance, if any, by Xxxxxxx, on the other
hand.
(A) The term "Working Capital" means the excess of the
Company's current assets over its current liabilities as of the Closing Balance
Sheet Date, calculated in accordance with the Interim Financial Statement
Standards, all as finally determined in accordance with this Section 2.6(a);
provided, however, that the calculation of the amount of Working Capital shall
not include or otherwise account for (i) the expenses and fees of the Company
incurred or accrued in connection with the Acquisition pursuant to the
provisions of Section 6.11 hereof, which expenses and fees are to remain a post-
closing obligation of the Company or (ii) any reclassification of a liability
described as a Deferred Compensation Payable from a Long-Term Liability to a
Current Liabilty and any related assets from Other Assets to Current Assets (as
each such term is set forth on the Interim Balance Sheet).
(B) The term "Net Shareholders' Capital" means the excess
of the Company's total assets over its total liabilities as of the Closing
Balance Sheet Date, calculated in accordance with the Interim Financial
Statement Standards, all as finally determined in accordance with this Section
2.6(a); provided, however, that the calculation of Net Shareholders' Capital
shall not include or otherwise account for (i) the expenses and fees of the
Company incurred or accrued in connection with the Acquisition pursuant to the
provisions of Section 6.11 hereof, which expenses and fees are to remain a post-
closing obligation of the Company or (ii) any reclassification of a liability
described as a Deferred Compensation Payable from a Long-Term Liability to a
Current Liabilty and any related assets from Other Assets to Current Assets (as
each such term is set forth on the Interim Balance Sheet).
(b) Adjustment. The Total Merger Consideration shall be adjusted
downward in accordance with this paragraph (b) to account for the negative
differential (the "Target Differential"), if any, between Target Working
Capital, Target Total Assets, and Target Net Shareholders' Capital (as each such
term is hereafter defined) and each of, respectively, Working Capital, Total
Assets, and Net Shareholders' Capital. In the event that a Target Differential
exists as of the Merger Date, the Total Merger Consideration shall be reduced by
the number of shares of Xxxxxxx Common equal to the quotient of the Target
Differential divided by the Xxxxxxx Common Value. For purposes hereof, the
Target Differential shall be the greater of the respective differentials between
(a) Target Working Capital and Working Capital, (b) Target Total Assets and
Total Assets, and (c) Target Net Shareholders' Capital and Net Shareholders'
Capital. Target Working Capital shall be $3,190,000, and Target Net
Shareholders' Capital shall be $3,350,000. As of the Merger Date, an amount of
shares of Xxxxxxx Common equal to 10% of the number of shares of Xxxxxxx Common
issued pursuant to the Acquisition shall be deposited with the Escrow Agent and
held in a segregated escrow account (the "Adjustment Escrow") in
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accordance with the terms of the Escrow Agreement. Within ten days following the
determination of the Target Differential, if any, the Escrow Agent shall return
to Xxxxxxx the number of shares valued at the Xxxxxxx Common Value equal to the
Target Differential and shall promptly distribute to the Shareholders the
remaining shares held in the Adjustment Escrow to the Shareholders, pro rata in
respect of their respective Pro Rata Percentages.
2.7 Closing of Company Transfer Books. As of the Closing, no transfer of
Company Stock shall thereafter be made or recognized.
2.8 Exchange of Certificates. Each holder of a certificate or certificates
representing shares of Company Stock issued and outstanding immediately prior to
the Merger Time shall at or as soon as practicable following the Closing,
surrender to Xxxxxxx (or at Xxxxxxx'x direction, Xxxxxxx'x stock transfer agent)
for exchange a certificate or certificates representing the number of shares of
Company Stock held by such holder, together with a duly executed letter of
transmittal. In exchange therefor, Xxxxxxx shall issue or pay, as applicable, to
such holder of Company Stock and deliver as provided herein a certificate or
certificates representing the shares of Xxxxxxx Common to be issued to such
holder pursuant to Section 2.6 to be delivered to such holder and, in the case
of payment for any fractional interest in Xxxxxxx Common, a check payable to the
holder. Such issuance and payment shall be made promptly upon receipt of Company
Stock accompanied by a duly executed letter of transmittal and in any case
within five days after receipt by Xxxxxxx. Surrendered certificates shall
forthwith be canceled. Xxxxxxx shall not be obligated to deliver the
consideration to which any former holder of Company Stock is entitled as a
result of the Acquisition until such holder surrenders such holder's certificate
or certificates representing shares of Company Stock for exchange as provided in
this Section 2.8; provided, however, that procedures allowing for payment
against receipt of customary and appropriate certifications and indemnities
shall be provided with respect to lost or destroyed certificates. Until so
surrendered and exchanged, each such certificate shall represent solely the
right to receive the shares of Xxxxxxx Common to be issued pursuant to Section
2.6 in exchange for the shares of Company stock represented by such surrendered
certificate and the right to receive the fractional share payment to be paid
pursuant to Section 2.6, without interest.
2.9 Rights of the Shareholders. From and after the Merger Time, the
Shareholders shall have no rights with respect to their shares of Company Stock
other than to surrender the certificate or certificates representing such shares
pursuant to Section 2.8.
2.10 Dissenting Company Shares. Company Stock that has not been voted for
approval of this Agreement and with respect to which a demand for payment and
appraisal shall have been properly made in accordance with Chapter 13 of the
CGCL ("Dissenting SDG Shares") shall not be converted into Xxxxxxx Common at or
after the Merger Time but shall be converted into such consideration as may be
determined to be due with respect to such Dissenting SDG Shares pursuant to the
CGCL. If a holder of Dissenting SDG Shares ("Dissenting Shareholder") shall
withdraw his or her demand for such payment and appraisal or shall become
ineligible for such payment and appraisal, then, as of the time of the
occurrence of such event of withdrawal or ineligibility, whichever last occurs,
such holder's Dissenting SDG Shares shall cease to be Dissenting SDG Shares and
shall be converted into the Xxxxxxx Common into which such Dissenting SDG Shares
would have been converted pursuant to Section 2.6
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hereof. The Company shall give Xxxxxxx prompt notice of any demand received by
the Company from a holder of Dissenting SDG Shares for appraisal of Company
Stock, and Xxxxxxx shall have the right to participate in all negotiations and
proceedings with respect to such demand. The Company agrees that, except with
the prior written consent of Xxxxxxx, or as required under the CGCL, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for appraisal. Each Dissenting Shareholder who, pursuant to the
provisions of Chapter 13 of the CGCL, becomes entitled to payment of the value
of shares of Company Stock shall receive payment therefor (but only after the
value therefor shall have been agreed upon or finally determined pursuant to
such provisions). Any Xxxxxxx Common which would have been issuable with respect
to Dissenting SDG Shares shall be retained by Xxxxxxx.
2.11 Taking of Necessary Action; Further Action. Xxxxxxx and Acquisition
Sub on the one hand, and the Company and the Shareholders, on the other hand,
shall use reasonable efforts to take all such action (including action to cause
the satisfaction of the conditions precedent to the Acquisition) as may be
necessary or appropriate in order to effectuate the Acquisition as promptly as
possible. If, at any time after the Merger Time, any further action is necessary
or desirable to vest the Surviving Corporation with full possession of all the
rights, privileges, immunities and franchises of the Company and Acquisition
Sub, the officers of the Surviving Corporation are fully authorized in the name
of either the Company or Acquisition Sub or otherwise to take, and shall take,
all such action.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Representations and Warranties Concerning the Company. As a material
inducement to Xxxxxxx and Acquisition Sub to enter into this Agreement and
consummate the transactions contemplated hereby, the Company and the Company
Executives hereby jointly and severally represent and warrant to Xxxxxxx and
Acquisition Sub that all of the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement, and hereby covenant that
said statements will be correct and complete as of the Merger Date (as though
made as of the Merger Date and as though the Merger Date were substituted for
the date of this Agreement throughout such statements provided that the
representations and warranties made as of a specified date will be true and
correct as of such date), except, in each case, as set forth in the schedule
delivered concurrently with this Agreement setting forth exceptions to the
representations and warranties set forth herein (the "Disclosure Schedule"). The
Disclosure Schedule is arranged in sections corresponding to the numbered and
lettered sections contained in this Section 3.1, and no matter disclosed with
respect to one section shall be deemed to be an exception to another section
unless the applicability of such item to such other section is reasonably
apparent. Notwithstanding anything herein to the contrary, the disclosure of any
contract agreement, arrangement or understanding herein shall not affect or
qualify any representation with respect to the effectiveness or enforceability
of such contract, agreement, arrangement or understanding or the absence of
breaches or defaults thereunder, unless otherwise specifically disclosed.
(a) Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. Each Subsidiary of the Company, as identified in
Section 3.1(a) of the Disclosure
11
Schedule, is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, as identified in Section 3.1(a) of
the Disclosure Schedule. Each of the Company and its Subsidiaries has all
requisite corporate power and authority to carry on the business in which it is
engaged and to own and use the properties owned and used by it. True and correct
copies of the Company's Articles of Incorporation and By-laws, in each case as
amended to date, have been delivered to Xxxxxxx. Each of the Company and its
Subsidiaries is qualified to conduct business and is in good standing under the
laws of each jurisdiction wherein the nature of its business or its ownership of
property requires it to be so qualified, except where the failure to be so
qualified, would not individually or in the aggregate, have a Material Adverse
Effect. Section 3.1(a) of the Disclosure Schedule lists all jurisdictions in
which the Company and each of its Subsidiaries is qualified to do business.
(b) Authorization of Transaction. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the prior
sentence, the Board of Directors and the Shareholders of the Company have duly
authorized the execution, delivery and performance of this Agreement and the
consummation of the Acquisition. This Agreement constitutes the valid and
legally binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to the rights and remedies of creditors generally
or (ii) rules of law governing specific performance, injunctive relief or other
general principles of equity.
(c) Noncontravention. Subject to compliance with the HSR Act and
except as set forth on Section 3.1(c) of the Disclosure Schedule, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) violate any applicable statute,
regulation, law, rule or common law doctrine, (ii) violate any judgment, order,
decree, stipulation, injunction, or other restriction of any governmental body,
governmental agency or court to which the Company is subject, (iii) breach any
provision of the Articles of Incorporation or By-laws of the Company, or (iv)
conflict with, result in a breach of, constitute a default under (with or
without notice or lapse of time, or both), result in the acceleration of, create
in any party the right to accelerate, terminate, modify or cancel, or require
any notice under, or result in the creation of any Security Interest upon any of
the Company's (or any of its Subsidiaries') assets pursuant to the terms of, any
contract, agreement, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement for borrowed money, instrument of indebtedness, Security
Interest or other binding arrangement to which the Company (or any of its
Subsidiaries) is a party or by which it is bound or to which any of its assets
are subject, except, in the case of clauses (i) and (iv) above, for those
violations or breaches which would not, individually or in the aggregate, have a
Material Adverse Effect. Except pursuant to the HSR Act and as set forth on
Section 3.1(c) of the Disclosure Schedule, the Company is not required to give
any notice to, make any material filing with, or obtain any authorization,
consent, or approval of any government, governmental agency or court, or any
other Person in order for the parties to consummate the Acquisition and the
transactions contemplated by this Agreement or in order that the Acquisition and
such transactions not constitute a breach or violation of, or result in a right
of termination or acceleration or any encumbrance on any of the Company's (or
any of its Subsidiaries') assets, pursuant to the provisions of any material
agreement, arrangement or
12
understanding or any material license, franchise or permit except as would not
have a Material Adverse Effect.
(d) Capitalization. The authorized capital stock of the Company
consists solely of 1,000,000 shares of voting common stock, no par value and
1,000,000 shares of non-voting common stock, no par value per share, of which
20,670 shares and 189 shares, respectively, are issued and outstanding on the
date hereof and all of which are owned by the Shareholders. Set forth on Section
3.1(d) of the Disclosure Schedule is a true and correct description of (i) the
full legal names and current address of each Shareholder, (ii) the Pro Rata
Percentage of each Shareholder, and (iii) all of the current directors and
officers of the Company. The Company has never authorized, offered, sold or
issued any securities other than Company Stock. All offerings, sales and
issuances by the Company of any Company Stock have been conducted in compliance
with and in accordance with or in reliance upon exemptions from all applicable
Federal and state securities laws and all other applicable state laws. Except as
set forth on Section 3.1(d) of the Disclosure Schedule, there are no currently
outstanding or authorized options, warrants, rights, contracts, rights of first
refusal or first offer, calls, puts, rights to subscribe, conversion rights, or
other agreements or commitments to which the Company is a party or which are
binding upon the Company or Company upon any of the Shareholders providing for
the issuance, disposition, or acquisition of any Company Stock or securities
convertible into or exchangeable for Company Stock. There are no voting trusts,
proxies, or any other agreements, restrictions or understandings with respect to
the voting of any shares of Company Stock, except for those agreements expressly
contemplated hereby.
(e) No Subsidiaries. Except as set forth in Section 3.1(e) of the
Disclosure Schedule, the Company does not own or control any direct or indirect
equity interest or equity participation in any corporation, partnership, limited
liability company, trust, or other business association or Subsidiary.
(f) Financial Statements; Books and Records.
(i) The Company has provided Xxxxxxx with the following
financial statements, correct and complete copies of which are set forth on
Section 3.1(f) of the Disclosure Schedule (collectively the "Financial
Statements"): (A) consolidated and consolidating balance sheet and related
statements of income and changes in shareholders' equity for the Company as of
and for the forty (40) week period ended January 3, 1998, the fiscal year ended
March 29, 1997 and the fiscal year ended March 31, 1996 (January 3, 1998 being
the "Most Recent Fiscal Year End"), each audited by the Company Accountants, and
(B) unaudited consolidated and consolidating balance sheet and related
statements of income for the Company as of and for the eleven months ended
November 7, 1998 and year to date (the "Latest Financials"). The Financial
Statements are correct and complete in all material respects and have been
prepared in accordance with GAAP, except, in the case of the Latest Financials,
for the absence of footnotes and normal year-end adjustments. The Financial
Statements fairly present, on such basis, the consolidated financial condition
and results of operations of the Company and its Subsidiaries as of the times
and for the periods referred to therein.
13
(ii) The Company's and its Subsidiaries' books and records are
and have been properly prepared and maintained in form and substance adequate
for preparing audited financial statements in accordance with GAAP, and fairly
and accurately reflect in accordance with GAAP all of the assets and Liabilities
of the Company and its Subsidiaries and all contracts and transactions to which
the Company or any of its Subsidiaries is or was a party or by which the Company
or any of its Subsidiaries or any of their respective business or assets is or
was affected. The minute books and related records of the Company and its
Subsidiaries, correct and complete copies of which have been made available to
Xxxxxxx, correctly reflect all resolutions adopted and all other material
corporate actions taken at all meetings or through consents of the directors
(including committees thereof) and the shareholders.
(g) Recent Events. Except as set forth in Section 3.1(g) of the
Disclosure Schedule, since the date of the Interim Balance Sheet, neither the
Company nor any of its Subsidiaries has experienced or suffered any Material
Adverse Effect. Without limiting the generality of the foregoing, except as set
forth on the Latest Financials or Section 3.1(g) of the Disclosure Schedule,
since the date of the Interim Balance Sheet, neither the Company nor any of its
Subsidiaries:
(i) sold, leased, transferred or assigned any of its assets,
tangible or intangible, with an aggregate value greater than $75,000, other than
in the Ordinary Course of Business;
(ii) accelerated, terminated, modified, canceled or committed
any breach of any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases, subleases, licenses, and sublicenses) either
involving more than $50,000 individually or in the aggregate or otherwise
outside of the Ordinary Course of Business;
(iii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$50,000 individually or in the aggregate or outside of the Ordinary Course of
Business;
(iv) experienced any damage, destruction, or loss to its
property in excess of $50,000 (whether or not covered by insurance) individually
or in the aggregate;
(v) created or suffered to exist any Security Interest upon any
of its assets, tangible or intangible, outside the Ordinary Course of Business
or securing any Liabilities in the aggregate in excess of $75,000;
(vi) issued, sold, or otherwise disposed of any Company Stock or
other equity securities, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion or exercise) any interest in the
Company or any of its equity securities, or any securities convertible or
exchangeable into Company Stock or other equity securities;
(vii) declared, set aside, or paid any dividend or distribution
with respect to the Company Stock or any of its equity securities (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any Company Stock
or any of its equity securities;
14
(viii) entered into any transaction, arrangement or contract
with, or distributed or transferred any property or other assets to, any
officer, director, Shareholder or other insider or Affiliate of the Company or
any of its Subsidiaries (other than salaries and employee benefits in the
Ordinary Course of Business);
(ix) made or committed to make any capital expenditures or
entered into any other material transaction outside the Ordinary Course of
Business involving an expenditure in excess of $50,000 individually or in the
aggregate;
(x) amended or modified in any material respect any Plan (beyond
any amendments and modifications reflected in true and complete copies of such
Plans delivered to Xxxxxxx);
(xi) entered into any employment agreement for a base salary in
excess of $125,000 or collective bargaining agreement or granted any increase in
excess of $25,000 in the salary of any officer or management employee of the
Company (or increase in excess of $15,000 in the case of any non-management
employee) or paid or committed to pay any bonus to any officer or employee;
(xii) changed in any material respect the manner in which the
business has been conducted, including, without limitation, billing of clients
or collection of accounts receivable, purchases of goods and services or payment
of accounts payable;
(xiii) changed the accounting principles, methods or practices
or any change in the depreciation or amortization policies or rates, except in
each case as required by GAAP;
(xiv) changed the relationships with any client, contractor or
supplier which might reasonably be expected to result in a Material Adverse
Effect; or
(xv) entered into any binding commitment (orally or in writing)
to do any of the foregoing.
(h) Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any Liability (and there is no Basis for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Company or any of its Subsidiaries giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Latest
Financials, (ii) Liabilities incurred since the date of the Interim Balance
Sheet in the Ordinary Course of Business (none of which relates to any breach of
contract, breach of warranty, tort, infringement, or violation of law or arose
out of any charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand), (iii) Liabilities in an aggregate amount of less than
$50,000, and (iv) Liabilities otherwise expressly disclosed in this Agreement or
on the Disclosure Schedule (it being understood that except as set forth in
Section 3.1(f) no representation or warranty is being made regarding the
revenues or results of operations of the Company).
15
(i) Tax Matters.
(i) The Company, each of the Subsidiaries and their respective
predecessors in interest (by merger, liquidation, or otherwise) (each such
person referred to as a "Taxpayer" and collectively, as the "Taxpayers") has
filed or caused to be filed in a timely manner (within any applicable extension
periods) all Tax Returns required to be filed by the Code or by applicable
state, local, or foreign tax laws, such Tax Returns have been timely filed on
behalf of the Taxpayers, such Tax Returns are true, correct and complete in all
respects, and all Taxes due (including all Taxes due in respect of any former
Subsidiary of each of the Taxpayers (whether due in respect of a separate
company, unitary, or consolidated federal income Tax Return or otherwise), and
Taxes due in respect of any person for which any of the Taxpayers had an
obligation to withhold and/or otherwise pay over Taxes) have been timely paid in
full or will be timely paid in full by the due date thereof (and whether or not
shown on a Tax Return).
(ii) With respect to any taxable year for which a statute of
limitations (or similar provision) has not yet run, none of the Tax Returns of
any of the Taxpayers has been audited by a government or taxing authority, nor
is any such audit or other Tax Proceeding in process, pending, threatened
(either in writing or verbally, formally or informally) or are expected to be
asserted with respect to Taxes (or the collection of Taxes) of any of the
Taxpayers, and no Taxpayer, officer, director or employee of a Taxpayer has
received notice (either in writing or verbally, formally or informally) or
expects to receive notice that a Taxpayer has not filed a Tax Return or not paid
Taxes required to be filed, withheld, or paid by it. Each of the Taxpayers has
disclosed on its federal income tax returns all positions taken therein that
could rise to a substantial understatement penalty within the meaning of Code
Section 6662. No Taxpayer currently is the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where any of the Taxpayers does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction.
(iii) The Company and each Subsidiary has delivered to Xxxxxxx
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by any of
the Taxpayers since December 31, 1996.
(iv) Neither the Company nor any of its Subsidiaries has filed a
consent under Section 341(f) of the Code concerning collapsible corporations.
Neither the Company nor any of its Subsidiaries has made any material payments,
is obligated to make any material payments, or is a party to any agreement that
would obligate it to make any material payments that will not be deductible
under Section 280G of the Code. Neither the Company nor any of its Subsidiaries
has been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(A)(ii) of the Code. Neither the Company nor any of its Subsidiaries is a
party to any tax allocation or sharing agreement. Neither the Company nor any of
its Subsidiaries has been a member of an Affiliated Group which filed federal
income tax returns, other than a group of which the Company was the common
parent. Neither the Company nor any of its Subsidiaries has any Liability for
Taxes owed by any Person (other than the Company), including without limitation,
(A) as a transferee, assignee or other successor, (B) pursuant to a Tax sharing
agreement or other
16
contract, or (C) pursuant to Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law).
(v) The Company has made available to Xxxxxxx information
regarding the Taxpayer's basis in its assets, its current and accumulated
earnings and profits, its net operating loss and tax credit carryovers, excess
loss accounts with respect to Subsidiary stock, tax elections made by any of the
Taxpayers affecting any other of the Taxpayers, and deferred intercompany
transactions. None of the Taxpayers has net operating losses or other tax
attributes presently subject to limitations under Code Sections 382, 383, 384,
the federal consolidated return regulations, or other similar provisions under
state, local or foreign law.
(vi) The Taxpayers have filed all reports and have created
and/or retained all records required under Code Section 6038A with respect to
their respective ownership by and transactions with related parties. Each
related foreign person required to maintain records under Code Section 6038A
with respect to transactions between any of the Taxpayers and related foreign
person(s) have maintained such records. All documents that are required to be
created and/or preserved by the related foreign person(s) with respect to
transactions with any of the Taxpayers are either maintained in the United
States or the Taxpayer was or is exempt from the record maintenance requirements
of Code Section 6038A pursuant to Treasury Regulation Section 1.6038A-1. None of
the Taxpayers is a party to any record maintenance agreement with the Internal
Revenue Service with respect to Code Section 6038A. Each related foreign person
that has engaged in transactions with any of the Taxpayers has authorized such
Taxpayer to act as its limited agent solely for purposes of Code Sections 7602,
7603, and 7604 with respect to any request by the Internal Revenue Service to
examine records or produce testimony related to any transaction with any of the
Taxpayers, and each such authorization remains in full force and effect.
(j) Title and Condition of Properties.
(i) Neither the Company nor any of its Subsidiaries owns any
real property.
(ii) The leases described in Section 3.1(j) of the Disclosure
Schedule (the "Property Leases") cover all of the real estate leased, used or
occupied by the Company or any of its Subsidiaries. Each of the Property Leases
is in full force and effect and the Company or one of its Subsidiaries holds a
valid and existing leasehold or subleasehold interest under each of such
Property Leases. The Company has delivered to Xxxxxxx complete and accurate
copies of each of the Property Leases and none of such Property Leases has been
modified in any respect, except to the extent that such modifications are
disclosed by the copies delivered to Xxxxxxx. Neither the Company nor any of its
Subsidiaries is in default, and to the Knowledge of the Company no circumstances
exist which would result in such default (including upon the giving of notice or
the passage of time, or both), under any of such Property Leases, and no other
party thereto has the right to terminate, accelerate performance under or
otherwise modify any of such leases. To the Knowledge of the Company, no lessor
under any such lease is in default under any of such leases in its duties to the
lessee. Except as set forth in Section 3.1(j) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has assigned, transferred,
conveyed,
17
subjected to a Security Interest, or otherwise encumbered any interest in any of
the Property Leases.
(iii) The Company or one of its Subsidiaries owns good and
marketable title, free and clear of all Security Interests, to all of the
personal property and assets reflected on the Latest Financials or acquired
after the date of the Interim Balance Sheet, except for (A) assets with an
aggregate original purchase price of less than $100,000 which have been disposed
of to non-affiliated third parties since the date of the Interim Balance Sheet,
in the Ordinary Course of Business, (B) Security Interests securing liabilities
reflected on the Latest Financials and (C) Security Interests for current Taxes
not yet due and payable.
(iv) The Company's computer hardware, equipment and other
tangible personal property and assets are in good condition and repair, except
for ordinary wear and tear not caused by neglect, and are useable for their
respective intended purposes in the Ordinary Course of Business. The personal
property and assets shown on the Latest Financials or acquired after the date of
the Interim Balance Sheet, the lease rights under the Property Leases and leases
of personal property and the Intellectual Property owned or used by the Company
or any of its Subsidiaries under valid license, collectively include all assets
necessary to the conduct of the Company's and its Subsidiaries business as
presently conducted. None of the Shareholders, other employees or independent
contractors of the Company or their respective Affiliates owns any rights, other
than as would exist upon liquidation or distribution of the Company, in any
material assets, real or personal, which are used by the Company or any of its
Subsidiaries in its business.
(k) Intellectual Property.
(i) Section 3.1(k) of the Disclosure Schedule contains a
complete list and an accurate functional description by category and indication
of status (completed or in process) of all Patents, Trademarks, Copyright
registrations, Software, Licenses-In, Licenses-Out and other material items of
Intellectual Property which are owned, licensed by, licensed to, used or held
for use in and are necessary for the conduct of the business of the Company or
any of its Subsidiaries as such business is currently conducted and presently
contemplated to be conducted, or as to which the Company or any of its
Subsidiaries has a contractual right to an assignment.
(ii) No Person has any Security Interest (other than the right
to use Software under license) in th e Company's or any of its Subsidiaries'
interest in any Intellectual Property owned by the Company or any of its
Subsidiaries. The Company and each of its Subsidiaries has all rights to use the
Intellectual Property owned or used by it in the manner in which such
Intellectual Property is currently being used, except where failure to do so
would not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is under any obligation to pay any royalty or other compensation to
any third party or to obtain any approval for use of any of the Intellectual
Property. To the Knowledge of the Company, none of the Intellectual Property is
subject to any outstanding judgment, order, decree, stipulation, injunction or
charge; no charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand is pending or, threatened, which challenges the legality,
validity, enforceability, use or ownership of any of the Intellectual Property.
Neither the Company nor any of its Subsidiaries
18
has ever agreed to indemnify any Person for or against interference,
infringement, misappropriation, or other conflict with respect to Intellectual
Property.
(iii) No breach or default (or event which with notice or lapse
of time or both would result in a breach or default) by the Company or any of
its Subsidiaries exists or has occurred under any License-In or other agreement
pursuant to which the Company or any of its Subsidiaries uses any Intellectual
Property, and the consummation of the transactions contemplated by this
Agreement will not violate or conflict with or constitute a breach or default
(or an event which, with notice or lapse of time or both, would constitute a
breach or default) or result in a forfeiture under, or constitute a Basis for
termination of, any such License-In or such other agreement or impair the
Company's or any of its Subsidiaries' ability after consummation of the
Acquisition to use the Software in the same manner as such Software is currently
used by the Company or such Subsidiary, except where such breaches, defaults,
violations, conflicts or other events which would not, individually or in the
aggregate, result in a Material Adverse Effect.
(iv) Each of the Company and its Subsidiaries owns or has the
right to use all the Intellectual Property necessary to provide, produce, sell
and license the services and products currently provided, produced, sold and
licensed by the Company or any of its Subsidiaries, and to conduct the Company's
or any of its Subsidiaries' business as presently conducted, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. The Intellectual Property includes all patents, trademarks,
trade names, service marks, copyrights, mask work rights and trade secrets, and
the Software includes all software, which are necessary to operate the business
of the Company and each of its Subsidiaries as it is presently conducted and to
satisfy and perform the contracts, commitments, arrangements and understandings
with customers of the Company and each of its Subsidiaries. The Company has no
Knowledge of any reason the Company and each of its Subsidiaries will not be
able to continue to own, possess or have access to, and to use, license and sub-
license as applicable, on reasonable terms, all Intellectual Property and other
proprietary rights necessary for the lawful conduct of its business as presently
conducted and currently contemplated to be conducted, without any infringement
or conflict with the rights of others.
(v) No Intellectual Property owned by the Company or any of its
Subsidiaries, and no product or service practiced, offered, licensed or sold by
the Company or any of its Subsidiaries, to the Knowledge of the Company,
infringes or is being infringed by any trademark, trade name, copyright, trade
secret, patent, right of publicity, right of privacy or other proprietary right
of any Person or would give rise to an obligation to render an accounting to any
Person as a result of co-authorship, co-invention or an express or implied
contract for any use or transfer. Neither the Company nor any of its
Subsidiaries has received notice of any adversely held patent, invention,
trademark, copyright, service xxxx, trade name or trade secret of any other
Person alleging or threatening to assert that the Company's or any of its
Subsidiaries' use of any of the Intellectual Property infringes upon or is in
conflict with any intellectual property or proprietary rights of any third
party. The Company, has no Knowledge of any Basis for any claim, threatened
claim or any suit or action asserting any such infringement or conflict or
asserting that the Company or any of its Subsidiaries does not have the legal
right to own, enforce, sell, license, sublicense, lease or otherwise use any
such Intellectual Property, process,
19
product or service, except for such instances of defenses such as "fair use" and
the Company has no Knowledge of any facts which should give such Person reason
to believe that there exists any Basis for such claim, threatened claim or suit
or that any such claim, threatened claim or suit may be asserted or instituted
in the future.
(vi) Neither the Company nor any of its Subsidiaries has sent or
otherwise communicated to any other Person any notice, charge, claim or
assertion of, and the Company has no Knowledge of any present, impending or
threatened infringement by any other Person of any Intellectual Property owned
by the Company or any of its Subsidiaries.
(vii) Except as disclosed in Section 3.1(k) of the Disclosure
Schedule, all the Company's and each of its Subsidiaries' Patents, Trademarks
and Copyrights listed in Section 3.1(k) of the Disclosure Schedule as having
been issued by, registered with or filed with the United States Patent and
Trademark Office or Register of Copyrights or the corresponding offices of other
countries identified in Section 3.1(k) of the Schedule have been so duly
registered, filed in or issued, as the case may be, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and each such other country. The
Company and each of its Subsidiaries has used reasonable efforts to protect its
rights in the Intellectual Property. The Company or one of its Subsidiaries owns
all right, title and interest in and to the Intellectual Property, other than
the Software listed on Exhibit 2 to Section 3.1(k) Disclosure Schedule, as to
which the Company has a valid license. No current licenses for the use of the
Intellectual Property requires the Company or any of its Subsidiaries to apply
for or enforce appropriate legal protection of such licensed Intellectual
Property.
(viii) Each of the Company's and each of its Subsidiaries'
current or former employees and those current or former independent contractors
retained by the Company or any of its Subsidiaries who, either alone or in
concert with others, created or creates, developed or develops, invented or
invents, discovered or discovers, derived or derives, programmed or programs or
designed or designs any of the Intellectual Property, has entered into a written
agreement with the Company or any of its Subsidiaries, copies of which have
heretofore been furnished to Xxxxxxx. All copyrightable property is "Work Made
For Hire" or has been duly assigned to the Company. No former employees or
independent contractors of the Company or any of its Subsidiaries have any
claims or rights to any of the Intellectual Property necessary for the conduct
of the Company's or any of its Subsidiaries' business as now conducted. To the
Knowledge of the Company, no employee of the Company or any of its Subsidiaries
is a party to or otherwise bound by any agreement with or obligated to any other
Person (including, any former employer) which in any respect conflicts with any
obligation, commitment or job responsibility of such employee to the Company or
one of its Subsidiaries under any agreement to which currently he or she is a
party or otherwise.
(ix) Exhibit 3 to Section 3.1(k) of the Disclosure Schedule
identifies each Person to whom the Company or any of its Subsidiaries has sold,
licensed, leased or otherwise transferred or granted any interest or rights to
any Intellectual Property, other than Intellectual Property licensed to end
users pursuant to standard, non-exclusive "shrink wrap" license agreements in
the Ordinary Course of Business, none of which is a license of any source
20
code ("Shrink Wrap Licenses"). The Company has previously delivered to Xxxxxxx
complete and accurate copies of all agreements relating to each such sale,
license, lease or other transfer or grant. The Company has delivered to Xxxxxxx
copies of all copyright and trademark registration certificates and all letters
patent.
(x) To the Knowledge of the Company and the Shareholders, all of
the data used in the Software was obtained from public sources and is not
subject to any confidentiality obligation imposed on the Company.
(xi) To its Knowledge, neither the Company nor any of its
Subsidiaries has taken any actions under the law of any applicable foreign
jurisdictions where the Company or any of its Subsidiaries has marketed or
licensed Software that would restrict or limit the ability of the Company or any
of its Subsidiaries to protect, or prevent it from protecting, its ownership
interests in, confidentiality rights of, and rights to market, license, modify
or enhance the Software.
(xii) Neither the Company nor any of its Subsidiaries has
granted any third party the right to market the Company's or any of its
Subsidiaries' Software.
(l) Contracts. Except as set forth on Schedule 3.1(l), with respect
to each written agreement that would be material to the Company and its
Subsidiaries as a whole (a "Material Contract"): (A) the Material Contract is in
full force and effect; (B) the Material Contract will continue to be in full
force and effect on identical terms immediately after the Merger Date; (C)
neither the Company nor any of its Subsidiaries (nor, to the Knowledge of the
Company, any other party) is in material breach or default (including, with
respect to any express or implied warranty), and no event has occurred which
with notice or lapse of time or both would constitute a material breach or
default or permit termination, modification, or acceleration, under any Material
Contract, except for any breaches, defaults, terminations, modifications or
accelerations which have been cured or waived; and (D) to the Knowledge of the
Company, no party has repudiated any material provision of any such Material
Contract. To the Knowledge of the Company, neither the Company nor any of its
Subsidiaries is a party to any verbal contract, agreement, or other arrangement
which, if reduced to written form, would be a Material Contract. Correct and
complete copies of the general forms of client engagement and services used by
the Company and each of its Subsidiaries have been made available to Xxxxxxx.
Except for those Material Contracts set forth on Section 3.1(l) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any fixed fee or capped price contracts or engagement arrangements (the
"Fixed Rate Engagements"), nor does the Company nor any of its Subsidiaries have
any outstanding offers, bids or proposals to perform any services on a fixed fee
or capped basis in an amount in excess of $500,000 per year. With respect to the
Company's Fixed Rate Engagements, the ratio of the amount of revenues recognized
to date (in the aggregate) by the Company compared to the amount of revenues
payable thereunder is reasonably proportionate to the ratio of the amount of
work completed under such Fixed Rate Engagements to the work required to be
completed thereunder.
(m) Notes and Accounts Receivable. All notes and accounts receivable
of the Company and each of its Subsidiaries are reflected properly on its books
and records, such
21
receivables are valid receivables subject to no set-offs or counterclaims, are
current and collectible in the aggregate amount shown, and will be collected in
accordance with their terms at their aggregate recorded amounts, subject only to
the reserve for bad debts set forth on the face of the Latest Financials, as
adjusted for operations and transactions through the Merger Date in accordance
with GAAP and the past custom and practice of the Company and its Subsidiaries.
Since the date of the Latest Financials, there has not been an adverse change of
more than 10% in the aggregate amount of the accounts receivable of the Company
or any of its Subsidiaries or an increase of the average age of such receivables
of 15 days.
(n) Work in Process. Except as set forth on Section 3.1(n) of the
Disclosure Schedule, the amount of unbilled receivables and other work-in-
process of the Company and its Subsidiaries has been properly reflected on the
books and records of the Company and its Subsidiaries, such that amounts set
forth therein, when billed, will represent valid receivables subject to no set-
offs or counterclaims and be collectible in the aggregate recorded amounts,
subject only to a reserve for bad debts calculated on a basis consistent with
the reserve for bad debts set forth on the face of the Latest Financials, as
adjusted for operations and transactions through the Merger Date in accordance
with GAAP and the past custom and practice of the Company and its Subsidiaries.
Since the date of the Latest Financials, there has not been an adverse change of
more than 10% in the aggregate amount of the unbilled receivables or other work-
in-process of the Company or any of its Subsidiaries or an increase of the
average age of such amounts of 15 days.
(o) Litigation. Section 3.1(o) of the Disclosure Schedule sets forth
each instance in which the Company or any of its Subsidiaries (i) is subject to
any unsatisfied judgment, order, decree, stipulation or injunction or (ii) is a
party to or, to the Knowledge of the Company, is threatened to be made a party
to, any complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasi-judicial or administrative agency of any Federal, state,
local, or foreign jurisdiction or before any arbitrator for an amount in
controversy in excess of $100,000 individually or $200,000 in the aggregate.
None of the complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 3.1(o) of the Disclosure Schedule could
reasonably be expected to result in any Material Adverse Effect. To the
Knowledge of the Company, there does not exist a Basis on which any such
complaint, action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Company or any of its Subsidiaries that could have a
Material Adverse Effect on the Company.
(p) Employees; Employment Matters.
(i) Except as set forth in Section 3.1(p) of the Disclosure
Schedule, to the Knowledge of the Company, no employee or group of employees of
the Company or any of its Subsidiaries who have in the last twelve months
generated more than $500,000 in revenues of the Company and its Subsidiaries has
notified the Company that they intend to terminate their employment with the
Company or any of its Subsidiaries generally or as a result of the transactions
contemplated hereby or otherwise. Neither the Company nor any of its
Subsidiaries is a party to or bound by any collective bargaining agreement, and
neither the Company nor any of its Subsidiaries has experienced any strikes,
grievances, other collective bargaining disputes or, to the Knowledge of the
Company, claims of unfair labor practices. The Company has no
22
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of the Company or any of
its Subsidiaries.
(ii) Section 3.1(p) of the Disclosure Schedule contains a true,
correct and complete list setting forth the names and current salaries or rates
of compensation of all employees of the Company and each of the Subsidiaries
with an annual base salary of at least $50,000 and independent contractors who
render services to the Company or any of its Subsidiaries on more than a single
occasion who are expected to be paid at least $50,000 in 1999. Except as
disclosed on Section 3.1(p) of the Disclosure Schedule, neither the Company nor
any of its Subsidiaries has any unsatisfied Liability to any previously
terminated employee or independent contractor. The Company has made available
all written (and summarized all oral) employee handbooks, policies, programs and
arrangements to Xxxxxxx.
(iii) Except as set forth in Section 3.1(p) of the Disclosure
Schedule, all Persons employed by the Company and each of its Subsidiaries are
employees at will. Except as set forth in Section 3.1(p) of the Disclosure
Schedule, none of the employees of the Company or any of its Subsidiaries are
subject to noncompete/nonsolicitation covenants in favor of the Company.
(iv) The Company and each of its Subsidiaries has materially
complied with all applicable laws relating to labor, including, without
limitation, any provisions thereof relating to wages, termination pay, vacation
pay, fringe benefits, collective bargaining and the payment and/or accrual of
the same and all Taxes, insurance and all other costs and expenses applicable
thereto, and neither the Company nor any of its Subsidiaries is liable for any
material arrearage, or any Taxes, costs or penalties for failure to comply with
any of the foregoing. Without limiting the generality of the foregoing, neither
the Company nor any of its Subsidiaries has in any material respect violated any
of the health care continuation provisions of Part 6 of Subtitle B of Title I of
ERISA ("COBRA") or other applicable state insurance continuation law. No
material COBRA or other state insurance continuation law violation exists or
will exist with respect to any employees of the Company or any of its
Subsidiaries prior to the Merger Date.
(v) Each Person whom the Company or any of its Subsidiaries
currently retains as an independent contractor or previously retained as an
independent contractor qualifies, or at all times while performing services for
the Company or any of its Subsidiaries qualified, as an independent contractor
and not as an employee of the Company or any of its Subsidiaries, under the Code
and all applicable state laws. Neither the execution of this Agreement nor the
consummation of the Acquisition shall cause the Company or any of its
Subsidiaries to be in breach of any agreement with any employee, contractor or
consultant or cause the Company or any of its Subsidiaries to be liable to pay
any severance or other amount to any of its employees, contractors or
consultants.
(q) Employee Benefit Plans.
(i) All Plans of the Company and each of its Subsidiaries which
are "employee benefit plans" within the meaning of Section 3(3) of ERISA are
listed in Section 3.1(q) of the Disclosure Schedule. Each Plan is in material
compliance with its terms
23
and with ERISA and other applicable laws (including, without limitation,
compliance with the health care continuation requirements of COBRA and any
proposed regulations promulgated thereunder), and all agreements and instruments
applicable to any Plan. Section 3.1(q) of the Disclosure Schedule sets forth
each former employee of the Company or any of its Subsidiaries entitled to COBRA
benefits and the remaining period of such benefits. The Company has either
received a favorable determination letter or notification letter (a
"Determination Letter") from the applicable Internal Revenue Service District
Director as to the qualification under the Code of each Plan which is a pension
plan, as defined in Section 3(2) of ERISA ("Pension Plan") or has remaining a
period of time under applicable Treasury regulations or Internal Revenue Service
pronouncements in which to apply for such a Determination Letter and make any
amendments necessary to obtain a favorable determination as to the qualified
status of each Pension Plan, and, to the Company's Knowledge, there have been no
amendments or, to the Company's Knowledge, other developments since the date of
such Determination Letter which would cause the loss of such qualified status.
Each Plan which has not received a favorable Determination Letter but which has
remaining a period of time under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for a Determination Letter is
reflected on Section 3,1(q) of the Disclosure Schedule. No material violation of
ERISA has occurred within the last 6 years in connection with the administration
of any of the Plans, and there are no actions, suits, or claims (other than
routine, non-contested claims for benefits) pending or, to the Knowledge of the
Company threatened against the Plans, or any administrator or fiduciary thereof,
which could result in any material Liability.
(ii) With respect to all present Plans, the Company has
heretofore made available to Xxxxxxx true and complete copies of each of the
following to the extent such documents exist or are applicable:
(A) the Plan documents (and any applicable trust agreement
or insurance contract and including descriptions of vacation, severance pay,
sickness, and separation policies);
(B) the most recent Internal Revenue Service determination
or notification letter request relating to each of the Pension Plans;
(C) the summary plan description (as currently in effect)
and any summary of material modification for each of the Plans;
(D) the most recent Annual Report (Form 5500 Series), and
accompanying schedules, filed for each of the Plans, and the most recent summary
annual report furnished for each of the Plans;
(E) the most recent actuarial valuations, and latest
financial statements for each of the Plans; and
(F) all documents filed with the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation since January 1,
1992.
24
There is and has been no material violation of ERISA known to the Company
with respect to the filing of applicable reports, documents, and notices
regarding such past or present Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of such documents to the
participants or beneficiaries of such Plans.
(iii) Except as disclosed in Section 3.1(g) of the Disclosure
Schedule, each Plan maintained by the Company is maintained under a plan
document which does not provide for other participating employers except for the
Company or any ERISA Affiliate of the Company and no Plan provides or has
provided credit with respect to service other than with the Company or any ERISA
Affiliate of the Company.
(iv) Neither the Company nor any ERISA Affiliate of the Company
nor any of their employees, shareholders, or directors has engaged in any
transaction in connection with which any of them would be subject either to a
civil penalty assessed pursuant to Section 502 of ERISA or a tax imposed by
Section 4975 of the Code, other than transactions which would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. The
execution and performance of this Agreement will not involve any prohibited
transaction within the meaning of Section 406 of ERISA, other than prohibited
transactions which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(v) None of the assets of any of the Plans is or has been
invested in any property constituting employer real property or any employer
security within the meaning of Section 407(d) of ERISA.
(vi) Intentionally Deleted.
(vii) Full payment as of the Merger Date will have been made of
all amounts which the Company and any ERISA Affiliate of the Company are
required, under the terms of all Plans, to have paid as contributions to such
Plans as of the last day of the most recent fiscal year prior to the Merger
Date.
(viii) The execution and performance of this Agreement will not
constitute a stated triggering event under any Plan or employment agreement that
will result in any material payment (whether of severance pay or otherwise)
becoming due to any employee of the Company or ERISA Affiliate of the Company.
(ix) Neither the Company nor any ERISA Affiliate of the Company
provides, nor have they at any time provided, coverage under any welfare plan (a
Welfare Plan (as defined in Section 3(l) of ERISA) (including, but not limited
to, life insurance, disability, medical, dental, prescription drugs, or
accidental death or dismemberment) to any of their retirees, other than any
continuation or conversion coverage which any such retiree may have purchased at
his own expense except as may be required by COBRA or other applicable statute.
(x) The financial statements of each Pension Plan as of the end
of the most recent plan year for which such statements are available, and the
list of the investments of
25
such Pension Plan as of the most recent plan year end for which such statements
are available, accurately reflect the financial conditions of the Pension Plans
as of the date of such statements, and there have been no material changes in
such investments between such date and the Merger Date.
(xi) To the Company's Knowledge, there have been no statements,
either written or oral, or communications made or materials provided to any
employee or former employee of the Company or any ERISA Affiliate of the Company
by any officer, director, employee, agent or representative of the Company that
provide for or could be construed as a contract or promise by the Company or any
ERISA Affiliate of the Company to provide for any pension, welfare, or other
insurance-type benefits to such employee or former employee, whether before or
after retirement, other than benefits under the Plans.
(xii) Neither the Company nor any ERISA Affiliate of the Company
currently maintains or contributes, or at any time in the past has maintained or
contributed to a defined benefit plan (as defined in Section 3(35) of ERISA),
including, but not limited to, each multi-employer plan, as defined in Section
3(37) of ERISA.
(r) Licenses, Permits and Approvals. Section 3.1(r) of the Disclosure
Schedule lists all material governmental and regulatory licenses, permits and
approvals necessary to the conduct of the Company's and each of its
Subsidiaries' business. All such licenses, permits and approvals are in full
force and effect. There are no violations by the Company or any of its
Subsidiaries of, or any claims or proceedings, pending or, to the Knowledge of
the Company, threatened, challenging the validity of or seeking to discontinue,
any such licenses, permits or approvals, except for such violations, claims or
proceedings which would not, individually or in the aggregate, have a Material
Adverse Effect.
(s) Unlawful Payments. No payments of either cash or other
consideration have been made to any Person by the Company, any of its
Subsidiaries or the Shareholders or, to the Knowledge of the Company, on behalf
of the Company by any agent, employee, officer, director, shareholders or other
Person, that were unlawful under the laws of the United States or any state or
any other foreign or municipal government authority having appropriate
jurisdiction over the Company.
(t) Compliance with Laws. The Company and each of its Subsidiaries
and each of their respective facilities are in compliance in all material
respects with and have not in the past violated any applicable law, rule or
regulation of any Federal, state, local or foreign government or agency thereof,
including without limitation, environmental laws and laws relating to labor and
employment, and no notice, claim, complaint, action, suit, proceeding,
investigation or hearing has been received by the Company or any of its
Subsidiaries or filed, commenced or, to the Knowledge of the Company threatened
against the Company or any of its Subsidiaries alleging any such violation,
except in each instance for such failures to comply and such notices, claims,
complaints, actions, suits, proceedings, investigations or hearings which would
not, individually or in the aggregate, have a Material Adverse Effect.
26
(u) Suppliers and Clients. During the past twelve months, no material
licensor, vendor, supplier or licensee, or any client of the Company or any of
its Subsidiaries accounting for more than 1% of the Company's or any of its
Subsidiaries' revenues during such period, has canceled or otherwise materially
adversely modified its relationship with the Company or any of its Subsidiaries
and, to the Knowledge of the Company, no such Person has any intention to do so,
and, to the Knowledge of the Company, there are no disputes or notices of
dissatisfaction with or from any such client of the Company or any of its
Subsidiaries, which is reasonably likely to result in a cancellation,
termination or materially adverse modification of any such relationship and, to
the Knowledge of the Company, the consummation of the transactions contemplated
hereby shall not adversely affect any relationships with such clients.
(v) Insurance.
(i) Except as set forth in Section 3.1(q) of the Disclosure
Schedule, attached as Schedule 3.1(v) is a list of each insurance policy
(including policies providing property, casualty, Liability, and workers'
compensation coverage and bond and surety arrangements) currently carried by the
Company or any of its Subsidiaries and the current annual premium for each such
policy.
(ii) With respect to each such insurance policy: (A) the
consummation of the Acquisition will not cause a default or require any consent
under any such policy; (B) to the Knowledge of the Company, all such insurance
is in full force and effect, and the Company and the Companies' Subsidiaries are
in compliance with all requirements and provisions thereof. The Company has not
suffered any adverse loss experience which could reasonably be expected to cause
its insurance coverage not to be renewed upon the expiration thereof at premiums
substantially equivalent to those currently being paid or otherwise at
commercially reasonable rates.
(w) Warranty. All services previously rendered by the Company and
each of its Subsidiaries have been in material conformity with all applicable
contractual commitments and all express and implied warranties, and the Company
and each of its Subsidiaries has no Liability (and the Company has no Knowledge
of any Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand giving rise to any Liability)
for damages in connection therewith, subject only to the reserve for customer
claims set forth on the face of the Latest Financials as adjusted for the
passage of time through the Merger Date in accordance with the past custom and
practice of the Company and its Subsidiaries. No services provided by the
Company or any of its Subsidiaries are subject to any contractual guaranty,
warranty, or other indemnity beyond the Company's or any of its Subsidiaries'
applicable standard terms and conditions of engagement. Neither the Company nor
any of its Subsidiaries is obligated to perform services or client work for
which it will not be paid in order to correct work previously performed that was
incorrect or deficient, complete work in excess of the fixed rate limit with
respect to a particular project or otherwise, other than reasonable and
customary efforts to maintain client satisfaction consistent with the size and
scope of a particular project and consistent with maintaining the reasonable
profitability of such project.
27
(x) Transaction-Related Accounting Matters. Neither the Company nor
any of its Subsidiaries has taken or agreed to take any action that it knows or
has been advised would prevent the transactions contemplated hereby from being
accounted for as a pooling of interests in accordance with GAAP.
(y) Brokers' Fees. The Company has no Liability or obligation to pay
any fees or commissions to any broker or finder with respect to the transactions
contemplated by this Agreement for which Xxxxxxx could become liable or
otherwise obligated.
(z) Potential Conflicts of Interest. Except as set forth on Schedule
3.1(z) hereof, no officer, director or shareholder of the Company or any of its
Subsidiaries: (i) owns, directly or indirectly, any interest in (excepting not
more than 5% stock holdings for investment purposes in securities of publicly
held and traded companies) or is a shareholder, officer, director, employee or
consultant of any Person which is a competitor, lessor, lessee, customer or
supplier of the Company or any of its Subsidiaries; (ii) owns, directly or
indirectly, in whole or in part, any interest in Intellectual Property which the
Company or any of its Subsidiaries is using or the use of which is necessary for
the business of the Company or any of its Subsidiaries; (iii) has any loan
outstanding to or, to the Knowledge of the Company, any cause of action or other
claim whatsoever against the Company or any of its Subsidiaries, except for
claims in the Ordinary Course of Business, such as for accrued salary, bonus,
vacation pay and benefits under Benefit Plans and similar matters and agreements
existing on the date hereof; (iv) has made, on behalf of the Company or any of
its Subsidiaries, any payment or commitment to pay any commission, fee or other
amount to, or purchase or obtain or otherwise contract to purchase or obtain any
goods or services from, any corporation or other Person of which any officer,
manager or director of the Company or any of its Subsidiaries, or, a relative of
any of the foregoing, is a partner or shareholder (except stock holdings solely
for investment purposes in securities of publicly held and traded companies). No
Affiliate of any Shareholder has any claim against the Company, other than for
wages for services performed and related business expenses incurred in the
Ordinary Course of Business.
(aa) Disclosure. None of the representations and warranties of the
Company contained in this Agreement or the Disclosure Schedule contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading. There is no material fact which has not
been disclosed to Xxxxxxx which results in, or could reasonably be anticipated
to result in, a Material Adverse Effect on the Company (it being understood that
except as set forth in Section 3.1(f) no representation or warranty is being
made regarding the revenues or results of operations of the Company).
3.2 Representations and Warranties of Xxxxxxx and Acquisition Sub. As a
material inducement to the Company to enter into this Agreement and consummate
the transactions contemplated hereby, Xxxxxxx and Acquisition Sub hereby jointly
and severally represent and warrant to the Company and to the Shareholders that
all of the statements contained in this Section 3.2 are correct and complete as
of the date of this Agreement and Xxxxxxx and Acquisition Sub covenant that said
statements will be correct and complete as of the Merger Date
28
(as though made as of the Merger Date and as though the Merger Date were
substituted for the date of this Agreement throughout this Section 3.2).
(a) Organization. Xxxxxxx and Acquisition Sub are corporations duly
incorporated, validly existing, and in good standing under the laws of the State
of Delaware. Xxxxxxx is qualified to do business in and is in good standing
under the laws of each jurisdiction wherein the nature of its business or its
ownership of property requires it to be so qualified, except where the failure
to be so qualified would not, in the aggregate, have a material adverse effect
or impact upon the assets, business, financial condition or results of
operations of Xxxxxxx and its Subsidiaries, taken as a whole (a "Xxxxxxx Adverse
Effect").
(b) Authorization of Transaction. Xxxxxxx and Acquisition Sub have
all requisite corporate power and authority to execute and deliver this
Agreement and to perform their respective obligations hereunder. The Board of
Directors of Xxxxxxx and Acquisition Sub have duly authorized the execution,
delivery and performance of this Agreement by Xxxxxxx and Acquisition Sub,
subject to the conditions set forth herein. This Agreement constitutes the valid
and legally binding obligation of Xxxxxxx and Acquisition Sub, enforceable
against them in accordance with its terms, except as enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to the rights and remedies of
creditors generally or (ii) general principles of equity.
(c) Noncontravention. Subject to compliance with the HSR Act, neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) violate or conflict in any way with
any statute, regulation, law, rule or common law doctrine, (ii) violate or
conflict in any way with any judgment, order, decree, stipulation, injunction or
other restriction of any government, governmental agency or court, to which
Xxxxxxx or Acquisition Sub is subject (iii) breach any provision of the
Certificate of Incorporation or By-Laws of Xxxxxxx or the Certificate of
Incorporation or By-laws of Acquisition Sub or (iv) conflict with, result in a
breach of, constitute a default under (with or without notice or lapse of time,
or both), result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under, or result
in the creation of any Security Interest upon any of Xxxxxxx'x or Acquisition
Sub's assets pursuant to the terms of, any contract, agreement, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to which
Xxxxxxx or Acquisition Sub is a party or by which it is bound or to which any of
its assets are subject, except where such violations, conflicts, breaches,
defaults or other events would not, individually or in the aggregate, result in
a Xxxxxxx Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated hereby. Except pursuant to the HSR Act, neither
Xxxxxxx nor Acquisition Sub is required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government,
governmental agency or court, or any other Person in order for the parties to
consummate the transactions contemplated by this Agreement and in order that the
Acquisition and such transactions shall not constitute a breach or violation of,
or result in a right of termination or acceleration or any encumbrance on any of
Xxxxxxx'x or Acquisition Sub's assets pursuant to the provisions of, any
agreement, arrangement or understanding or any license, franchise or permit.
29
(d) Xxxxxxx Common. Xxxxxxx has taken all actions necessary to
authorize and approve the issuance of the Xxxxxxx Common, and as of the Merger
Date the Xxxxxxx Common will, when issued in accordance herewith, be duly
authorized, validly issued, fully paid and nonassessable. There are no statutory
or contractual shareholders' preemptive rights or rights of refusal with respect
to the issuance of the Xxxxxxx Common upon consummation of the Acquisition.
(e) Brokers' Fees. Subject to Section 3.1(y) hereof, neither Xxxxxxx
nor Acquisition Sub has any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Shareholder is or could become
liable or obligated, except for the fees and expenses payable to Xxxxxxxxx,
Lufkin & Xxxxxxxx Securities Corporation.
(f) Capital Structure.
(i) The authorized capital stock of Xxxxxxx consists of
75,000,000 shares of Xxxxxxx Common and 3,000,000 shares of preferred stock, par
value $0.001 per share ("Xxxxxxx Preferred Stock"). As of December 31, 1998,
approximately 38,010,000 shares of Xxxxxxx Common and no shares of Xxxxxxx
Preferred Stock were issued and outstanding. All outstanding shares of Xxxxxxx'x
outstanding capital stock are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
(ii) Except for options granted in the normal course pursuant to
Xxxxxxx'x stock option plans and employee stock purchase plan, as described in
Xxxxxxx SEC Reports (as defined below), and except as contemplated herein, there
are no options, warrants, calls, rights, commitments or agreements of any
character to which Xxxxxxx or any Subsidiary of Xxxxxxx is a party or by which
any of them is bound obligating Xxxxxxx or any Subsidiary of Xxxxxxx or any
securities or rights convertible into or exchangeable for any such capital
stock.
(g) Commission Filings. Xxxxxxx has timely filed all forms, reports
and documents required to be filed by Xxxxxxx with the Commission under the
Exchange Act and the Securities Act since October 4, 1996 (collectively, the
"Xxxxxxx SEC Reports"). The Xxxxxxx SEC Reports (i) at the time filed, complied
in all material respects with the applicable requirements of the Exchange Act,
or Securities Act, as applicable, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Xxxxxxx SEC
Reports or necessary in order to make the statements in such Xxxxxxx SEC
Reports, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of Xxxxxxx
included in the Xxxxxxx SEC Reports (the "Xxxxxxx Financial Statements")
complied when filed as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, and were, when filed, in accordance with the books and
records of Xxxxxxx, complete and accurate in all material respects, and
presented fairly the consolidated financial position and the consolidated
results of operations, changes in stockholders' equity and cash flows of Xxxxxxx
and its Subsidiaries as of the dates and for the periods indicated, in
accordance with GAAP, consistently applied, subject in the case of interim
30
financial statements to normal year-end adjustments and the absence of certain
footnote information.
(h) No Material Adverse Changes. Since November 5, 1998, to the
Knowledge of Xxxxxxx, no event has occurred which has had a Xxxxxxx Adverse
Effect and no action, suit, claim or proceeding has been filed, or threatened in
writing, which if adversely determined, would result in a Xxxxxxx Adverse
Effect.
(i) Transaction-Related Tax Matters. Xxxxxxx has not taken or agreed
to take any action that would prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(j) Disclosure. None of the representations or warranties of Xxxxxxx
and Acquisition Sub contained herein contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, as of the Merger Date.
(k) Information Statement Materials. None of the Xxxxxxx SEC Reports
contained in Exhibits __ attached to the Information Statement at the time of
mailing of the Information Statement to the Shareholders contained any untrue
statement of a material fact or omitted to state any 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.
4. CLOSING DELIVERIES
------------------
4.1 Company Closing Deliveries. The Company shall deliver to Xxxxxxx each
of the following:
(a) a certificate of the Secretary of the Company and a certificate
of the Secretary of each of its Subsidiaries dated the Merger Date certifying
(i) a copy of the text of the resolutions by which the action on the part of the
Company or such Subsidiary, as the case may be, necessary to approve this
Agreement and the Acquisition were taken, (ii) incumbency of each officer
executing this Agreement or any other agreement, certificate or other instrument
executed pursuant hereto, (iii) the Articles of Incorporation and By-laws or
other governing document of the Company or such Subsidiary, as the case may be,
and (iv) a list of Shareholders or other equity holders, as the case may be, as
of the Merger Date;
(b) a copy of the Company's Articles of Incorporation, as amended to
date, certified as of a recent date prior to the Merger Date by the State
Secretary of the State of California;
(c) Good standing certificates for the Company issued by the State
Secretary of the State of California and each jurisdiction in which the Company
is qualified to do business, and for each Subsidiary issued by the applicable
secretary of state (or other state agency) of the state of organization of such
Subsidiary (or other jurisdiction in which such Subsidiary is qualified to do
business), in each case dated as of a recent date prior to the Merger Date;
31
(d) (i) from each of the Shareholders (other than Shareholders who
are exercising dissenters' rights with respect to the Acquisition [the
"Departing Shareholders"]), executed counterparts to the Registration Agreement
substantially in the form of Exhibit A hereto (the "Registration Agreement"),
(ii) from the Company, each of the Shareholders and the "Shareholders'
Representative" (as such term is defined thereunder), executed counterparts of
that certain Consent, Indemnification and Noncompete Agreement between the
foregoing parties, Xxxxxxx and Acquisition Sub in the form attached hereto as
Exhibit B (the "Consent, Indemnification and Noncompete Agreement"), (iii) from
the Shareholders' Representative and the Escrow Agent, executed counterparts of
the Escrow Agreement, and (iv) from the Dissenters, executed counterparts of
that certain Departing Shareholders' Noncompete Agreement in the form attached
hereto as Exhibit C (the "Departing Shareholders' Noncompete Agreement");
(e) evidence that no court or other governmental entity having
jurisdiction over the Company or Xxxxxxx, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Acquisition or any of the transactions contemplated
hereby illegal;
(f) evidence that 90% or more of the outstanding shares of Company
Stock shall have consented to the Acquisition; and
(g) evidence that the Existing Company Documents shall have been
terminated.
4.2 Xxxxxxx Closing Deliveries. Xxxxxxx shall deliver to the Company (or,
in the case of subsection (b), the Shareholders) each of the following:
(a) Xxxxxxx shall deliver to the Company a certificate of the
Secretary or any Assistant Secretary of Xxxxxxx and the Acquisition Sub dated
the Merger Date certifying (i) a copy of the text of the director resolutions by
which the corporate action on the part of Xxxxxxx and the Acquisition Sub
necessary to approve this Agreement and the Acquisition were taken; and (ii)
incumbency of each officer executing this Agreement or any other agreement,
certificate or other instrument executed pursuant hereto;
(b) the Registration Agreement, the Escrow Agreement, the Consent,
Indemnification and Noncompete Agreement, and the Dissenters' Noncompete
Agreement;
(c) evidence that no court or other governmental entity having
jurisdiction over the Company or Xxxxxxx, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Acquisition or any of the transactions contemplated
hereby illegal;
(d) evidence that the applicable waiting period, if any, under the
HSR Act shall have expired or been terminated; and
32
(e) evidence that the shares of Xxxxxxx Common issuable pursuant to
the Acquisition shall have been authorized for listing on the Nasdaq Stock
Market, subject to notice of issuance.
5. ADDITIONAL AGREEMENTS
---------------------
5.1 Post-Acquisition Covenants. The Parties agree as follows with respect
to the period following the Merger Date:
(a) General. In case at any time after the Merger Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents, and in the case of Xxxxxxx,
using its reasonable efforts to cause the listing of the shares of Xxxxxxx
Common issuable in the Acquisition on Nasdaq) as any other Party reasonably may
request, at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification with respect to such matter
under Consent, Indemnification and Noncompete Agreement.
(b) Tax Matters. Xxxxxxx and the Company Executives shall cooperate
fully, as and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns of the Company and its Subsidiaries
and any audit, litigation or other proceeding with respect to any Taxes of the
Company or any of its Subsidiaries or any Taxes incurred in connection with any
of the transactions contemplated by this Agreement. Neither Xxxxxxx, Acquisition
Sub nor any direct or indirect Subsidiary of Xxxxxxx shall take any action or
agree to take any action that prohibits the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
(c) Indemnification of Directors and Officers. The Surviving
Corporation shall indemnify, defend, hold harmless and advance expenses to the
individuals who are the Company Executives and officers of the Company as of the
date of this Agreement to the same extent, if any, that such directors and
officers are indemnified under the terms of the Articles of Incorporation or By-
laws or otherwise in respect of any claims brought after the date of this
Agreement relating to events occurring on or prior to the date of this
Agreement. In the event the Surviving Corporation or its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all its properties and assets to any Person,
then, and in each case, proper provision shall be made so that the successors
and assigns of the Surviving Corporation, as the case may be, honor the
indemnification obligations set forth in this Section (it being understood that
the amount of such indemnification and expenses shall constitute Xxxxxxx
Indemnifiable Losses as such term is defined under the Consent, Indemnification
and Noncompete Agreement to the extent they relate to a breach of a
representation or warranty by the Company).
(d) Employee Benefits. Employees of the Surviving Corporation
immediately following the Effective Date who, immediately prior to the Effective
Date, were employees of the Company, any Affiliate, or ERISA Affiliate, shall be
given credit for purposes of eligibility,
33
vesting, and determination of level of benefits under each employee benefit
plan, program, policy or arrangement of Xxxxxxx, or an Affiliate of Xxxxxxx,
including, but not limited to the Surviving Corporation, in which such employees
participate subsequent to the Effective Date for all service with the Company,
any Affiliate, or ERISA Affiliate, prior to the Effective Date.
(e) Deferred Compensation Pay-out. Within thirty (30) days of the
Merger, Xxxxxxx shall cause the Company to pay to certain employees of the
Company cash or other immediately available funds equal to the difference
between (i) amounts actually accrued to such employees pursuant to that certain
Deferred Compensation Agreement, dated April 1, 1990, as thereafter amended (the
"Deferred Compensation Agreement"), entered into by and among the Company and
the employees of the Company who are party thereto, and (ii) the aggregate
amount of fees and expenses incurred or accrued by and payable by the Company as
a post-closing obligation and specified in Section 6.11 hereof; provided,
however, that the aggregate amounts payable pursuant to such Deferred
Compensation Agreement shall not exceed the difference between (i) $8,000,000
and (ii) the aggregate amount of fees and expenses incurred or accrued by and
payable by the Company as a post-closing obligation and specified in Section
6.11 hereof.
6. MISCELLANEOUS
-------------
6.1 Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party (for purposes hereof, Xxxxxxx and
the Acquisition Sub shall be deemed one party and the Company and the
Shareholders collectively shall be deemed another Party); provided, however,
that any Party may make any public disclosure it believes in good faith is
required by law or regulation, including, without limitation, any disclosures
made necessary by Xxxxxxx'x status as a public company (in which case the
disclosing Party will advise the other Party prior to making the disclosure).
6.2 No Third Party Beneficiaries. Except for Section 5.1(c), this
Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
6.3 Entire Agreement. This Agreement (including the other documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
6.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign this Agreement or any of such Party's
rights, interests, or obligations hereunder without the prior written approval
of the other Parties. Notwithstanding the foregoing, Xxxxxxx may (i) cause the
stock of the Company to be acquired by a wholly owned subsidiary of Xxxxxxx
and/or (ii) merge the Company with or into a wholly-owned direct or indirect
subsidiary of Xxxxxxx, in either case without affecting its rights or
obligations hereunder.
34
6.5 Survival. All of the representations and warranties of the Company and
the Company Executives contained in Section 3.1 hereof (the "Company
Representations"), shall survive the consummation of the Acquisition (regardless
of any Knowledge or investigation of Xxxxxxx, Acquisition Sub or the Surviving
Corporation) and shall continue in full force and effect for a period of one
year following the Merger Date (the "Survival Period"). All of the
representations and warranties of Xxxxxxx contained in Section 3.2 (the "Xxxxxxx
Representations") shall survive the consummation of the Acquisition (regardless
of any Knowledge or investigation of the Shareholders or the Company) and shall
continue in full force and effect until the expiration of the Survival Period.
All covenants (as opposed to representations and warranties) of the Parties in
this Agreement shall survive the consummation of the Acquisition and shall
continue in full force notwithstanding the expiration of the Survival Period.
6.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
6.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) three (3)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, (ii) one day after receipt is electronically
confirmed, if sent by fax (provided that a hard copy shall be promptly sent by
first class mail), or (iii) one (1) business day following deposit with a
recognized national overnight courier service for next day delivery, charges
prepaid, and addressed to the intended recipient as set forth below or in the
case of the Shareholder on the signature pages hereto:
If to the Company: With a Copy To:
------------------ ---------------
Strategic Decisions Group Xxxx Xxxx Xxxx & Freidenrich LLP
0000 Xxxx Xxxx Xxxx 000 Xxxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000-0000 Xxxx Xxxx, XX 00000-0000
Attn: Xxxx Xxxxxxxx Attn: Xxxxx Xxxxx, Esq.
Fax: (000) 000-0000 Fax: (650) 327 - 3699
If to Xxxxxxx or Acquisition Sub: With a copy to:
--------------------------------- ---------------
The Xxxxxxx Group, Inc. Barack Xxxxxxxxxx Xxxxxxxxxx
000 Xxxxx Xxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Attn: General Counsel Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000 Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy,
35
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is delivered to the individual for whom it is intended. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
6.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois, any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois. Each party hereto
(a) agrees that any suit, action or other legal proceeding relating hereto may
be brought in state court sitting in the County of Xxxxx, Nevada or the United
States District Court for the District of Nevada, as applicable; and (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding; and (c) waives any objection said party may have to the laying of
venue in any such suit, action or proceeding in either such court; and (d)
consents to service of process by U.S. mail.
6.9 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Xxxxxxx, the Company, and the Executive Officers; provided, that the
Shareholders' Representative may, on behalf of the Company and the Executive
Officers (and, indirectly, the Shareholders), consent to any amendment of or
waive any provision of this Agreement, the Consent, Indemnification and
Noncompete Agreement, the Registration Agreement, or the Escrow Agreement, so
long as such amendment or waiver is not more favorable to one Shareholder or
group of Shareholders than any other. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence of
such kind.
6.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the invalid or unenforceable term or provision in
any other situation or in any other jurisdiction. If a final judgment of a court
of competent jurisdiction declares that any term or provision hereof is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
6.11 Expenses. Subject to the following two sentences, each of Xxxxxxx and
the Company will bear its own direct and indirect costs and expenses (including
fees and expenses of legal counsel, accountants or other representatives or
consultants) incurred in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the
36
transactions contemplated hereby, whether or not such transactions are
consummated. If the Acquisition is consummated, then expenses paid, incurred, or
accrued by the Company to effect the Acquisition shall be paid by the Company;
except that the following expenses relating to the Acquisition will be accrued
by the Company and become post-closing obligations of the Company, but shall not
be considered in determining Working Capital, Total Assets or Net Shareholders
Capital for purposes of Section 2.6 hereof: (i) the reasonable accounting fees
and expenses of the Company and (ii) the legal fees incurred by the Company in
connection with the Acquisition and Merger (up to $75,000). Xxxxxxx shall pay
any and all investment banking fees due and owing Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation.
6.12 Obligations of Company Executives. The parties hereby agree and
acknowledge that notwithstanding the fact that the Company Executives have given
representations and warranties under this Agreement and are parties to this
Agreement, the Company Executives shall not thereby be liable for
indemnification or otherwise beyond the indemnification provided for pursuant to
the terms of the Consent, Indemnification and Non-compete Agreement.
6.13 Construction. The Parties have jointly participated in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumptions or burdens of proof
shall arise favoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
Parties intend that each representation, warranty and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
6.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
6.15 Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
37
IN WITNESS WHEREOF, the Parties hereto have executed this Plan and
Agreement of Merger as of the date first above written.
XXXXXXX: THE COMPANY:
-------- ------------
THE XXXXXXX GROUP, INC., STRATEGIC DECISION GROUP
a Delaware corporation a California corporation
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxx Xxxxxxxx
Xxxxxx X. Xxxxx, President and Xxxx Xxxxxxxx, Chief Executive
Chief Executive Officer Officer
By: /s/ Xxxxxxx X. Xxxxxxxxx By: /s/ Xxxxxx Xxxxxx
Xxxxxxx X. Xxxxxxxxx, Secretary Xxxxxx Xxxxxx, Secretary
ACQUISITION SUB:
----------------
MGI ACQUISITION III, Inc.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx, President
and Chairman
By: /s/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx, Secretary
38
Company Executives' Signatures
==============================
COMPANY EXECUTIVES:
/s/
----------------------------
----------------------------
----------------------------
----------------------------
39
List of Exhibits and Schedules
------------------------------
Exhibit A - Form of Registration Agreement
Exhibit B - Consent, Indemnification and Noncompete Agreement
Exhibit C - Departing Shareholder's Noncompete Agreement
Exhibit D - California Merger Agreement
Schedule 2.5 - Additional Officers of Surviving Corporation
Schedule 2.6 - Conversion of Securities
40
